Effect of Microfinance Banks’ Interest Rate on Loan Repayment Capability of Borrowers (Published)
This study examined how microfinance banks’ interest rate on loan affects repayment capability of borrowers in Lapo microfinance Bank. This study examined factors affecting loan repayment plan of borrowers; with a view on the impact of promptness of loan repayment on Micro Finance Insittution sMFI loans; and find out measurse put in place by MFsI to improve repayment plan of borrowers. Lapo Bank borrowers in Osun state branch participated in the study. A sum total of 110 customers of Lapo microfinance bank participated in the study. A structured questionnaire adapted from previous studies and grounded literature review was used in collecting data. Findings from the study showed that: there is significant effect of high interest rate of MFI on the repayment plans of borrowers’ loans, the frequency of loan repayment plan significantly has effect on borrowers’ ability to payback loan, there is significant difference in the perception of borrowers on effect of high interest rate of MFI on the repayment plans of borrowers’ loans based on gender and educational level. Also, the descriptive result showed that; Majority of the borrowers agreed that high interest rate affect loan repayment, it implied that Lapo and other microfinance bank interest rate on loan is higher compare to Deposit Money Banks. Majority of the participants believes that a single digit interest rate on loan could easy the paying back of loan. The study recommends that: Since default on loans is linked to high interest rate, MFIs should consider looking into their interest rates to encourage prompt pay menrt. This may be weighed with interest rates of Deposit money banks and made relatively lower to encourage borrowers of MFIs. KEYWORDS: Microfinance, Interestrate, Borrowers, Loan.
Citation:Olufolakemi Oludami Afrogha and Oluwamayowa Iyanuoluwa Oluleye (2021)Effect of Microfinance Banks’ Interest Rate on Loan Repayment Capability of Borrowers, European Journal of Accounting, Auditing and Finance Research, Vol.9, No. 9, pp.18-29
Keywords: Banks’, Interest Rate, Loan, Microfinance, Repayment, borrowers
Assessment of Agricultural Revolving Fund Performance in Rural Uganda (Published)
Access to agricultural credit in rural areas in developing countries is limited and it undermines growth of rural agriculture based economies. The study assessed an agricultural revolving fund performance in terms of access to inputs, repayment for inputs and access to cash loans from farmers’ groups in rural Uganda. Two hundred farmers were interviewed. A structured questionnaire was used to collect quantitative data which was analysed using bivariate and linear regression analyses. The cost of inputs (p = 0.0001, R2 = 0.437), grace period (p = 0.0001, p = 0.0001, R2 = 0.423) and repayment knowledge (p = 0.0001, R2 = 0.406) influenced access to inputs. Location (p = 0.0001, R2 = 0.209), grace period (p = 0.0001, R2 = 0.209) and farmer group experience in savings and credit (R2 = 0.187) influenced repayment for inputs. Interest rate (p = 0.0001, R2 = 0.503) and farmer group experience in saving and credit management (p = 0.0001, R2 = 0.395) influenced access to cash loans. Majority of farmers were likely to access inputs if their cost was lower, the grace period was sufficient and farmers were well sensitized. Repayment for inputs was more successful for longer grace periods, and where the group had savings and credit management experience. Access to cash loans was influenced by interest rate and farmers’ group experience in savings and credit management. Cost of inputs, grace period, knowledge about the revolving fund, interest rate and farmers’ group experience of saving and credit management influenced the performance of the revolving fund significantly. Agricultural inputs given to farmers should be customized to their income levels to improve repayment, the grace period should be at least one year, highest interest rate should be 10% or lower. Beneficiary farmers’ groups should have five years’ experience in savings and credit management.
Keywords: Access, Credit, Farmer Group, Inputs, Repayment
