Determinants of loan repayment in rural areas: a study of Lyamujjungu Cooperative Bank, Kabale District

Abstract

The study examined the factors affecting loan repayment in Maziba Sub-county_ Ndorwa County-Kabale district. The objectives of the study were to examine social, economic and managerial factors affecting loan repayment in loan repayment in Lyamujungu Cooperative Bank. Empirical data was collected by the use of questionnaires, interview guide and documentary review and analyzed using thematic and content analysis. The findings show that loan repayment increased if the group had initial savings or if group members could repay the loan in case of default and when the group has written rules and regulations. The economic factors included the borrowers financial status, the homogeneity of the group members in terms of their economic background and the pooling ability to repay the loan. The findings further show that most respondents most of those borrowers who diverted the money for other uses other than specified in the loan application forms failed to pay back. Managerial related reasons in failure to follow up is one of the causes of none payment as well as the repayment period, high interest rates, poor attitude of the respondents in repaying the loan, and failure to acquire the money in time. These combined to have an impact on the ability of the borrowers to repay the loan. The researcher concludes that there is a significant relationship between the financial status and loan repayment and a significant relationship between managerial factors and loan repayment. The researcher recommends that lending institutions must emphasize collateral and improve loan management strategies as a means of improving loan recovery.