International Journal For Multidisciplinary Research

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Review of Literature on Determinants of Loan Repayment Performance in Microfinance Institutions

Author(s) Kiran K, Sureshramana Mayya
Country India
Abstract This article presents a comprehensive literature review on the determinants of loan repayment performance in microfinance institutions (MFIs). The review aims to enhance the understanding of borrower behaviour regarding loan repayment, focusing on socio-economic, institutional, and motivational factors. It synthesises findings from various studies, including the Indian Institute for Mother and Child (IIMC), a nonprofit Indian MFI, to identify critical determinants influencing borrowers' ability to repay loans. Factors such as income stability, education level, financial literacy, and family size are highlighted as significant socio-economic determinants. Loan-specific factors, including loan size, repayment period, and supervision, are also critical. Institutional practices like credit assessment techniques, loan structuring, and technological adoption are examined alongside social factors such as peer pressure, social cohesiveness, and community support systems.
Additionally, the review explores borrowers' motivation for taking out additional loans, finding that the drive to reach the maximum loan level positively impacts repayment performance. Empirical evidence suggests that repayment rates increase as borrowers approach their loan limits. The article concludes with recommendations for MFIs to improve their operational strategies by addressing these determinants, thereby enhancing loan repayment rates and contributing to the sustainability and effectiveness of microfinance programs.
Keywords Microfinance Institutions (MFIs), loan repayment performance, financial literacy, socio-economic determinants, borrower behaviour, sustainability
Published In Volume 6, Issue 4, July-August 2024
Published On 2024-07-10
Cite This Review of Literature on Determinants of Loan Repayment Performance in Microfinance Institutions - Kiran K, Sureshramana Mayya - IJFMR Volume 6, Issue 4, July-August 2024. DOI 10.36948/ijfmr.2024.v06i04.24399
DOI https://doi.org/10.36948/ijfmr.2024.v06i04.24399
Short DOI https://doi.org/gt4gkr
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