The level of non-performing loans at Nisir Microfinance Institution is slightly above the standard set by the National Bank of Ethiopia, owing to various challenging factors. This study assesses the major challenging factors affecting loan repayment performance at the Piassa, Main, and Megenagna branches of Nisir Credit and Saving Institution S.C. The study covers the period from July 1, 2017 to June 30, 2018. Specifically, the paper examines institutional, economic, borrower-characteristics, and other challenging factors of loan repayment performance. To achieve the study objectives, sufficient data were collected from 94 respondents through structured questionnaires distributed purposively across the three selected branches of the institution. The data were found to be reliable for analysis, and the descriptive statistics indicate that borrowers faced challenges arising from their own characteristics, inadequate institutional follow-up, economic constraints, and other factors such as limited access to technology. An econometric regression model estimated using the Tobit method was employed, and the model was validated through various post-estimation diagnostics. The marginal effects of the independent variables confirmed results consistent with the Tobit model estimates. The dataset was found to be free from multicollinearity, autocorrelation, and heteroscedasticity problems, and the residuals were normally distributed. The major findings reveal that loan repayment performance is significantly challenged by borrower characteristics such as sex, education, and dependency ratio; economic factors such as income from loan-financed activities and savings; institutional factors such as loan sufficiency, loan cycle, loan supervision, availability of other credit sources, and training; and other factors such as technology. It is therefore recommended that stakeholders revise their loan disbursement policies in line with the diverse characteristics of their borrowers and strengthen institutional follow-up mechanisms to improve loan collection. Keywords: challenges, loan repayment performance, Tobit model, microfinance, NCSI