Microfinance Banks’ Loan Size and Default in Some Selected Microfinance Banks in Lagos State, Nigeria
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Date
2019-02
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International Conference on Education and Social Sciences
Abstract
The study investigated the extent to which loan size has contributed to default rate of MFBs borrowers in Lagos State having a population of one hundred and seventy eight with a sample size of twenty microfinance banks located in the state capital. Two hundred copies of questionnaire were administered while one hundred and eighty two were returned for analysis using linear regression.It was found out that loan size and instalment size play significant roles in greater risk of default than lending rate. A unit increase in loan size and instalment size increases harzard ratio by 1 unit at 1 per cent level of significance. The result thus indicated unfavouarable survival rate for the micro finance clients which implies that the loan size could significantly result to increase in risk associated with client’s non -repayment. This shows that the effect of loan size and the instalment size during loan default is highly significant such that the higher the loan size and instalment size, the more the risk associated with it during a period of default. However, lending rate seems not to play a dominant role in influencing loan default though it could contribute to loan failure but not significant as expected. It was suggested that loan size should be based on certain percentage of a borrower’s net income.
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Citation
Adu, C.A., Owualah, I.S., and Babajide, A.A. (2019). Microfinance Banks’ Loan Size and Default in Some Selected Microfinance Banks in Lagos State, Nigeria. International Conference on Education and Social Sciences. 1203-1211.