Determinants of Loan Repayment Default in Micro-finance Institutions in Kenya
Abstract
The purpose of this survey was to determine the loan repayment determinants examine
the determinants defaults in MFI(microfinance institutions) in Kenya. Specifically the
research sought to establish the effect of lenders, characteristics, borrowers’
characteristics, loan characteristics and business characteristics on repayment of loan
default in MFI(microfinance institutions) in Kenya. A CSD(cross-sectional design)
was used to collect information from a sampled population which representated a
larger population of the study area. The target population of this research study was 49
MFIs operating and registered in Nairobi County in Kenya as per the AMFI-K 2016
Annual Report. These MFIs are regulated and licensed by CBK under the
microfinance Act of 2006 and the Microfinance Regulations for Deposit Taking MFIs
of 2008. The study used a census method and involved all the MFIs based in Nairobi
County. The study applied purposive sampling technique to select one loan officers
from every institution and one customer from the MFIs giving a sample size of 98
respondents. Questionnaires were used to gather primary data that was analyzed using
regression model and SPSS(statistical package for social sciences software). The study
showed that there was a significant relationship between lenders characteristics,
borrowers’ characteristics, loan characteristics and business characteristics and loan
repayment default in microfinance institutions in Kenya. However, loan characteristics
had an insignificant relationship with loan repayment default. It was concluded that
there was a significant relationship between lenders characteristics, borrowers’
characteristics, and business characteristics and the repayment of loans among clients
in Kenya. The survey saw it fit that MFIs require supervision for the repayment and
utilization of loans. MFIs should apply CRM(credit risk management) that is effective
and effecientand that ensures that loans are given in a way that their payable by the
owners. They should pool together and create a CIB(credit information bureau) to a ct
as a reference platform as the loan is disbursed. MFIs should finally apply strict
policies loans advancements to make sure their given to those able to pay back and to
make sure that insider lending and other moral hazards don't occur.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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