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DETERMINANT OF LOAN PREPAYMENT OF MICROFINANCE BANKS IN NIGERIA

Table of contents

CHAPTER ONE: Introduction                                                                                              1

1.1       Background to the Study                                                                                           1

1.2       Statement of the Problem                                                                                           3

1.3       Objectives of the Study                                                                                              4

1.4       Research Questions                                                                                                     4

1.5       Hypotheses                                                                                                                 4

1.6       Significance of the Study                                                                                           5

1.7       Scope of the Study                                                                                                     5

1.8       Organization of the Study                                                                                          5

CHAPTER TWO: Literature Review                                                                                     6

2.1       Conceptual Review                                                                                                     6

2.1.1    Microfinance and Microfinance Institutions                                                              6

2.1.2    Evolution of Microfinancing                                                                                      9

2.1.3    Evolution of Microfinance Institutions in Nigeria                                                      12

2.1.4    Types and Characteristics of Microfinance Institutions                                             13

2.1.5    Concept of Loan Repayment Default                                                                        16

2.2       Theoretical Review                                                                                                     17

2.2.1    Loan Pricing Theory                                                                                                   17

2.2.2    Credit Market Theory                                                                                                 18

2.3       Empirical Review                                                                                                        19

2.3.1    Determinant Factors Affecting Loan Repayment                                                      23

2.3.1.1 Demographic Factors                                                                                                  23

2.3.1.2 Economic Factor                                                                                                         25

2.3.1.3 Cultural Factors                                                                                                          26

2.3.1.4 Loan Factors                                                                                                               26

2.3.1.5 Institutional Factors                                                                                                    28

CHAPTER THREE: Methodology                                                                                        30

3.1       Research Design                                                                                                         30

3.2       Population of the Study                                                                                              30

3.3       Sample Size and Sampling Procedure                                                            30

3.4       Instrumentation                                                                                                           30

3.5       Validity of Instrument                                                                                                            31

3.6       Reliability of Instrument                                                                                             31

3.7       Procedure for Administration of Instrument                                                              31

3.8       Model Specification                                                                                                    31

3.9       Method of Data Analysis                                                                                           32

CHAPTER FOUR: Data Analysis and Interpretation of Results                                          33

4.1       Demographic Distribution of Respondents                                                                33

4.2       Descriptive Analysis of Questionnaire Items                                                             35

4.3       Test of Hypotheses                                                                                                     39

4.4       Discussion of Findings                                                                                               44

CHAPTER FIVE: Summary, Conclusion, Recommendations                                              47

5.1       Summary                                                                                                                     47

5.2       Conclusion                                                                                                                  47

5.3       Recommendations                                                                                                      48

References                                                                                                                              49

Appendix                                                                                                                                55

Abstract

Loan repayment performance have known to be influenced by a myriad of factors such as interest rate, unstable prices of agricultural commodities, and the social relations and responsibilities of the borrowers among others. This study was investigated to determine loan repayment of microfinance banks in Nigeria. It further examine if the socio-economic characteristics of borrowers such as income, sex, age, education status will determines their loan repayment and analyzing the determinants of loan repayments among the microcredit finance group.

            The study adopted a survey approach. One hundred and fifty (150) copies of structured questionnaire, designed in accordance with the aforementioned objectives of the study were distributed to three Microfinance banks in Ijebu-North Local Government Area; they are Apple Microfinance Bank, Oru; Orisun Microfinance Bank, Ago-Iwoye and; OOU Microfinance bank. The data generated from the survey was analysed using descriptive statistics such as frequency count and simple percentage for the demographic data while ANOVA was used to test the hypotheses stated in the study.

            Findings of the study revealed that there was no significant impact of income on loan repayment (X2c=61.362, p>.05). and also the analysis showed that there was no significant impact of age on loan repayment (X2c=28.164, p>.05). The implication of this is that the borrowers are not using their income to service their loan or they are not making profit as expected from their businesses.

            It was concluded that there was no significant difference in the determinant (income, gender, educational status and interest) on loan repayment among the microcredit finance group members. Among other recommendation is that enhancing the borrowers’ products marketability, financial management and accounting course through training in order to boast their business performances for reasonable profit to accrue for settlement of the loan they borrowed. 

 

Word Count: 263

Keyword: Determinant of Loan, Repayment, Microfinance Bank, Income, Gender,

Educational Status and Interest. 

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