Interest rate is an impact on demand for credit because the higher the cost of loan is leads to inability to repay the loaned amount by customers. Again the lower the interest rate by itself also has impact on the development of investment in the country. From the lenders perspective, the interest rate is considered as the premium paid to savers for making surplus funds available to financial intermediaries. From the borrower’s point of view, the interest rate is the user cost of capital incurred by using funds for investment. This paper focuses on to identify on impact of interest rates on credit and loan repayment in Ethiopia with reference to credit cooperative unions. To achieve this objective, the study was employed by using both descriptive and explanatory research design with quantitative and qualitative methods with simple random sampling, which is used to select sample co-operatives and members. Since the members of the cooperatives are homogenous in nature, then 100 samples are selected for the study. From this the descriptive statistic finding shows that there were significant association between dependent variable with respect to education level, loan diversion, loan size, training, time laps between loan application and disbursement, repayment period and all business types. Researcher found the significance difference between defaulters with respect to age, family size, and number of dependent’s, business experience, repeatedly borrowing, and supervision.
Keywords: Ethiopia, Interest Rates, Impact of Interest Rates, Credit Cooperative Unions.