Account transaction And multiple quarantors as Debt Recovery Strategies: Loan Performance By Women In Kenya

Abstract

The loan performance of microfinance banks has recently shown a decline, leading to an increase in non-performing loans and hindering their ability to meet their goals. Given that microfinance institutions derive revenue from interest on loans to small and medium-sized entrepreneurs, the effectiveness of their credit management systems is crucial for their success. The specific objectives included evaluating the effect of account transactions, and multiple guarantors on loan performance by women banking of Kenya Women Microfinance Banks in South Rift Region, Kenya. The study was grounded in transaction cost theory, customer-supplier relationship theory, and stewardship theory. Descriptive research design was used. Target population was139 staff members at Kenya Women Microfinance Banks in South Rift Region, which include 1 regional manager, 1 credit risk manager, 12 branch managers, 5 credit analysts, 60 business development officers, and 60  randomly selected customers. Sample size was 103 selected using simple random technique with the aid of Krejcie and Morgan (1970) formula, collection was carried out using closed and open-ended questionnaire distributed on a drop-and-pick basis. Validity was determined using expert opinion and reliability was assessed using Cronbach’s alpha method with the help of statistical package for social sciences. The data was analyzed using both descriptive and inferential statistics utilizing the Statistical Package for Social Sciences. It was presented on tables and charts. Qualitative data was subjected to content analysis and presented in narrative form. The study adhered to research ethics, including obtaining informed consent from respondents. It was established that, debt recovery strategy affects loan performance by women banking in Kenya Women Microfinance However, multiple guarantors are not a significant determinant of loan performance. In conclusion, account transactions, auctioning of assets and retention of collateral were significant to loan performance whereas use of multiple guarantors was negative and insignificant to loan performance. It was recommended that microfinance institutions should enhance accounts transactions by their clients. There should be perfection and retention of collateral to ease the auctioning process while sensitizing and involving their clients in the auctioning process to enhance transparency and accountability. Microfinance institutions to review their guarantor model.

Keywords: Debt Recovery Strategies,  Loan Performance, Kenya

DOI: 10.7176/EJBM/17-4-02

Publication date: May 30^th 2025