The Relationship between Loan Default and Repayment Schedule in Microfinance Institutions in Ghana: A Case Study of Sinapi Aba Trust

Abstract

The activities of Microfinance institutions have increased in its attempt to helping the poor, and one of such activities is microcredit. However, in their attempt to help alleviate poverty, one major challenge that Microfinance face is loan default. This study seeks to examine the relationship between loan default and repayment schedule in microfinance institutions in Ghana with specific case study of Sinapi Aba Trust.  The study is an investigative type and only used primary data. Questionnaires were administered to some customers of the Tema and Lapaz branch of Sinapi Aba Trust and were analyzed by means of Ordinary Least Square (OLS) Regression, graphs and tables.

The results indicated that, there was no significant relationship between loan default and repayment schedule in Microfinance institutions. Rather, the study finds significant relationship between interest charged on loans, moral hazard and over-borrowing by customers. Moreover, inability of loan officers to visit borrowers regularly, loans not being backed by collateral were also found to have contributed significantly to loan default among customers.

Keywords: Relationship, Loan Default, Repayment, Microfinance