Loan Delinquency And The Performance Of Microfinance Institutions. Case Study: Capital Microfinance

ABSTRACT

The study aimed at establishing the relationship between loan delinquency and performance of

micro finance institutions basing on the following objectives; to identify the causes of

delinquency, examine the indicators of loan delinquency and examine the impact of loan

delinquency to Capital microfinance.

Both qualitative and quantitative research designs were used. The sample size was selected using

a purposive method and sample size of 30 respondents was consideredand they were employees

of the Capital microfinance institution, they comprised of cashiers, accountants loan officers,

ledger keepers and field officers. Examples of the user department samples included finance and

administration, Human resource, !CT department as well as the welfare department.

Data was collected by the use questionnaires given by the respondents and analyzed usmg

means, rank and graphical data analysis.

Findings indicated that loan delinquency is mainly composed of causes, indicators and impact

which constitute average mean of 3.86, 2.87 and 2.83 respectively. The causes of loan

delinquency 3.86 constituted the highest value with impact 2.83 constituting the least value. This

implies that Capital micro finance concentrates more on the causes of loan delinquency and less

on its impact, but the overall loan delinquency was high at an average mean of 3.19.

Recommendations included, the general conduct of the research saw a number of loopholes

around delinquency and its eventual effect. Therefore the researcher felt there should be

improvements in the following areas. Repayment commitments to be sufficiently strong to

discourage borrowers from defaulting, Staff to contact the borrower to communicate the

message that late payment is unacceptable, Micro finance institutions to review credit policies

and operations to ensure they comply with basic principles and methodology and Micro Finance

Institutions to set up a control system to measure refinancing requests.