Loan repayment determinants among entrepreneurs in Abia State, Nigeria

Abstract

Credit access and its repayments has been a challenge for both the lender and the borrower. It has been observed over time that repayment of borrowed funds has been an issue and this has made financial bodies skeptical in giving out loans to entrepreneurs. The study analyzed the loan repayment determinants in Abia state. Specifically, the study identified the credit sources available to the entrepreneurs; determined the factors affecting access to loan facilities and loan repayment among entrepreneurs in Abia state. Primary data were collected using a structured questionnaire administered to 60 entrepreneurs in the study area. Data were analyzed using descriptive statistics, probit and multiple regressions. Results showed that most of the respondents (65%) sourced for funds through the informal financial institutions like Esusu because of its limited protocols and requirements. The results further revealed that age, marital status, education, experience in business were significant at 10% respectively, value of collateral at 5% and cooperative membership at 1% were the statistically significant factors effecting on the entrepreneurs’ access to loan. The factors influencing loan repayment were marital status (10%), experience (5%), repayment period (5%), availability of other credit source (5%) and income (10%). Based on the findings the study recommended that financial institutions should educate and enlighten entrepreneurs on what it entails to obtain loans and need to repay appropriately. This could come in the form of trainings, seminars, etc. this will go a long way in changing their perception on the issue.