Browsing by Author "DANSO, JUSTICE KWABENA"

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    Factors responsible for loan default: survey of Asokore and Nwabiagya Rural Banks.
    (KNUST, 2016-08) DANSO, JUSTICE KWABENA
    Rural and community banks have made positive impact in the Ghanaian banking industry. They have made impact not only in the banking sector but also in advancing credit facilities to their clients. However, just like other financial institutions, rural and community banks experience many cases of loan defaults which have led to the inability of the banks to increase loan advance to clients. This study mainly focused on factors responsible for loan default in the rural banking sector using Nwabiagya and Asokore Rural Banks as case studies. Both qualitative and quantitative research design were adopted in the study. Questionnaires and interviews were employed to collect data from the employees and customers of both banks. Hence, a total of 300 questionnaires were distributed but 265 of them were correctly filled and collected indicating a response rate of 88.3%. The collected data was coded into the SPSS program and the mean and standard deviation tests were performed and used for the final analysis. The study found that borrowers keep on defaulting the repayment of their loans and the five main factors responsible for loan default are government intervention like demolitions, relocation etc, and delays in granting loans to borrowers, improper keeping of business records and diversion of borrowed funds to risky investments once granted the loan to borrowers. It was also found that unemployment, interest rate and inflation are the major economic factor responsible for loan default. The study recommends to banks to liaise with the land commission and the metropolitan assembly to ensure that the places where borrowers businesses are located have not been assigned for any future project which will call for demolition before approving loan for a customer. The study also recommends to banks to organise training for borrowers before and after granting them loans.