ABSTRACT

This study examined the determinants of loan recovery under microfinance banking system in Abia State, Nigeria. The specific objectives were to; identify the basic features of the banks in terms of number and size of loans, analyze the criteria for granting loans by the microfinance bank, analyze the volume of loans applied for and granted by the banks, determine the level of loan recovery by the banks, estimate the factors that influence loan recovery by the microfinance banks, determine outreach level achieved by the Microfinance banks. Statistical and econometric techniques such as means, tables, percentages and regression were used for the analysis. Empirical results showed that the coefficient of multiple determination (R2) was 0.9150 which implies that 91.5 percent of the variations in amount of loan recovered were explained by the variable in the model. The F-ratio was significant at 1percent indicating the goodness of fit of the model. Recovery of microfinance banks were outreach, interest amount, amount of loan per beneficiary, number of defaulters, experience in lending and staff strength. Outreach was significant at 5 percent level of significance. Interest amount, amount of loan per beneficiary, number of defaulters, experience in lending and staff strength were significant at 1 percent level of significance. The mean(s) of the feature of banks' in terms of number and size of loan granted are 214.34 and 64.48 respectively. The mean(s) of volume of loan applied for by borrowers is 75.07 The level of loan recovery by the banks was calculated and the mean level of recovery was obtained to be 73.72%. The outreach level is 68.79 percent. The default rate is 25.64percent. Therefore, special attention must be given to these factors in loan administration in order to improve the Microfinance Banks' Loan recovery performance. The government should also allow institutions to mobilize savings and offer other financial Services to broaden their activities and the outreach to the poor. This will automatically increase the efficiency of farmers and thereby attract more youths to the agricultural sector.