Determinants of Loan Repayment in Rural Areas A Case 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.

TABLE OF CONTENTS

Declaration

Dedication iii

Approval to Submit iv

Acknowledgement

List Of Abbreviations

List of Tables

Table of Contents ix

Abstract

CHAPTER ONE: BACKGROUND TO THE STUDY

1.0 Introduction 1

1.1 Background to the problem 1

1.2 Statement of the problem 3

1.3 Objectives of the study 4

1.4 Research questions 5

1.5 Null hypotheses 5

1.6 Scope of the study 5

1.7 Study justification 6

1.8 Theoretical framework 6

1.9 Organization of the report 6

1.10 Definition of key terminologies 7

CHAPTER TWO: LITERATURE REVIEW

2.0 Introduction 10

2.1 Rural development 10

2.2 Factors undermining the success of credit Schemes 11

2.3 Possible solutions to the factors affecting credit schemes 14

2.4 The nature of rural households 16

2.5 Role of Credit Schemes in promotion of rural development 16

2.6 Emerging gaps 18

2.7 Conceptual framework 18

CHAPTER THREE: METHODOLOGY

3.0 Introduction 20

3.1 Research design 20

3:2 Target Population 20

3.3 Study Area 21

3.4 Sampling procedures 21

3.5 Data collection 22

3.5.1 Personal Interviews 22

3.5.2 Secondary data 23

3.5.3 Quality Control 23

3.6 Response Rate 23

3.7 Data Processing and Analysis 24

3.7.1 Data processing 24

3.7:2 Editing .24

3.7.3 Reliability and validity of the questionnaires 24

3.7.4 Coding and frequency tabulation 25

3.7.5 Data Analysis 25

3:8 Problems encountered during the study 27

CHAPTER FOUR: PRESENTATION, INTERPRETATION AND DISCUSSION OF FINDINGS

4.0 Introduction 29

4.1 Background characteristics of respondents 29

4.2 Extent of managerial factors affecting loan repayment 43

4.3 Inferential statistics 45

CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS.

5.0 Introduction 49

5.1 Summary of findings 49

5.2 Conclusions 54

5.3 Recommendations

5.4 Areas of further research 55

References 56

List of Appendices: Appendix A: Budget 59

Appendix B: Questionnaire 60

Appendix C: Pilot Study 68