Microcredit Repayment Research Articles

An Analysis of Influential Elements of Microcredit Repayment in Covid 19 Crisis: Evidence from Bangladesh

This study investigates the status of microcredit repayment due to the COVID-19 crisis in Bangladesh. The study inspects several socioeconomic factors to discover the probability of default and to avoid delinquency regarding repayments rate. This study focuses on 194 respondents from Bangladesh and apply logistic regression model for executing the analysis. It found several influencing variables from the analysis with significant differentiation that has effects on the microcredit repayments rate. From the predictors, household yearly income in the COVID-19 pandemic was the strongest predictor that was reported as an odds ratio of 1.620. Two other independent variables that made statistically unique significant contributions to the model are difficulty of COVID-19 and number of loans taken by the credit holder. Microcredit Regulations Authority (MRA) and the government of Bangladesh need to implement several policies in order to drive the difficulty of the financial crisis as well as to boost up the repayments rate in crisis periods.

Does counter‐guarantee affect microcredit mechanism's performance on repayment? Evidence from Guangzhou, China

AbstractWe study the credit repayment effectiveness when microcredit is operating in combination with the counter‐guarantee mechanism. We use a sample of 176 poor urban borrowers from the Guangzhou Municipal Labor and Social Security Bureau (GZMLSSB). Their loans were guaranteed by the Guangzhou Financing Guarantee Center (GZFGC), then counter‐guaranteed by borrowers. The size of loans offered to urban borrowers varies from 20,000 RMB to 30,000 RMB per individual per year (60,000 RMB if part of a partnership and maximum of 50,000 RMB per individual in a given loan cycle). We estimated the model using a conditional mixed process given the binary dependent variable and a binary endogenous explanatory variable in the model. We find that the real estate mortgage as a financial counter‐guarantee mechanism has no effects, but a training certificate as a non‐financial counter‐guarantee mechanism has a negative impact on the microcredit repayment rate. Group lending and focusing on women have no impact as well. The findings help to minimize the management cost of pre‐default and default risk on microcredit loans in GZMLSSB and other similar projects by targeting university graduates. Our study is the first to assess the impact of microcredit mechanisms together with counter‐guarantee on loan repayments in China.

Effect of the Socioeconomic Characteristics of Borrowers on Microcredit Repayment Behaviour: An Application to a Category II Microfinance Institution in Cameroon

The purpose of this study is to determine the influence of socioeconomic characteristics of borrowers on microcredit repayment behaviour. The results of Probit regression statistical analysis using a database of 1805 individual loan contracts, credit records and follow-up files from 2007 to 2014 period by Community Credit of Africa (CCA) in Cameroon, reveal that educational level, awareness about the location of business and/or home of borrowers by the lender, sector of activities, availability of collateral, income stability, and personal wealth of borrowers have a statistically significant influence on microcredit repayment behaviour of borrowers. The outcome of the results shows that microfinance institutions should not only rely on financial indicators to assess the creditworthiness of borrowers. Other factors belonging to the social and economic characteristics of the borrowers are supposed to be integrated in credit risk models. These factors are sought to influence significantly microcredit repayment behaviour of borrowers.

The role of cognitive and personality characteristics in timely microcredit repayment: Evidence from a survey conducted by Provident, Mexico

Sustainability of microfinance institutions depends, among other factors, on having appropriate repayment levels. This article's contribution to the existing literature is the analysis of the role of a personality trait named "grit" in individual microcredit repayment decisions, alongside cognitive characteristics and time and risk preferences. This study is based on a survey of a sample of clients at 'Provident México', a formal microfinance institution that provides personal loans in vulnerable communities in Puebla, Mexico. We find evidence that, generally, older individuals possessing higher levels of grit and a tendency toward short term present bias are more likely to show no delays in loan repayments. Cognitive characteristics are inversely related to paying microcredits on time. Refinancing incentives does not play a key role in timely microcredit repayment, a result that is contrary to related literature but consistent with our finding that individuals in this sample that do not have delays in repayments are characterized by showing a short term present bias. El papel de las características cognitivas y de personalidad en el pago oportuno de microcréditos: Evidencia de una encuesta realizada por Provident, México.

Determinants of Repayment among Male and Female Microcredit Clients in the USA. An Approach Based on Managers’ Perceptions

Research on microfinance institutions (MFIs) has normally been focused on developing and emerging markets. However, an analysis of developed countries is also important for foreign MFIs wishing to take advantage of the growth potential of those markets. Therefore, the aim of this article is to determine whether MFIs working in the USA’s market should change or adapt their microcredit policies with respect to women. In effect, there are no studies in the USA supporting the argument that women are a better risk of microcredit than men, or that there are differences in microcredit repayment behavior between women and men. Additionally, it was investigated if the payment behavior of women and men is related to variables such as their age, ethnicity, academic level, marital status, or the characteristics of the microcredits, like purposes, amounts, and payment terms. In the USA, there are not—as in other countries—strong incentives, motivations, or external pressures, other than those that men also have, which influence women to pay their microloans better than men. Then, domestic and international MFIs attracted to enter the USA’s market should review their microcredit policies in relation to women. More research is needed about the microfinance market in the USA.

Microcredit Repayment among Smallholder Farmers: What Microfinance Institutions Need to Know

Microcredit default among borrowers has been rising in recent years but empirical evidence to ascertain the factors determining repayment remain lacking especially in developing countries like Ghana. This study contributes to addressing this knowledge gap. The study used data of 224 microcredit borrowers from Ada West and Ada East districts to analyse factors determining repayment rate among smallholder farmer borrowers. Applying the logistic regression model, farmer and credit specific characteristics were used to analyse the determinants of microcredit repayment. From the logistic regression, age, gender, income, and number of dependants increase the likelihood of repayment. However, membership of farmer based organization, experience, interest rate, and duration of loan repayment negatively influences loan repayment. The study also found delays in loan disbursement resulted in loan use for unproductive ventures and repayment challenges. In addition, lack of training for borrowers on credit management, and investment procedures adversely impacted on loan repayment. The paper recommends that MFIs should institute measures to train borrowers on loan utilization, focus on women clients, since they have higher probability of repayment, reduce interest rate as well as putting in place mechanisms to reduce cost of operations.

Determinants of microcredit repayment in Portugal: analysis of borrowers, loans and business projects

Microcredit programs in Portugal represent a unique case for studying the microcredit repayment determinants in a developed country, as it experienced a financial hardship in 2008–2009, with economic and social consequences that led to unemployment crisis. This research examined the determinants of microcredit loan repayment based on a sample of 752 microcredit loans granted in Portugal by the National Association for the Right to Credit, adopting individual lending mechanisms and granting loans through partnerships with several credit institutions. This is the first study to ascertain the influence that a set of factors – grouped into three categories: borrowers’ individual characteristics; loan characteristics; and characteristics of business projects implemented by borrowers – has on the repayment ability of microcredit programs, in a developed country of the Eurozone. Moreover, this is the first study using an ordered logistic regression (OLR) in estimating the determinants of microcredit loan repayment. Similar to previous studies, married borrowers tend to repay loans faster as they tend to be more responsible than single borrowers. Nationality seems to be an issue as foreigners tends to default the repayment loans. Finally, those involved in manufacturing activities perform better than those involved in service activities in repaying their loans. This clearly indicates that in developed countries special attention needs to be provided to minority groups as well as market/supply conditions, which are not normally considered in less favored economic countries.

DETERMINANT OF MICROCREDIT REPAYMENT

This paper investigate the determinants of microcredit repayment by employing the logistic regression on micro-business households in Pati, Central Java. The result of this study reveals that loan repayment affected significantly by the business lines, food consumption spending, side job, other loan sources, collateral, and credit constrained. Interestingly, the result concludes that the loan repayment are no longer influenced by moral hazard, since the characteristics such as gender, education level, age, experience do not significantly encourage borrowers to repay. This paper also conform the important role of peer-screening process on hindering the credit default.

Effect of Consulting on Microcredit Repayment in Korea

Oh, Yoonhae.2015.Effect of consulting on microcredit repayment in Korea,Articles,[Sejong]Korean Development Institute,21

Determinants of agricultural micro-credit repayment-evidence from Minna microfinance bank, Nigeria

The study assessed the determinants of agricultural micro-credit repayments by beneficiaries of Minna Micro-finance Bank, Nigeria. Multi-stage sampling technique was employed to select 180 respondents for the study while descriptive statistics and multinomial binary logit model were employed for data analyses. The study affirmed that substantial proportion of respondents (42.78%) were smallholders owning between 1.1-2.0 hectares of land. Ironically, 61.67% do not belong to cooperatives or farmers’ associations. The volume of loans disbursed to beneficiaries was a significant determinant of agricultural micro-credit repayment. The analysis further established that repayment increased with the volume of micro-credit received, as 100% and 82% of those who received above N250,000 and N200,000 - N250,000, respectively repaid compared to 74.34% of those who received between N50,000 and N100,000. Also, majority (68.89%) of the respondents indicated that the short period of loan tenor, high interest rate (55%) and loan period (54%) were major obstacles in loan acquisition. Against this backdrop, the study recommended the need for proper financial analysis of beneficiaries’ enterprises with the view to effectively ascertaining the quantum of credit needs while premising financial inflow of the bank on long term funds (without prejudice to the existing revolving loan mechanism) such as the pension contributions, with the view to enhancing the resource base of the bank and its ability to effectively support beneficiaries while guaranteeing its own sustainability. Channeling micro-credits through farmer institutions, allowing for longer loan repayment periods and premising interest on economic and social considerations will also enhance effective loan recovery. Keywords : Agricultural micro-credit repayment, volume of micro-credit, financial analysis, long term funds, cooperatives.

English

Agricultural micro-credit repayment has been a thorny issue in Nigeria, and in particular, Niger State. This study therefore assessed the socio-economic characteristics of Agricultural micro-credit beneficiaries under Minna Micro-finance Bank; determined the volume of micro-credit applications and receipts; ascertained the determinants of micro-credit repayments by beneficiaries and examined the challenges encountered by beneficiaries in obtaining and repaying micro-credits. Multi-stage sampling technique was employed to select 180 respondents for the study while descriptive statistics and Multinomial Binary Logit model were employed for data analyses. The study affirmed that substantial proportion of respondents (42.78%) were smallholders owning between 1.1 to 2.0 ha of land. Ironically, 61.67% do not belong to cooperatives. The Multinomial Logit model revealed that sex, membership of cooperatives, loans granted and duration of micro-credit repayment were positive determinants of repayment, implying that these variables were significantly associated with the classification of beneficiaries under the non-repayment and partial loan repayment groups relative to the group of respondents who had fully repaid their loans. In addition, the elastic variables, namely, sex (3.58), cooperative membership (5.95) and loans granted (2.02) connotes that a unit change in these variables will lead to a more than proportionate change in the probability of classifying respondents into the non-repayment group relative to the full micro-credit repayment group. The study further established that repayment increased with the volume of micro-credit received. Majority (68.89%) of the respondents also indicated that the short period of loan tenor, high interest rate (55%) and loan repayment moratorium (54%) were major obstacles to loan access and repayment. The study concluded that agricultural micro-credit repayment performance by beneficiaries of Minna Microfinance Bank was considerable. Policy option requires that efforts be directed at complementing the resource pool of agricultural micro-credit with long term or idle funds, such as, the pension funds. This will guarantee or create room for reasonable duration for micro-credit repayment to the advantage of beneficiaries while not compromising the sustainability and revolving nature of the scheme. Basing interest rates on social and economic considerations will also go a long way in enhancing repayment among small-holder farmers. Channeling micro-credits through farmer institutions and ensuring effective monitoring will also enhance effective micro-credit recovery. Key words: Micro-credit, repayment, moratorium, cooperatives.

Determinants of Microcredit Repayment: The Case of Tunisian Microfinance Bank

Repayment of loans in microfinance is a very important subject for study. Microfinance institutions lend to poor and low-income borrowers and thus the terms of lending should be as easy as possible for more poor people to have access. On the other hand, poor and low-income borrowers tend to have no collateral and thus would constitute a considerable risk to lenders once they default. Lenders, therefore, have to devise a special system whereby to ensure that loan defaults are as low as possible in order to avoid charging a higher interest rate which will defeat the very purpose of microfinance-lending. In this paper, using a binary logistic regression model, we undertake to examine the factors that affect default among borrowers. It has been discovered that borrowers' socio-demographic characteristics, past participation in microcredit loans and past credit history have significant impacts, as special features, on their default rates.

An Empirical Analysis of Microcredit Repayment in Southwestern Nigeria

This paper provides empirical analysis of microcredit repayment in Southwestern Nigeria. Multistage stratified random sampling procedure was used to collect data from 200 members of microfinance institutions (MFIs) in the study area. Linear multiple regression was used to determine the variables that affected microcredit repayment. The mean weekly contribution of the members of microfinance nongovernmental organizations (NGOs) in groups was N = 772.62 and the mean borrowing was N = 23, 55.25 per annum. On the average, they pay 90 percent of their microcredit as at when due. The Fvalues indicated that the microcredit repayment model had good fit (p = 0.01) with an adjusted R2 of f.36. The variables that significantly influence repayment: income, distance between dwelling place and bank, amount of business investment, socio-cultural expenses, amount of loan borrowed, access to business information, penalty for lateness to group meetings, membership of cooperative society, number of days between loan application and disbursement and poverty indicator were analyzed. Poverty was found to hamper repayment. Nevertheless, the study supports findings that members of microfinance groups are creditworthy.