Factors influencing repayment of loans among group borrowers: a case study of group businesses in Bungoma District

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Sungwacha, Stephen M.
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Micro financing plays a key role in enabling small business organizations to expand their businesses and fund their operational costs. Financial institutions lend small businesses both short term and long term loans. The purpose of this research was to investigate and establish [actors influencing loan repayment ability of entrepreneurs accessing credit through groups and make necessary recommendations to policy makers. Factors studied included market conditions, the effect client evaluation loan repayment, and the contribution of credit camps to loan repayment and how implementation procedures impact on loan repayment. The objectives of the research were to investigate how market conditions influence repayment ability of groups in servicing their loans, to establish the effect of client evaluation on repayment of loan credit, to determine the contribution of credit camps on servicing of business loans among businesses and to assess the impact of credit implementation procedures on loan repayment by small businesses accessing credit through groups. The significance of this study is to credit policy makers, peer group leaders and individual borrowers in clearly appreciating the environment in which loan credit may be misappropriated hence default. Lending institutions may utilize results generated here for further research. The scope of the study was limited to Bungoma district. The target population were the social groups formed by borrowers to enable them access loan finance and the financial institutions that lend these borrowers. The study design adapted was descriptive and utilized the questionnaire in collecting data. Random sampling was used to generate a sample size of fifty respondents. Stratified random sampling was used in which a 50 size sample of respondents was reached. Data was analyzed with the aid Statistical Package [or Social Science (SPSS) to establish the relationship between the factors studied and the loan repayment performance. The study shows that poor loan repayment results from lack of clients to identify key market conditions prior to investing. Evaluating clients before giving out loans, increases the probability of repaying as it minimizes loaning potential defaulters. Participating in credit camps by group members increases repayment discipline as members utilize the forum to encourage each other to repay and evaluate new members. Lastly loan disbursement procedure has an impact on loan repayment with cash disbursement being recommended because clients get a chance to select suitable investment projects.
HG 2156 .K4S9