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Abstract
This study examines the determinants of loan repayment among microfinance institutions (MFIs) among their 384 microenterprises. The research found that age, gender, marital status, educational level, business experience, family size, type of business, interest rate, profit level, lending method, training/business enhancement program, and loan repayment time are not significant determinants of loan repayment among MEs in the study area. Prompt loan repayment can encourage cordial relationships between MFIs and their customers, and thus, MFIs and stakeholders should consider these significant variables when extending loans to their clients. This highlights the importance of timely loan repayment for MFIs' survival and growth.
Highlights
Microfinance institutions (MFIs) no doubt provide loan to small business holders with little or no collateral security, and for this function to be performed effectively and efficiently without disruptions, repayment of loan by borrower as at when due is germane
Default in loan repayment of microfinance loan is often faced by MFIs which could threaten their sustainability and impede them from extending loan to other customers
Microfinance institution no doubt is one of the financial institutions that assists in channeling fund/credit for business activities especially to the most vulnerable in the society, this channeling of fund is often peculiar to business activities like micro and small business (Nawai & Mohd Shariff, 2012)
Summary
Microfinance institutions (MFIs) no doubt provide loan to small business holders with little or no collateral security, and for this function to be performed effectively and efficiently without disruptions, repayment of loan by borrower as at when due is germane. Studies have used different categories to categorise variable that determine repayment rate among borrower for instance, Jote (2018) categorised variable that influence loan repayment into three: demographic factors, economic factors, and institutional factors. The educational level of the borrower is found in the literature to have a mixed impact on repayment of loan for instance, Jote (2019) found in his study in Ethiopia a positive influence of educational level on loan repayment by borrower while Nawai and sharriff (2012) found a different result of a negative impact of education on loan repayment rate. Profit earned from business activities is observed to have a positive and significant influence on loan repayment by borrower (Fale fack & Tegula, 2016; Jote, 2019) This shows that increase in profit earned by borrower from the loan received can enhance prompt repayment of loan than when loss is made. Haile (2015) found a positive influence of business training on loan repayment of borrower in the study area
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