Bangladesh Research Institute for Development (BRID)

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ESDO MF Study (Why borrowers do not repay?)

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The long-term sustainability of microfinance organisations depends on loan repayment. In other words, to ensure a good portfolio quality, microfinance institutions must provide full cost recovery, efficient lending, and either a 100% repayment record or a very low delinquency/default rate (Addae-Korankye, 2014). However, in recent times, microfinance organisations have been griping about a high percentage of client default and delinquency. This shows that many microfinance institutions in Ghana are not adhering to the 3% portfolio at risk threshold that is generally accepted, which has a detrimental impact on enterprises, people, and the country’s economy as a whole. This study on the causes and potential remedies for loan delinquency and default was prompted by the recent widespread problems that these issues have caused for Ghana’s microfinance institutions (Addae-Korankye, 2014). However, the current study is intended to discover the nature and characteristics of loan defaulters who borrowed loan from ESDO-MF program. Since its establishment, ESDO is now operating its MF program in 10 selected zones. Among the regular and scheduled borrowers, there also have many loan defaulters (estimated 17040 as of January 2023). ESDO now wants to study on these individuals to explore their nature and reason behind failure of regular repayment. Throughout this study strong recommendations will be formulated to combat excessive rate of defaulters so as smooth implementation of MF program could be restored.