Paper
An Empirical Analysis of Microcredit Repayment in Southwestern Nigeria
Analyzing variables that affect microcredit repayment
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12 pages
This study examines socio economic factors that influence microcredit repayment among MFI members in Southwest Nigeria. Most microfinance NGOs in Nigeria took off as credit first financial institutions. They obtain resources from donor agencies, which they loan to members.
The study uses multistage stratified random sampling and selects MFIs from the Community Development and Microfinance Roundtable, the umbrella body for registered MFIs in Nigeria. Findings include:
- Well established microfinance NGOs carry out microfinance delivery in order to alleviate poverty among members;
- Most MFI members borrow from their groups and invest in farming and non-farming businesses;
- Repayment rate is about 90 percent;
- Members spending on socio-cultural activities is positively related to repayment;
- Increase in lateness penalty reduces repayment rate by 0.88 percent;
- Improvement in income increases repayment rate;
- Increasing banking opportunities in the area improves microcredit repayment;
- Access to adequate business information increases repayment rate by 29 percent;
- Members of cooperative societies have better repayment rates;
- Delay in loan disbursement reduces repayment rate by 0.98 percent.
The paper concludes that members of microfinance NGOs in the area are creditworthy and fulfil their repayment obligations.
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