Determinants Of Loan Repayment Among The Women Enterprise Fund Borrowers In Muranga County.

Abstract

This study sought to determine the individual level and group level factors that influence loan repayment and loan default among the Women Enterprise Fund (WEF) borrowers in Muranga County. The WEF is a Government initiative to address challenges facing women entrepreneurs through provision of credit at low interest rate without need for collateral. Sustainability of the fund is dependent on the ability of borrowers to repay loans. Most studies on loan repayment relate to Micro Finance Institutions(MFIs) and commercial banks with little attention being paid on factors that may influence loan repayment for a Government funded scheme like WEF.The purpose of the study was to empirically analyze the factors that influence loan repayment among WEF borrowers. The study employed survey research design to collect primary data from a target population of 1039 WSHGs. A multistage sampling was used to randomly select 70 Women Self Help Groups (WSHGs) from all seven constituencies of Muranga County with a total of 210 individuals of the groups included in the sample. Two models were used to analyze the survey data. The individual level factors were analyzed using the logistic regression model while the group level factors were analyzed using the multiple regression model. The results of the logistic regression model indicated that age, experience, marital status, education level, household size and gender of household head were statistically insignificant in influencing the odds of loan repayment. The results of the multiple regression model indicated, group size, meetings and workshops were statistically significant in influencing group default while WEF experience, group age, group composition and sanctions were not significant in influencing group default. The results of the study revealed that group factors are more critical than individual factors in explaining loan default. It is therefore important that WEF and financiers that use group lending model pay particular attention to the group characteristics when evaluating borrower’s eligibility for a loan.