AN ASSESSMENT OF THE CAUSES OF LOAN DEFAULTS BY BENEFICIARIES OF THE MICROFINANCE AND SMALL LOANS CENTRE IN TAMALE

Abstract

This study assesses the causes of loan defaults amongst beneficiaries of the MASLOC microcredit scheme in the Tamale metropolis. Amongst the key issues the study looks at include; the processes for loan application, the perception of beneficiaries about the scheme, the schedules put in place by MASLOC to ensure loan repayments are timely, the characteristics of beneficiaries and personnel of the scheme, the causes of defaults and finally, explores the various measures that could help minimize the incidence of defaults. The study adopts descriptive survey of non-experimental research method involving the use of both qualitative and quantitative analytical techniques. The study also used purposive and stratified random sampling for selection and inclusion of respondents in the study with questionnaire as the research instrument. Out of a total population of 200 beneficiaries, 82 respondents were selected as the sample size for the study. The study revealed that processes for loan application is rather bureaucratic and cumbersome and takes approximately four months to obtain from MASLOC. The study also discovered that loans obtained from MASLOC are regarded by beneficiaries as political gifts for their loyalty with the government of the day. Again, the study also revealed that political interferences is the major cause of loan defaults. The study further discovered that, non-interferences by politicians in the operations of the scheme can help minimize the incidence of loan defaults. The study concludes that loan defaults are high amongst beneficiaries of the microcredit scheme in Tamale averaging 54.35% even though interest rate is as low as 2% per month. The study however, recommends that in order to improve the performance of the scheme, MASLOC should be given the free hand by politicians to operate.