Determinants of micro-finance repayment performance: a study of South African MFIs

• Main Authors: Jonathan Muchnick, Umakrishnan Kollamparambil
• Format: Article
• Language: English
• Published: AOSIS 2015-07-01
• Series: Journal of Economic and Financial Sciences
• Subjects: microfinance; joint-liability lending; repayment performance; Logit regression; South Africa
• Online Access: https://jefjournal.org.za/index.php/jef/article/view/110

This empirical article looks at the determinants of joint-liability lending repayment performance among the two largest microfinance group-lending organisations in South Africa. Most empirical work on repayment performance does not focus on the characteristics of group-based lending methodologies. This study is an attempt to fill this gap in South African microfinance literature. The results of the logit analysis uncover interesting findings. The study uses the Poverty Wealth Ranking score variable to show the ability of individuals with little or no collateral to be good borrowers. Smaller loan sizes are found to perform better than larger loans. An important contribution of the article is analysing the impact of group homogeneity on repayment performance. It was found that large group sizes and groups made up of male and female (as opposed to groups with only females) can have a negative impact on repayment performance. The findings also indicate that the more homogeneous a group in industry type the better the repayment performance.