Determinant of loan default, a case study of Dumpong rural Bank limited and other Rural Banks in the Kwahu Municipality
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Date
2016-08
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Publisher
KNUST
Abstract
The main aim of this study is to examine the determinant of loan default in Dumpong rural bank
and other rural banks in the Kwahu Municipality. It specifically tries to examine in detail, the laid
down credit policy which regulates loan administration and to determine how loan default affects
the operations of rural banks. The study employed survey and descriptive research design and uses
questionnaire to collect data from five rural banks in the Kwahu Municipality namely Kwahu Rural
Bank, Kwahu Praso Rural Bank, Odwen Anoma Rural Bank and Mumuadu Rural Bank. At the
end of the data collection, the collected data was analyzed. Simple frequency tables, figures and
percentages were used to analyze the data. The study revealed that, poor monitoring, bad weather,
wrong timing of credit delivery, business failure and high interest rate makes the customers default
the loan. It was further revealed that microfinance loan and agriculture loan had the highest
percentage of loans default rate. The conclusion of the study is that loans default affects the
profitability of rural banks and even cause a “run” on the bank. The study recommended that, rural
banks should establish local credit bureaus that will provide database to which all participating
financial institutions will provide the names of defaulted clients and their personal data. This will
help identify defaulted clients among the banks easily. The officials of the bank must visit the
customers on regular basis to know the state of their business.
Description
A Thesis Submitted To The Department Accounting And Finance In Partial Fulfillment Of Requirement For The Award Of Master Of Business Administration, Finance Option