Determinants of Loan Repayment by Borrowers from Micro-Financial Institutions in Nakuru County Kenya
Journal of Investment and Management
Volume 5, Issue 5, October 2016, Pages: 64-69
Received: Sep. 8, 2016; Accepted: Sep. 19, 2016; Published: Sep. 29, 2016
Views 4655      Downloads 328
Author
Wafula Nathan Wamalwa, School of Business, Kenyatta University, Nairobi, Kenya
Article Tools
Follow on us
Abstract
Many financial institutions in developing countries provide financial services such as saving and Credit to aid several smallholder enterprises including farmers. This is an effort in line with the Millennium development goals which seeks to reduce poverty by 50% by the year 2015. However, the sustainability and continuity of the financial institutions to increase the volume of credit to stimulate the poverty reduction goal depends on the repayment rates. However many of the financial institutions have not been able to carry out these services effectively perhaps because of loan defaults of previous advances. The study used descriptive type of design. This is the design whose purpose is to provide a description of affairs as they are. The main objective of the research was to identify the determinant of loan repayment by borrowers in micro financial institutions in Nakuru County. Specific objectives were to determine the significance of level of education, level of income and age of borrowers as a determinant of loan repayment in Micro Financial Institutions in Nakuru County. The target population comprised a total of 590 loan borrowers and employees of Micro Financial institutions out of which a sample of 10%was picked using stratified random sampling on each stratum out of which a simple random was done to pick the respondent from the list of borrowers and employees, which enable every member of the population have an equal and independent chance of being selected as respondents and also simplest, most convenient and bias free selection method. The cross sectional data was collected by use of questionnaire. The data was analyzed using linear multiple regression model which quantified the determinants while the descriptive statistics was analyzed by use of frequency tables and percentages pie charts. The results showed that education level, income level and age negative were significant determinants of loan repayment. The study recommends that borrowers with low levels of income and education should be encouraged to take up loan since they are associated with loan repayment than their counterparts respectively. The study from the sample also recommends that youths should be taken serious because they are also associated with loan repayment. Nevertheless Most MFLs were going concern.
Keywords
Loan Repayment, Micro Financial Institutions, Nakuru County Kenya
To cite this article
Wafula Nathan Wamalwa, Determinants of Loan Repayment by Borrowers from Micro-Financial Institutions in Nakuru County Kenya, Journal of Investment and Management. Vol. 5, No. 5, 2016, pp. 64-69. doi: 10.11648/j.jim.20160505.14
Copyright
Copyright © 2016 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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 No 2 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 OyewoleI. 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), 2007.
[30]
Daley-Harris, .S. (2006). State of the Microcredit Summit. Available at www.microcreditsummit.org/pubs/reports/socr/Z2006/SOCRφ6.pdf.
[31]
Bestw and Kahn, 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 W., (2011).Impact Investing A Framework for Policy Design and Analysis Microfinance Act Case Study 11:
[36]
Ministry of Trade, Republic of Kenya, (2010).Microfinance in Kenya Country Briefing, Washington, DC: www.mixmarket.org/mfi/country/Kenya/report.
[37]
Peng C. J., Lee, K. L. and Ingersoll, G. M. (2002), An Introduction to Regression Analysis and Reporting; The Journal of Educational Research, 96 (1).
[38]
Godquin, M. (2004), “Microfinance Repayment Performance in Bangladesh: How to Improve the Allocation of Loans by MFIs”, World Development, Vol. 32, (11), 1909-1926.
[39]
Akerlof, G. A. (2010), “Procrastination and Obedience,” Working Papers Series No. 13, Institute for Policy Reform, Washington, D. C.
[40]
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.
[41]
Hart, O., and Holmström, B. 2005 “The Theory of Contracts” Advances in Economic Theory ed. T. Besley, Cambridge University Press, Cambridge.
[42]
Republic of Kenya, (2013). Associations of Micro Financial institution in Kenya (AMFI-K) Report.
[43]
Priscilla N. Wangai, (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 Vol 2, No 2.
[44]
Kothari, C. R. (2008). Research Methodology, (2nd Ed.). New Age International (P) Limited Publishers.
ADDRESS
Science Publishing Group
1 Rockefeller Plaza,
10th and 11th Floors,
New York, NY 10020
U.S.A.
Tel: (001)347-983-5186