Journal of Investment and Management

| Peer-Reviewed |

Interest Rate, Corporate Membership and Loan Repayment by Borrowers from Micro-Financial Institutions in Nakuru County

Received: 13 September 2016    Accepted: 20 October 2016    Published: 20 February 2017
Views:       Downloads:

Share This Article

Abstract

The purpose of this study was to determine the relationship between interest rate, corporate membership and loan repayment in MFIs in Nakuru County. The study was guided by two objectives; to investigate the role of interest rate in loan repayment in MFIs in Nakuru County and to analyze the role of corporate membership in loan repayment in MFIs in Nakuru County. The study adopted correlation design and was guided by multiple regression models. The study collected data through structured questionnaires that had adequate research items on every research indicator. Collected data was analyzed using STATA and results were presented using tables. The findings of the study revealed that interest rate is not a determinant of loan repayment in Micro Financial Institutions in Nakuru County and it was concluded that interest rate charged on a loan does not impact on repayment. Similarly, it was evident that corporate membership is not significant determinant of loan Repayment in micro financial institutions in Nakuru County. The study recommends that institutions should establish a close relationship between the lenders and the borrower through monitoring, business advice and regular meetings. The institution can also develop a reward system to those borrowers who repay their loans on time through discounts on subsequent loans and savings. Further studies should be conducted to examine if the following determinants are associated with loan repayment in MFIs period of membership, security given, utmost good faith, consistency of payment during previous loan and social problems.

DOI 10.11648/j.jim.20170601.16
Published in Journal of Investment and Management (Volume 6, Issue 1, February 2017)
Page(s) 37-43
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Interest Rate, Corporate Membership, Loan Repayment

References
[1] Armendariz, G.. & Murdoch, G.. (2007). The Economics of Microfinance MIT Press Cambridge, MA, U.S.A.
[2] Wongnaa C. A. & Awunyo V. (2013). Factors Affecting Loan Repayment Performance among Yam Farmers in the Sene District, Ghana Vol V No2 2013Agris on-line Papers in Economics and Informatics.
[3] Chaudhary, M. A., & Ishfaq, M. (2003). Credit worthiness of rural borrowers of Pakistan. The Journal of Socio-Economics, 32, 675-684.
[4] CBS-GoK, (2007). Economic survey, Ministry for Planning and National Development, Nairobi.
[5] Abdullah A. Mamun, C. A. & Mariapun S. (2010). Examining Critical Factors Affecting the Repayment of Microcredit of Malaysia.
[6] Abdullahi S. (2008). Factors Affecting Loan Repayment Perfomance of Women in Ethiopia. Analysis of the case of Harari Microfinance Institutions.
[7] Adeyemo R, Agbonlahor, M. U. & Oke, J. T. O. (2007), an empirical Analysis of Micro credit repayment in South Western Nigeria. Human and social sciences journal 2(1): 63-73; 2007.
[8] Hooman M. & Mohammed R. (2008), Factors influencing on repayment behavior of Khorazan Province.
[9] Linsky, K. (2008). The Innovative Entrepreneur, Macmillan Publishers, Nairobi.
[10] Oladebe O. L, Oni O. A and Oyewole I. K (2005). An Analysis of Factors Influencing loan Default Among Poultry Farmers in Nigeria.
[11] Oladeebo. J. O and Oladeebo O. E, (2008) Determinants of loan repayment among smallholder Farmers in Ogbomoso Agricultural Zone of Oyo state. Journal of Social Science 17 (1): 59-62.
[12] Paul, S. (2008). The New Born Day in Cooperative Loans, McGraw Hill, Southampton.
[13] Mugenda M. O. & Mugenda A. G.. (2003). Research Methods: Quantitative & Qualitative approaches, Nairobi Acts Press.
[14] Roslan, A. H., & Abd Karim, M. Z. (2009). Determinants of microcredit repayment in Malaysia: The case of Agrobank. Humanity & Social Sciences Journal, 4 (1), 45-52.
[15] Mudida, (2003). Modern Economic (Nairobi: Focus Publication Ltd.).
[16] Brehanu, A., & Fufa, B. (2008). Repayment rate of loans from semi-formal financial institutions among small-scale farmers in Ethiopia: Two-limit Tobit analysia. The Journal of Socio-Economics, 37, 2221-2230.
[17] Smith, P., & Thurman, E. (2007). A billion Strarp: Microcredit, Barefoot banking, and The business Solution for Ending Poverty New York: McGraw Hill
[18] Republic of Kenya, (2012) Small Medium Entrepreneur program (SMEP) journal.
[19] George O., (2005). Regulation and supervision of microfinance institutions in Kenya. Central bank of Kenya.
[20] Afolabi, F. (2010). Analysis of loan repayment among farmers in oyo state Nigeria Kampla-Raj 2010 soc sci, 22920; 115: 119, (2010).
[21] Aleke D., (2005). The status of microfinance in Kenya.
[22] Hoff, F. & Joseph S. (2000). World Bank report No 58Fehr, E. and Fischbacher, U (2002). Why social preferences matter |the impact of non-selfish motives on competition, cooperation and incentives. The Economic Journal 112 (478), pp. C1 C33.
[23] Francis N. & Abel A. K., (2009). Determinants of loan repayment performance in microcredit institutions: evidence from Tanzania.
[24] Consultative Group to Assist the Poor C GAP G8 Microfinance policy document.
[25] Priscilla N. W., (2011). Factors that Influence the Demand for Credit for Credit Among Small-Scale Investors: a case study of Meru Central District, Kenya. Research Journal of Finance and Accounting. 2, (2).
[26] Cassian N. J. (2008). Central bank of Kenya. The status of Micro financial institutions in Kenya.
[27] Stephen S., (2011). Factor influencing repayment of loan among group borrowers case study of group business in Bungoma District.
[28] Yunus, M. (2004). Banker to the Poor: The Autobiography of Muhammad Yunus, Founder of Grameen Bank, Oxford University Press: USA, ISBN 0-19-579537-7.
[29] Vogelgesang, A. (2003). Microfinance in Times of Crisis: The Effect of Competition, Rising Indebtedness, and Economic Crisis on Repayment Behavior” World Development. 31 (2).
[30] Daley-Harris, S. (2006). State of the Microcredit Summit. Available at www.microcreditsummit.org/pubs/reports/socr/Z2006/SOCRφ6.pdf.
[31] Bestwand, J. (2006). Research in education (6th edition).
[32] Singel N. (2003). Research Methods for managers. A skill-building approach (2nd ed). New York; wily Publishers.
[33] Cooper D. R. and Schindler P. S. (2003). international Edition; Business Research Methods 8thed; New Deihi; Mac Graw-Hill.
[34] CBS-GoK (2003). Economic Survey, Report by Task Force on Micro and Small Scale Enterprises: Nairobi. Ministry of Labour and Human Resource Development, Nairobi.
[35] David Wood, (2011). Impact Investing A Framework for Policy Design and Analysis Microfinance Act Case Study 11: Republic of Kenya, (2010). Microfinance in Kenya Country Briefing, Washington, DC: www.mixmarket.org/mfi/country/Kenya/report.
[36] Peng C. J. and Lee, G. M. Ingersoll (2002). An Introduction to Regression Analysis and Reporting; The Journal of Educational Research, 96 (1).
[37] Godquin, M. (2004). “Microfinance Repayment Performance in Bangladesh: How to Improve the Allocation of Loans by MFIs”, World Development, Vol. 32, (11), 1909-1926.
[38] Akerlof, G. A. (2010). “Procrastination and Obedience,” Working Papers Series No.13, Institute for Policy Reform, Washington, D. C.,
[39] Adams, D. And Canavosi, M. L (2008). “Rotating Savings and Credit Associations in Bolivia” Informal Finance in Low-Income Countries ed. Adams, D. W. and Fitchett, D. A., Westview Press, Boulder, CO.
[40] Hart, O., and Holmström, B. (2005) “The Theory of Contracts” Advances in Economic Theory ed. T. Besley, Cambridge University Press, Cambridge.
[41] Republic of Kenya, (2013). Associations of Micro Financial institution in Kenya (AMFI-K) Report.
Author Information
  • School of Business, Kenyatta University, Nairobi, Kenya

Cite This Article
  • APA Style

    Wafula Nathan Wamalwa. (2017). Interest Rate, Corporate Membership and Loan Repayment by Borrowers from Micro-Financial Institutions in Nakuru County. Journal of Investment and Management, 6(1), 37-43. https://doi.org/10.11648/j.jim.20170601.16

    Copy | Download

    ACS Style

    Wafula Nathan Wamalwa. Interest Rate, Corporate Membership and Loan Repayment by Borrowers from Micro-Financial Institutions in Nakuru County. J. Invest. Manag. 2017, 6(1), 37-43. doi: 10.11648/j.jim.20170601.16

    Copy | Download

    AMA Style

    Wafula Nathan Wamalwa. Interest Rate, Corporate Membership and Loan Repayment by Borrowers from Micro-Financial Institutions in Nakuru County. J Invest Manag. 2017;6(1):37-43. doi: 10.11648/j.jim.20170601.16

    Copy | Download

  • @article{10.11648/j.jim.20170601.16,
      author = {Wafula Nathan Wamalwa},
      title = {Interest Rate, Corporate Membership and Loan Repayment by Borrowers from Micro-Financial Institutions in Nakuru County},
      journal = {Journal of Investment and Management},
      volume = {6},
      number = {1},
      pages = {37-43},
      doi = {10.11648/j.jim.20170601.16},
      url = {https://doi.org/10.11648/j.jim.20170601.16},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.jim.20170601.16},
      abstract = {The purpose of this study was to determine the relationship between interest rate, corporate membership and loan repayment in MFIs in Nakuru County. The study was guided by two objectives; to investigate the role of interest rate in loan repayment in MFIs in Nakuru County and to analyze the role of corporate membership in loan repayment in MFIs in Nakuru County. The study adopted correlation design and was guided by multiple regression models. The study collected data through structured questionnaires that had adequate research items on every research indicator. Collected data was analyzed using STATA and results were presented using tables. The findings of the study revealed that interest rate is not a determinant of loan repayment in Micro Financial Institutions in Nakuru County and it was concluded that interest rate charged on a loan does not impact on repayment. Similarly, it was evident that corporate membership is not significant determinant of loan Repayment in micro financial institutions in Nakuru County. The study recommends that institutions should establish a close relationship between the lenders and the borrower through monitoring, business advice and regular meetings. The institution can also develop a reward system to those borrowers who repay their loans on time through discounts on subsequent loans and savings. Further studies should be conducted to examine if the following determinants are associated with loan repayment in MFIs period of membership, security given, utmost good faith, consistency of payment during previous loan and social problems.},
     year = {2017}
    }
    

    Copy | Download

  • TY  - JOUR
    T1  - Interest Rate, Corporate Membership and Loan Repayment by Borrowers from Micro-Financial Institutions in Nakuru County
    AU  - Wafula Nathan Wamalwa
    Y1  - 2017/02/20
    PY  - 2017
    N1  - https://doi.org/10.11648/j.jim.20170601.16
    DO  - 10.11648/j.jim.20170601.16
    T2  - Journal of Investment and Management
    JF  - Journal of Investment and Management
    JO  - Journal of Investment and Management
    SP  - 37
    EP  - 43
    PB  - Science Publishing Group
    SN  - 2328-7721
    UR  - https://doi.org/10.11648/j.jim.20170601.16
    AB  - The purpose of this study was to determine the relationship between interest rate, corporate membership and loan repayment in MFIs in Nakuru County. The study was guided by two objectives; to investigate the role of interest rate in loan repayment in MFIs in Nakuru County and to analyze the role of corporate membership in loan repayment in MFIs in Nakuru County. The study adopted correlation design and was guided by multiple regression models. The study collected data through structured questionnaires that had adequate research items on every research indicator. Collected data was analyzed using STATA and results were presented using tables. The findings of the study revealed that interest rate is not a determinant of loan repayment in Micro Financial Institutions in Nakuru County and it was concluded that interest rate charged on a loan does not impact on repayment. Similarly, it was evident that corporate membership is not significant determinant of loan Repayment in micro financial institutions in Nakuru County. The study recommends that institutions should establish a close relationship between the lenders and the borrower through monitoring, business advice and regular meetings. The institution can also develop a reward system to those borrowers who repay their loans on time through discounts on subsequent loans and savings. Further studies should be conducted to examine if the following determinants are associated with loan repayment in MFIs period of membership, security given, utmost good faith, consistency of payment during previous loan and social problems.
    VL  - 6
    IS  - 1
    ER  - 

    Copy | Download

  • Sections