Repayment Performance Research Articles

Patterns and heterogeneity in credit repayment performance: Evidence from Malian farmers

Patterns and heterogeneity in credit repayment performance: Evidence from Malian farmers

Determinants of loan repayment performance: A study of microfinance institutions in Nepal

The study’s main goal is to empirically examine the association between loan repayment performance among microfinance institutions (MFIs) in Nepal regarding institutional characteristics (ICs), client characteristics (CCs), and loan characteristics (LCs). Further, the study emphasizes a causal relationship between the variables that directly corresponds with the regression research model for organic validity. For this, the researcher has chosen twenty Nepalese microfinance institutions along with 217 respondents for the study, respectively. The study found that institutional factors, client characteristics, and loan characteristics were positively and significantly associated with the loan repayment performance of Nepalese MFIs. The above-mentioned variables remain pivotal to determining the loan repayment performance of Nepalese MFIs, including institutional policy formation, loan and savings product design, and corporate culture formation for senior-level management. The results of the study will be effective for Banks and Financial Institutions (BFIs), Microfinance Institutions (MFIs), regulatory authorities, Human Resources (HR) analysts, and planners to take corrective actions to improve the repayment performance of MFIs for credit risk management.

Retraction Note: Loan repayment performance and its determinants: evidence from micro and small enterprises operating in Dire-Dawa, Ethiopia

Retraction Note: Loan repayment performance and its determinants: evidence from micro and small enterprises operating in Dire-Dawa, Ethiopia

The Factors of Determining Repayment Performance in Individual Loan for Small Medium Enterprises in Indonesiathis study aims to determine the affecting factors of repayment performance in Small Medium Enterprises (SMEs) in Indonesia for individual loan pr

The Factors of Determining Repayment Performance in Individual Loan for Small Medium Enterprises in Indonesiathis study aims to determine the affecting factors of repayment performance in Small Medium Enterprises (SMEs) in Indonesia for individual loan pr

Analyzing Determinants of Loan Repayment Performance at Grameen Koota: A Comprehensive Study in Bangalore District

Microfinance institutions (MFIs) are pivotal in promoting financial inclusion by providing financial services to underbanked populations. This study investigates the key determinants influencing loan repayment performance at Grameen Koota, a leading MFI in the Bangalore district. Employing a comprehensive mixed-method approach, the research integrates quantitative analysis of loan repayment data from 50 borrowers with qualitative interviews involving 20 borrowers and five loan officers. The findings indicate that borrower income stability, financial literacy, loan size, and loan duration significantly affect repayment performance. Specifically, higher income stability and greater financial literacy correlate with better repayment rates, while smaller loan sizes and shorter loan durations enhance repayment performance. Qualitative insights emphasize the importance of solid borrower relationships with loan officers and community support systems in addressing repayment challenges. These relationships and support mechanisms are crucial for timely and successful loan repayment. This paper contributes valuable insights into the microfinance sector within the urban Bangalore context, adding to the limited research on repayment determinants in MFIs operating in urban Indian settings. The study suggests that implementing financial literacy programs, offering manageable loan sizes, and fostering robust borrower support systems can significantly improve loan repayment rates. The research highlights the need for MFIs to focus on borrower education and community engagement to enhance financial inclusion and sustainability. This comprehensive analysis of loan repayment performance at Grameen Koota offers practical recommendations for MFIs to improve their operational strategies and better serve their clients, ultimately contributing to the broader goal of financial inclusion and economic development.

Review of Literature on Determinants of Loan Repayment Performance in Microfinance Institutions

This article presents a comprehensive literature review on the determinants of loan repayment performance in microfinance institutions (MFIs). The review aims to enhance the understanding of borrower behaviour regarding loan repayment, focusing on socio-economic, institutional, and motivational factors. It synthesises findings from various studies, including the Indian Institute for Mother and Child (IIMC), a nonprofit Indian MFI, to identify critical determinants influencing borrowers' ability to repay loans. Factors such as income stability, education level, financial literacy, and family size are highlighted as significant socio-economic determinants. Loan-specific factors, including loan size, repayment period, and supervision, are also critical. Institutional practices like credit assessment techniques, loan structuring, and technological adoption are examined alongside social factors such as peer pressure, social cohesiveness, and community support systems. Additionally, the review explores borrowers' motivation for taking out additional loans, finding that the drive to reach the maximum loan level positively impacts repayment performance. Empirical evidence suggests that repayment rates increase as borrowers approach their loan limits. The article concludes with recommendations for MFIs to improve their operational strategies by addressing these determinants, thereby enhancing loan repayment rates and contributing to the sustainability and effectiveness of microfinance programs.

Loan Repayment Performance on Smallholder Tobacco Contract Farmers. A Case of Ward 21 Marondera District, Mashonaland East Province

This study examined the factors affecting loan repayment performance among smallholder tobacco contract farmers in Mashonaland East Province in Marondera District, Ward 21. The study was a quantitative research. A total of 222 respondents were administered with structured questionnaires to provide the relevant information. The information was gathered from respondents in Ward 21 Marondera District using the multistage sampling technique. A Linear regression model was applied to analyse factors that affected tobacco output and a Probit model was applied to analyse factors that affected loan repayment performance among smallholder tobacco farmers. The majority of the respondents who participated were males and they were the ones making household financial decisions. Results from the linear regression model showed that of the 9 variables that were tested, education level, tobacco land irrigation land and farm experience were significant at a 5% level of significance. Results from the probit model showed that of the 27 variables that were tested, household size, land size, experience, other loans due, other crop enterprise, loan purpose, other sources of income and side marketing were found statistically significant at a 5% level of significance. Therefore, it is recommended that the lenders pay much attention to land size, experience and the size of households of the farmers before extending credit to them as these were found to be contributing the highest variance in loan repayment performance

The Effect of Financial Literacy on Loan Repayment Performance of MSMEs: A Literature Review

Credit loans among MSMEs are beneficial for business sustainability. The quality of a credit loan is a concern to avoid default, so the topic of loan repayment performance is interesting to explore. This study summarizes and analyzes several previous studies related to the topic of the influence of financial literacy on business performance among MSMEs, as well as the influence of financial literacy on loan repayment performance. Based on a literature study conducted, financial literacy was found to have a significant influence on business performance and loan repayment performance among MSMEs. This study found gaps in previous research, there are still limited studies that provide a comprehensive framework explaining how financial literacy influences loan repayment performance directly or through business performance variables. Therefore, it is important to research further, how an MSME manager who accesses credit to run his business can achieve optimal business performance, where the results will be used for loan repayment. This research proposes business performance as a mediating variable that could be considered in future research.
 Keywords: financial literacy, business performance, loan repayment performance

Does multiple borrowing and COVID-19 pandemic matter in a microfinance contract?

PurposeTo improve the loan repayment performance (LRP) of microfinance banks (MFBs) in Pakistan, this study aims to look at the direct impact of multiple borrowing (MB) on LRP and client-business performance (CBP), as well as the direct impact of CBP on LRP. The moderating function of pandemic factors in the relationship between MB and CBP, as well as the mediating effect of CBP in the association between MB and LRP, was also investigated in this study.Design/methodology/approachA questionnaire was used to obtain data from 531 lower-level workers of microfinance institutions (MFIs) for the study. The respondents were chosen using stratified sampling, which divided the target population into four influential groups: lending officers in agriculture, lending officers in businesses, lending officers in gold loans and lending officers in salary loans. In this study, a two-stage structural equation modeling approach was used, including a measurement model (outer model) and a structural model (inner model). The validity and reliability of the questionnaire were investigated using the measurement model (outer model), whereas PLS-SEM bootstrapping was performed to test the hypothesis and find the relationship among different underpinning constructs by using the structural model (inner model).FindingsThe outcomes of this study demonstrate that MB has a direct impact on CBP, and that CBP has a direct impact on LRP. MB, on the contrary, had no direct and significant impact on LRP in this study. The idea that CBP mediates the relationship between MB and LRP, as well as the moderating effect of pandemic factors on the relationship between MB and CBP, is supported by this research.Originality/valueUntil now, the influence of MB on LRP via the mediating role of CBP and the moderating role of a pandemic factor in the setting of Pakistani MFBs has received little attention. During the COVID-19 pandemic, this research also aids MFBs in better understanding MB and its impact on LRP. Furthermore, based on the findings of this study, Pakistani MFIs can enhance their LRP by implementing new lending regulations, particularly with reference to MB and the COVID-19 pandemic.

Bank Credit and Loan Repayment Rates During Covid-19 In Kabale District: A Case of Lyamujungu Sacco

The objective of the study was to investigate the impact of bank credit on loan repayment rates in the Kabale region using Lyamujungu SACCO as the case study. Loan repayment performance at Lyamujungu SACCO has rapidly declined. The loan manager said the situation was getting worse and there was almost no ability to repay the loan. This has to do with the borrower's personality, solvency, and credit history. Members will flee from SACCO if the situation persists. The objectives of the study are:To establish the effect of borrower characteristics on loan repayment during COVID-19 in Lyamujungu SACCO, Examine the impact of borrower's loan solvency on repayment during the COVID-19 pandemic in Lyamujungu SACCO and Determining the effect of borrower's credit term on repayment during the COVID-19 pandemic at Lyamujungu SACCO. This study used a cross-sectional survey method to examine, characterize and compare bank credit and loan repayment in Kabale district, using Lyamujungu SACCO as the case study. The sample size for each subject type was determined using the table of Krejcie and Morgan (1970) cited in Amin (2005). Out of 150 samples, a sample of 108 people was selected for the study. The researcher used both purported sampling and simple random sampling to select members/clients of SACCO. The simple stochastic method is suitable for large numbers like SACCO customers. Based on the results in the table, the null hypothesis for all three variables is rejected, with a significance level of (p = <.000, p = <.040, and p = <.001) for " The average score of the borrower's character during the repayment period", "The average score of the borrower's capacity during the repayment period" and "The average score of the borrower's credit periods during the repayment period debt" respectively. This means that there is evidence that the distribution of mean scores for each of the three variables is not the same depending on the borrower's ability to repay. The study concluded that labor productivity growth decreased and therefore income decreased, investment decreased and affected the borrower's ability to repay loans during the covid-19 pandemic in lyamujungu SACCO. The study recommends that SACCOs conduct a pre-customer assessment before granting a loan and an ongoing review process before and during loan repayment. This way, the bank will be able to know the exact trajectory of the borrower's performance in terms of repayment. This should be reinforced by effective customer relationship management, where the bank acts as more than just a source of credit

Determinants of Repayment for Youth Development Fund Loans in Tanzania

The study intended to identify factors influencing youth group loan repayment for the Youth Development Fund (YDF) in Tanzania. This study utilizes cross-sectional primary data from structured questionnaires and interviews with 388 individuals in the Butiama District of the Mara Region. The analysis involved descriptive statistics and econometric estimation using the ordinal logistic regression model. As per descriptive analysis results, this study provides a comprehensive analysis of socio-economic and institutional factors distinguishing loan defaulters from non-defaulters among youth participants in Tanzania's loan programs. Significant variations, supported by p < 0.05, highlight that non-defaulters possess more leadership experience, exhibit superior business performance, undergo increased training, and are in closer proximity to lending institutions. The study reveals noteworthy differences in demographic factors such as marital status, education, belief in societal employment, and types of financed projects between the two groups. Misappropriation of funds, peer pressure, and economic shocks are identified as key contributors to loan defaults, emphasizing the need for targeted interventions and vigilant monitoring for enhanced loan repayment and project success. Moreover, the econometric estimation using the ordinal logistic regression model, with statistical significance at a 5% level, demonstrates that independent factors account for 85.5% of the variation in loan repayment performance among youth groups. The study encounters societal views favoring employment over entrepreneurship, revealing a negative impact on youth loan repayment. Factors like loan diversion, peer pressure, group size, and entrepreneurship training emerge as significant determinants of loan repayment performance, providing valuable insights. In conclusion, the study underscores the critical importance of tailored interventions for addressing challenges faced by youth borrowers. Misappropriation of funds, peer pressure, and economic shocks require nuanced mitigation strategies. Policy recommendations encompass refining loan structures, enhancing training programs, and challenging societal norms favoring employment over entrepreneurship. Tailored interventions with strengthened monitoring, addressing socio-cultural attitudes, and internal control reinforcement are suggested for sustained success in youth-focused financial initiatives through continuous research and policy adaptation.

The impact of green credit distribution on bank performance and influencing factors

This research aims to analyze the impact of green credit distribution by banks on bank performance and identify factors that can influence green credit. The study utilizes data from 46 banks in Indonesia during the 2018-2022 period, by using the panel data regression method. The findings indicate (i) that green credit does not have a significant influence on credit risk, as measured by the NPL (Non-performing Loan). The distribution of more green credit allocations does not result in a decrease in bank credit risk. Additionally, sustainable business borrowers do not exhibit better debt repayment performance compared to the non-sustainable business category. (ii) In terms of bank profitability, green credit does not impact ROE (Return on Equity) and NIM (Net Interest Margin), but it does have a negative effect on ROA (Return on Assets). Banks that allocate a significant portion of their credit distribution to green initiatives tend to experience a decline in their profits. (iii) Bank size has a positive impact on the allocation of green credit, with larger banks dedicating a greater portion to the distribution of green credit. Larger banks possess more capital and extensive networks, making them better equipped to address potential risks compared to smaller banks. (iv) Meanwhile, government ownership and good corporate governance in banks do not influence the proportion of green credit distribution. The author recommends that the government make corrections to existing green financing programs, to cultivate a green credit ecosystem in Indonesia. One concrete step that can be taken is to support government-owned banks in becoming pioneers in the distribution of green credit in Indonesia.

Bank Credit and Loan Repayment Rates during COVID-19 in Kabale District, Uganda

The study was to investigate the impact of bank credit on loan repayment rates in the Kabale region using Lyamujungu SACCO as the case study. Loan repayment performance at Lyamujungu SACCO has rapidly declined. This study used a cross-sectional survey method to examine, characterize and compare bank credit and loan repayment in Kabale district, using Lyamujungu SACCO as the case study. The sample size for each subject type was determined using the table of Krejcie and Morgan. Out of 150 samples, a sample of 108 people was selected for the study. The researcher used both purported sampling and simple random sampling to select members/clients of SACCO. Based on the results in the table, the null hypothesis for all three variables is rejected, with a significance level of (p = <.000, p = <.040, and p = <.001). This means that there is evidence that the distribution of mean scores for each of the three variables is not the same depending on the borrower's ability to repay. The study concluded that labor productivity growth decreased and therefore, income decreased, investment decreased and affected the borrower's ability to repay loans during the COVID-19 pandemic in Lyamujungu SACCO.

Local Wisdom, Dignity, Trust, and the Construction of Social Collateral for Micro Financing

Micro business plays an important role in poverty alleviation. Yet, its development is constrained by the absence of access to banking at a reasonable cost. This is simply due to the unavailability of collateral to back up the loan/financing. Actually, the lack of physical collateral may be substituted by social collateral that informally exists in society and the micro-business community. Therefore, there has to be an effort to officialize and construct the social collateral in order for the banking industry to admit and accept it as collateral. This work begins with research on the effect of social capital on repayment performance. This is to the extent that the effect of social capital has long been recognized by many economists, even though not formally theorized. Yet, there are ample notions stating that there is a close relationship between those variables. This research was carried out to see in more detail the role of local wisdom, approached from religiosity. This research was accomplished using a survey method, which got primary data directly from the respondents. The ground of research was the Southern Region of Kedu, Central Java, Indonesia. The results suggest that religiosity shares the effect with social dignity as well as trust and they all show to be dominant variables affecting repayment. The implication is it seems better for both the government and banking industry to consider this arrangement a substitute for physical collateral. Moreover, the construction of social collateral is, indeed, in accord with the uncovered fact. Originality/Value: This paper addresses the issue of loan repayment in Islamic micro financing. Because of the unavailability of collateral in small and micro firms to support loans or financing, this study examines the importance of social capital to substitute physical collateral in dealing with repayment performance.

Determinants of Repayment Performance of Agricultural Loans Clients of RBDI, Abuyog Branch

The study aimed to present the profile of the agricultural loan clients of RBDI, describe the loan assessment process, describe the loan monitoring process in RBDI, identify the determinants of loan repayment performance of RBDI agricultural loan clients and to recommend courses of action to improve loan application assessment, loan monitoring, and loan collection activities of RBDI. The study used the Logit Regression Analysis and the model Y = β0 + β1X1 + β2X2 + β3X3 + β4X4 + . . . . . . . βnXn + e was developed. The binary response is non-payment (default) and payment (non-default). The determinants were the socio-demographic and socio-economic characteristics of the agricultural loan clients, as well as the loan application and monitoring activities of the bank. The profile of the agricultural loan clients of RBDI showed commonalities of the clients in terms of age (63% are above 45 years old), most of them were not able to finish college (53% secondary level) and most are married (77%) with more than 3 dependents (73%). Age was determined as a statistically significant factor affecting the non-payment or loan default. The increase in family size and schooling dependents also raises the probability of default. The result that higher educational level and increase in dependents reduces the probability of default has to be further verified. As the size of land increases and the farming experience increases, the probability of loan default decreases.

A Study on Loan Delinquency of the Self Help Group-Bank Linkage Programme in Rural Rajasthan

Abstract Research background Providing the microfinance to rural women is the prime concern of the government at central and state level in which the best microfinance programme is the Self Help Group Bank Linkage Programme. However, the Delinquency rate of the SHGBLP loan is on the higher side. As, borrowers do not make their loan repayments on time. Purpose The purpose of this research is to examine which types of self-help groups make timely repayments of an old loan. Also, to find out the different aspects of the loan delinquency rate which affect them and to find out the impact of self-help group maturity on loan repayment. Research methodology For this a total of 300 members were selected from the Udaipur and Banswara district of Rajasthan. Further, Tobit Regression has been applied to find out the factors which affect the loan delinquency percentages in the Self Help Group Bank Linkage Programme. Results The results highlighted that the maturity of the SHG group affects their repayment performance as old SHGs are functioning well in terms of repayment. The reason for the high delinquency rate is that the members had no surplus Income to repay back because of the failure of Business, natural calamities and medical issues. The members who are repaying the loan back on time are giving from their agriculture and enterprise profits. Novelty A lot of research has been carried out on the Impact of SHGBLP on many other factors but there is no research that has been done to find out why the programme has high loan delinquencies after being the best together with the impactful microfinance programme.

Willingness and capacity of borrowers for loan repayment among farmers in Delta State Nigeria

Willingness of borrowers to repay loan and their capacity to repay borrowed fund has been an enigmatic challenge in the financing of agricultural enterprises in the tropics. As it stands, there is lack of empirical information on willingness of borrowers to repay loan and their capacity to repay credit. Investigating this challenge will improve agriculture in Delta state, Nigeria. This study derives its significance from its implications and usability among credit institutions. This study investigates willingness and capacity of borrowers for credit repayment among farmers in Delta State, Nigeria. A multistage sampling approach was used to select 216 farmers, Descriptive statistics, multiple regression, and binary logistic regression were employed in the analysis of collected data. The findings of the study show a mean amount of ₦460,972.22 was borrowed and ₦253,268.52 was repaid with a loan repayment performance of 54.94% and loan default rate of 45.1%. Further result indicates that 56.5% of farmers express willingness to repay loans, while 43.5% show unwillingness to repay borrowed fund. Further finding reveals that 40% of the farmers possess capacity to repay loan.. The study revealed that there is a significant difference in loan repayment capacity of poultry< fish, < arable crop farmers, with an F-value of 5.669 and (P≤ 0.05). Regression analysis identifies significant predictors of loan repayment capacity to include stock size, off-farm income, and farm income. Diversified income sources and effective farm management practices play crucial roles. Logistic regression indicates that longer repayment periods, larger stock sizes, and greater farming experience positively influence farmers’ willingness to repay loans (P≤0.05). It was recommended among others that financial institutions should offering flexible loan terms and sizes according to borrowers capacity. Encouraging farmers to diversify their income sources can improve loan repayment capacity of farmers.

Risk Assessment for Reimbursement of Microfinance Institutions

Purpose: Understanding the repayment behavior of the borrower is very important to the lending decisions of financial institutions and thus helps to promote the development of microfinance. This paper examines the factors that affect the repayment default of microfinance in Tunisia. Theoretical framework: Some studies highlight the importance of incorporating macroeconomic conditions for the estimation of borrowers’ credit risk (Bellotti & Crook, 2013). However, IADB (2020) announced that after the start of the Covid-19 pandemic in the region, microfinance institutions had restricted liquidity, which affected the availability of credit. Therefore, for the purpose of the present article, the literature on default in MFIs analyzes the credit risk and factors that influence granted loans Design/Methodology/Approach: We carried out a survey, with a non-stratified sample of 320 microcredit beneficiaries, during 2021 in Enda-inter-Arab agencies located in the region of Sousse- Tunisia. We introduce a binary logistic regression model to predict the values taken by a discrete variable from a series of continuous or binary explanatory variables. Findings: We show that borrowers’ socioeconomic characteristics, total loan, repayment period and past participation in microcredit loans have significant impacts, as special features, on their default rates. Research, Practical & Social implications: This paper has been designed to provide some valuable contributions in improving the repayment performance and can be significant political involvement, derived from the strong relationship between the level of poverty and the success of loan repayments. Indeed, the level of borrowers’ poverty must be given considerable weight before the loan is disbursed. Originality/Value: The results indicate that the qualification and age of the workforce should be considered a basic requirement before the granting of loan. In addition the microfinance institution's credit policy should also consider service projects a priority.

Analyzing the Effects of Credit Management Practices on Loan Repayment Performance of Microfinance Institutions in Makamba, Burundi

The ability to obtain funding is crucial to the success of microfinance institutions. To give credit to micro entrepreneurs, an individual’s credit history and worthiness is pivotal. However, loan payback performance is a barrier. Burundi's financial institutions have collapsed as a result of poor credit management. The purpose of this study was analyzing the effects of credit management practices on loan performance in Microfinance institutions. The study was based on the subsequent goals: to ascertain the impact of client evaluation on loan repayment performance benchmark; to assess how credit risk management control affect MFI loan payback performance; to determine how credit terms affects MFI’ ability to collect loan; and to ascertain how credit collection practices affect MFI loan repayment performance. Ten microfinance Institutions registered in the Makamba province of Burundi were used. Purposive sampling was employed as the sample method in this investigation. Target population of study was 134 and sample size was 100 from using Yamane’s formula. Mean, frequency and standard deviation were also the main descriptive statics employed. Primary data from credit officers, managers’ officers, finance and accounting officers, cashiers, control officers and recovery officers of all microfinance Makamba, Burundi were used. To be utilized to gather main information on credit management techniques, structured questionnaires were used to gather primary data on existing microfinance loan records. The secondary data about the documentation reports related to the loan performance of microfinance institutions for the period 2018-2021 was verified to ensure whether those MFIs recorded loan repayment performance or not. Findings revealed that the Pearson Chi-Square value is 85.226, and the Likelihood Ratio value is 85.656. These values represent the chi-square test statistics for the association between the variables of interest (credit collection policy and loan repayment performance). In both cases, the p-value is 0.000, indicating a statistically significant association between the variables. Multiple linear regressions indicated that client evaluation had the highest positive correlation of 0.141 proves that there existed a positive significant relationship between client evaluation and loan repayment performance while credit risk control had a negative correlation of -0.014, credit terms had no correlation since its beta value was found to be 0.00 and credit collection policy had a negative correlation of -0.014. Evaluating clients' characteristics, such as moral character and creditworthiness, before granting loans is important for microfinance institutions. Microfinance institutions should focus on implementing robust credit risk control mechanisms to mitigate default risk and improve overall repayment rates. There is need for investigate the long-term effects of credit management practices on loan repayment performance by conducting longitudinal studies that track borrowers and analyze their repayment behavior over an extended period.

Factors Influencing Loan Repayment Performance among Smallholder Rice Farmers under the Anchor Borrower Programme in Sokoto State, Nigeria

Factors Influencing Loan Repayment Performance among Smallholder Rice Farmers under the Anchor Borrower Programme in Sokoto State, Nigeria