Factors influencing loan repayment by credit beneficiaries of microfinance institutions in the Far North region, Cameroon

Achille Jean Jaza Folefack and Josephine Sandrine Mahbou Teguia
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Achille Jean Jaza Folefack: Department of Agricultural Economics, University of Dschang
Josephine Sandrine Mahbou Teguia: Department of Agricultural Economics, University of Dschang

Russian Journal of Agricultural and Socio-Economic Sciences, 2016, vol. 51, issue 3, 44-51

Abstract: In the Extreme North Region of Cameroon, the non-performing loans increased continuously by 17.5%, as the number of banks in the financial sector facing insolvency continued rising. Hence, the present study is carried out to understand how members of microfinance institutions (MFIs) cope with the credit they are awarded in this region. Using questionnaire addressed to 201 members of MFIs (comprised of 107 non-defaulters and 94 defaulters), the descriptive statistics and logit model are used in order to analyze the factors affecting the loan repayment capacity of credit beneficiaries in the MFIs. The results indicate that, members with small household size, with profitable activities, less distant from cash desks, trained for credit management, not married/single, and who use their credit for farming activities are more likely to refund their credit on time. These six factors show significant coefficients in the logit model. However, the six other factors such as the age, gender, farm size, source of finance, loan size, and use of improved technology show insignificant coefficients in the logit model, proving that they have less impact on the defaulter rate of credit beneficiaries. We therefore recommend to the government authorities to give much attention to the significant factors, if microfinance services need to be improved in this region.

Keywords: CREDIT; LOGIT MODEL; MICROFINANCE INSTITUTIONS; DEFAULTERS; NON-DEFAULTERS (search for similar items in EconPapers)
Date: 2016
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