An Examination of Causes that Lead to Late Loan Repayments in Mwanza- Saving and Credit Cooperative Society.
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ABSTRACT
The objective of this study was to examine the causes that lead to late loan repayment in
Mwanza Saving and Credit Cooperative Society. Specifically the study described factors
that lead to late loan repayments and recommends the preventive strategies to be used by
SACCOS as soon as any repayment falls late.
This study was guided by group theory which views formation of group as highly needed
as means for channeling the finance needed for the individual micro enterprises and
induce members to repay their loans early when they fall due. The study used both
qualitative and quantitative techniques to determine factors for late loan repayments and
preventive strategies adopted by SACCOS in dealing with matter related to late
repayments. Questionnaires and interviews guides were the instruments used for data
collection purposes.
The study established the main factors for late loan repayment as: inadequate loan follow
up team by the management, inadequate collateral verifications, overcapitalization of
members’ projects, members’ failure to honor their obligations, insider dealings, bad
repayment system, lack of incentives to members who repay the loan earlier and
ignorance of some members on how to use the loan. The preventive strategies adopted by
Mwanza SACCOS are: closely visiting of members’ ventures, conduct of seminars and
work-shop on how to utilize funds, free educate members on loan repayment system, on
line calling or sending messages as means to remind them to make repayment and take
some disciplinary measures to members who fail to return back their loan.
It is recommended that management of Mwanza SACCOS should ensure that they create
a proper loan management follow up team that will help to reduce late loan repayment,
organize good incentive strategies that will encourage members to repay earlier, employ
high qualified personnel with financial management skills, educate members on how to
use the loan, encourage the members to increase their savings and formulate a multiple
source of finance rather than depending on members’ savings. Also the government
should help SACCOS through formulating flexible and supportive policies that will help
to minimize late loan repayment problems throughout the country.
Keywords
Late Loan Repayments, Savings, Cooperative Society