Determinants Of Default In Microfinance Institutions In Zimbabwe
- Author
- Alice Chamunorwa
- Title
- Determinants Of Default In Microfinance Institutions In Zimbabwe
- Abstract
- This study investigated the determinants of default in Microfinance Institutions (MFIs) using a logistic regression model. Utilizing R-programming, the analysis covered a 2-decade period from 2002 to 2022 of secondary data collected from ZIMSTAT, RBZ, World data, and utilized data from MFIs. The key determinants examined are Gross Domestic Product (GDP), interest rates, and inflation rate. The results show that GDP and interest rates have a significant impact on defaults in MFIs. Specifically, a decrease in GDP and an increase in interest rates lead to a higher likelihood of default. Inflation rate, however, does not have a significant effect. The microfinance institution should blacklist or write off clients in default so as to maintain their profitability status. They can also take legal action after they have carried out reschedule and client failed to adhere to the new repayment schedule while remaining in default. Financial institutions should closely monitor the economic indicators identified as significant predictors of non-performing loans, such as years, GDP per capita, and interest rates. Additionally, they should consider diversifying their loan portfolios to reduce concentration risk and exposure to specific economic factors that may contribute to non-performing loans. The findings of this study have important implications for MFIs, policymakers, and regulators seeking to reduce defaults and improve the overall sustainability of microfinance programs. The comprehensive analysis underscores the urgency for proactive measures in managing microfinance risks amidst fluctuating economic conditions.
- Date
- June 2024
- Publisher
- BUSE
- Keywords
- Determinants Of Default In Microfinance Institutions In Zimbabwe
- Supervisor
- MR Kusotera
Part of Determinants Of Default In Microfinance Institutions In Zimbabwe