INVESTIGATING THE FACTORS CONTRIBUTING TO LOAN DEFAULT – A CASE STUDY OF AMANTIN AND KASEI COMMUNITY BANK LIMITED

ABSTRACT 

The main objective of the study was to investigate the factors that contribute to loan default at the Amantin and Kasei Community Bank Limited. This study adopted the case study design. The study used qualitative and quantitative research approaches. The population for the study was one hundred and twenty (120). The population of the study was made up of credit officers and customers of Amantin and Kasei community bank Limited in the Ashanti and Brong Ahafo Region of Ghana. The study used stratified random sampling method to select a sample size of eighty respondents for the study. The main instrument that was used to collect information for the study was questionnaire. The data gathered was analysed statistically using Statistical Package for Social Sciences (SPSS) software version 18. Tables and figures were used to present the results of the study. The study results concluded that the factors that contribute to loan default are poor weather condition, business failure, inadequate marketing avenues to sell products, wrong timing of credit delivery, high interest rate, poor credit appraisal and inadequate monitoring. The causes of delays in loan approval are Customers inability to meet loan requirement approval, rigid approval procedures, insufficient loanable funds, and poor credit appraisal.  

Moreover, loan default has a negative impact on interest income of the bank. Also, loan default has a negative impact on the banks operating profit. Frequent supervision of borrowers can influence the loan repayment financed by the bank. The factors that hindered effective loan monitoring in the bank are staffing problems, lack of logistics and inadequate credit documentations. The study recommended that the management of the bank must organize periodic workshops and seminars to educate credit officers on loan approval, credit appraisal techniques, loan supervision strategies and monitoring strategies to improve loan recovery in the bank.