Analysis of Factors That Affect Group Loan Repayment Performance of Microfinance Institutions in Orumba South Local Government Area of Anambra State

Abstract

Microfinance institutions (MFIs) primarily exist to offer small enterprises and poor household access to credit facilities as well as other financial products and services. MFIs in Nigeria adopt group based lending method as a strategy to encourage borrowers’ compliance with repayment obligations. Despite this strategy, repayment problem still persists in MFIs. The aim of this study is to determine those factors that affect group loan repayment performance of MFIs in Orumba South Local Government Area of Anambra State. Two research questions and two hypothesis guided the study. Five microfinance banks that engage in group lending and 53 selfhelp groups were studied. The study applied purposive sampling technique to select 61 respondents from MFIs and self-help groups. Sixteen-item questionnaire was used to elicit responses from the respondents. Mean and standard deviation were used to analyse the data collected, while Chisquare was used to test the two hypothesis. The result showed that there exist significant relationship between group’s loan repayment performance and lender-related factors, among others. The study recommended, among others, that MFIs’ management should pay more attention to those factors identified that affect loan repayment performance.