TESFSAY GEBREHIWOT2025-12-112025-09-24https://repository.mu.edu.et/handle/123456789/1105Microfinance involves the provision of micro-credit, saving and other services to poor people that are excluded by the commercial bank for collateral and other reasons. The role of microfinance institutions is to serve needy people generally in the region and specifically in the city. This study aims at identifying the major socio-demographic factors, business related, institutional and loan related factors that determine credit default of MFIs borrowers. In fact, identifying and analyzing such determining factors of credit default is vital in the achievement of profitability and sustainability of MFIs. The survey population was divided into defaulters and non-defaulters based on credit repayment performance. In this connection, the researcher collected data from primary and secondary sources. The primary data has been collected by interviewing and using a structured questionnaire from 400 defaulters and non-defaulters’ respondents with the help of trained enumerators. The questionnaire includes both open and closed- ended questions. In addition, secondary data were gathered from Mekelle citifies offices and other related relevant publications. Descriptive statistics with the help of tables and Percentages were used in analyzing the collected data. In addition to this econometric model by employing SPSS versions 16.0 were used to analyze the collected data. Furthermore, a chi-square(X2) test of independence was employed to compare the relationship of dependent variable with independent variables. A total of twelve explanatory variables were included in the regression and the result of the model show that age, education level, family size, other sources of income, and method of lending are significant factors affecting loan repayment in MFIs. In contrast, gender, loan size, business experience, timeliness of loan release, distance from MFI, and suitability of installment period were not significant in predicting repayment performance. Based on the findings of the study, some recommendations were made to improve loan repayment performance in the study area. To improve loan repayment of MFIs interventions should be tailored to borrowers' age, education, and family size, with a focus on providing financial education for those in larger households. Efforts should also prioritize strengthening reliable income sources and financial management skills, particularly for borrowers with informal income streams. Additionally, enhancing group lending mechanisms with better peer monitoring and stricter institutional oversight will help reduce default rates.enMicrofinanceCredit defaultDefaultersNon-defaultersBinary logisticThesis