MICROFINANCE BANKS’ LOAN SIZE AND DEFAULT IN SOME SELECTED MICROFINANCE BANKS IN LAGOS STATE, NIGERIA

Cecilia Adurayemi Adu (PhD), Ikechukwu Sunday Owualah (Prof.), Ayopo Abiola Babajide (Prof.)

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 loacted 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. However, lending rate revealed no significant greater risk for default rate. It was suggested that loan size should be based on certain percentage of a borrower’s net income.


Keywords


loan size, default rate, instalment size, repayment pattern, repayment period, instalment size, defaulted period, microfinance banks, lending rate, lending criteria

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