Determinants Of Loan Delinquency Among Credit Unions In Ghana

ABSTRACT The objective of this paper was to determine the probability and extent of loan delinquency among Credit unions in Ghana. The independent double hurdle model was used to analyze primary data collected from 300 loan beneficiaries of 30 Credit Unions that are under the Accra Chapter of the Credit Union association of Ghana (CUA). Based on the regression results it was found that among the variables that were considered, only four out of eleven variables significantly influenced the probability of loan delinquency and five out of eleven variables significantly influenced the extent of delinquency. The findings of the study suggest that a borrower’s number of dependents and illiterate borrowers positively influence loan delinquency whereas the number of previous loans taken and loans taken for productive use have negative influence on loan delinquency. The findings also reveal that borrowers who have other sources of obtaining a credit facility other than the Credit Union, borrowers who have obtained formal education up to the Junior high school level and Senior high school level and borrowers who are required to present guarantors take a shorter time to pay back loans that are in arrears should they become delinquent. On the other hand, borrowers who have accessed many previous loans from the Credit Union take a longer time to pay back loans that are in arrears in the event where they become delinquent. The study recommends that credit unions give financial management counseling to those who have no formal education before loans are disbursed. Credit unions should also make it imperative for loan applicants to get guarantors before loans are given out and credit union loan officers should continuously assess, monitor and supervise borrowers who are seen to have a good credit history with the credit union