Repayment Performance Of Agricultural Credit Among Clients Of Microfinance Institutions In The Nadowli/Kaleo District Of Ghana

ABSTRACT

The purpose of agricultural credit is to provide funds to people who are engaged in agricultural activities in order to improve their living conditions. These credits are normally to be repaid within the stipulated period to enable others benefit. However, credit recovery is an impediment to agricultural credit delivery in the Nadowli/Kaleo district of the Upper West Region. Microfinance has been advocated as the solution to both the failure in the public sector agricultural lending and usurious interest rates charged by informal lenders. Microfinance institutions are, however, unable to fulfil this role in the district and this could be attributed to a number of client socio-economic and microfinance products and service characteristics. It is against this background that this study examined the factors influencing repayment performance of agricultural credit among clients of microfinance institutions in the district. The data used in the study was gathered through a survey of 80 respondents affiliated to three rural microfinance institutions, and one public institution with a credit programme. Descriptive and inferential statistics were used to examine the factors affecting repayment performances of the clients within the institutions. The study found that four socio-economic variables namely, gender, age occupation and use of informal sources of credit have significantly affected repayment performance of the clients. The results further showed that interest rate, lending methods, number of collateral requirements and saving demands were the product characteristics affecting repayment performance. The results also showed that 53% of respondents continue to patronize informal credit sources while they remain clients of MFIs due to the appropriateness of their products and services. The study recommends MFIs identify and integrate informal financial strategies into mainstream microfinance and charge realistic interest rates to make credit programmes sustainable. It also recommends that public institutions offering credit services should do so with partnerships with other institutions who has expertise in credit management.