An examination of the factors that influence loan repayment in the credit with education programme in the Tamale metropolis

Abstract

Microfinance has been used as a development strategy for reducing poverty and contributing to development. Survival of microfinance institutions (MFIs) is however, much dependent on ability of borrowers to make timely loan repayment. Records of MFIs in the Tamale metropolis of Ghana show unusually high repayment rates. This has consequence of being replicated widely even though no empirical study has been done to guarantee the sustainability of these claims. This study examined factors that influence loan repayment in the Credit With Education Programme (CWE) implemented in the Tamale Metropolis. The study employed simple random sampling within cross sectional and correlational research designs to collect data from 375 borrowers and 23 loan officers. Data collection instruments used include questionnaire and interview schedules. Data analysis utilised both descriptive statistics such as means and standard deviations and inferential statistics such as binary logistic regression. The findings show that older borrowers, borrowers with access to market, and borrowers with smaller households repaid loans on time. Similarly, older loan officers, loan officers with smaller households, and those who had more initial trainings recovered loans on time. In terms of loan conditions, borrowers with multiple loans and those who participated more in initial trainings repaid loans on time. The study recommends replication of the CWE by other MFIs but called for intensification of the training and education components of the programme, increase in loan officer incentives and intensification of screening of new loan officers and borrowers.