An Evaluation of Factors influencing Loan Default among Group Borrowers of Deposit Taking Microfinance Banks in Kenya
Journal Title: IOSR Journal of Economics and Finance (IOSR-JEF) - Year 2018, Vol 9, Issue 6
Abstract
Microfinance is provision of small amount of institutional credit and saving to jointly liable low income people, who are unable to obtain loans from formal sector banks for lack of collateral. There has been a decrease in in employment levels, client’s business closures and cash flow problems in Microfinance institutions in Kenya which is occasioned by high default or non repayment of loans lend to borrowers. The purpose of this study was to evaluate the factors influencing loan default among group borrowers in microfinance banks in Kenya. The study was carried out in microfinance bank in Kenya. The theories discussed were; Pearson Greeff Theory, Group Developmental Stage Theory, Grameen theory and Peer pressure model. The study adopted descriptive research design. A survey was carried out to the factors affecting default among group borrowers of Deposit taking Microfinance banks in Kenya. A sample of respondents was drawn from relationship officers of microfinance banks in Kenya. The study used only primary data. Primary data was collected using structured questionnaires which were issued to the sampled relationship officers. Data collected was analysed using inferential statistics andthe results of the analysed data revealed that loan sizes has a significant influence on loan default among group borrowers while, group cycle, loan cycle and borrowers’ education do not have a significance influence. The results of the linear regression analysis revealed that the combined effect of Group Life Cycle, Loan Size, Group borrower’s education levels and Loan Cycle only explained 10.6% of the total variations in loan default risk. This means that about 89.4% of the variations in loan default are accounted for by other factors not within the scope of the study.
Authors and Affiliations
Jefferson K. Kasango, James N. Kung’u
Keywords
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- EP ID EP416537
- DOI 10.9790/5933-0906026270.
- Views 187
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