Modelling the Determinants of Credit Delinquency Among Credit Unions in Rural Communities in Ghana
Keywords:loan delinquency, credit unions, rural communities, logistic regression
This study sought to empirically examine the determinants of loan non-repayment of credit unions operating within rural communities. 330 customers of thirty-six (36) credit unions in the Eastern Region of Ghana constituted the sample frame. A structured questionnaire was used to solicit data from the respondents. The Logistic Regression method was employed to analyze the hypothesized model. The results identified factors that affect the probability and extent of loan delinquency in credit unions. These factors relate to both the characteristics of the lender, borrower as well as the loan. The probability of loan delinquency is influenced by the borrower’s number of dependents, education, other sources of income and the purpose for which the loan is taken. Factors that affect the extent of loan delinquency are the number of other sources of credit available to the borrower, education, Loan monitoring, Prompt loan disbursement, Default signals, Clients’ screening and Loaners’ appraisal experience. Loan Delinquency studies in the African context are limited. This paper adds to contemporary literature by providing a new perspective towards understanding the determinants of Loan Delinquency, especially in rural communities in developing economies. The government and policymakers in a quest for credit unions to keep up with their social objective of ensuring that members’ welfare is enhanced, should not lose sight of the fact that their economic viability is paramount.