Determinants of loan default among microfinance institutions in techiman municipality

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The study aimed at addressing the following; identifying the causes of loan default among Microfinance Institutions in Techiman Municipality, its relationship with profitability, challenges in managing loan portfolios and identifying the category of clients who default to enable Microfinance Institutions to take proactive decisions. Simple random sampling and purposive sampling techniques were employed to select respondents to provide answers to questionnaires. SPSS and Excel were used to analyze the collected data. The findings of the study indicate that the major causes of loan default by clients of Microfinance Institutions in Techiman Municipality are failure by Microfinance Institutions to effectively monitor the loans they grant to clients and the delay in the approval and disbursement of loans. It also indicated that loan default causes the Microfinance Institutions to make huge loan loss provisions which negatively impacted the financial performance of the Microfinance Institutions through the reduction in loan interest income, profits, and creating liquidity problems for the Microfinance Institutions which can lead to liquidation. The following recommendations were made to reduce loan default by clients: regular monitoring of loans by Credit Officers simplified credit appraisal report to reduce the delay in approving loans and training of Credit Officers on credit management.
A thesis submitted to the institute of distance learning, kwame nkrumah university of science and technology in partial fulfilment of the requirements for the degree of commonwealth executive masters in business administration (finance option) institute of distance learning