SAMUEL K. BADU OCRAH FREDUA AGYEMANG A.

BOATENG VICTOR KOFI AGYEMANG MANU OBENG TWUM DANIEL

Presented by
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ACCOUNTING ACCOUNTING ACCOUNTING ACCOUNTING ACCOUNTING

NOBLE GROUP

4/22/2012

In Ghana, Credit Unions plays important role in the economic development of the country. Currently, there are about 527 unions with total membership of over550,000 operating under apex body of credit unions Association (CUA)
The main aim of establishing credit unions is to help small and medium enterprises through savings and loans scheme for their members

In recognition of the role of Credit Union institutions in a nation development, Ghana operationalized the concept of Credit Unions in the 1950s.
The study will attempt to investigate the reasons why members default in loans and to look into the problems encountered in issuance of loan.

NOBLE GROUP

4/22/2012

The study aims at investigating the reasons why members of St. Martin De Porres Credit Union members default in loan repayment The research also aims at establishing the contribution of Credit Unions to the economic growth and development of Ghana. Another aim of the study is to look into the problems confronting members in assessing the loans. To find out if guarantorship is ineffective leading to high defaults.
NOBLE GROUP 4/22/2012

The methodology and procedure used for the study were both qualitative and quantitative method. This constitutes the data collection methods, the sample and the samplings techniques, the design and the population of the study. Researchers interviewed management and members of St martin De porres credit union. Questionnaires were sent about two months ago and had about 90% response rate

Limitations

The researchers encountered various difficulties such as financial constraint. Another constraint was the time used to explain the questionnaires to the beneficiaries since most of them could not read and write.
NOBLE GROUP 4/22/2012

Educational Background The study showed that education has not been barrier to having credit. Some of the respondents had not obtained any form of formal education. The Relevance of Gender Females formed the majority of microfinance clients in the town, yet about 60% of the default rate was male.

Nature of operation The nature of operation has influence on repayment thus agriculture sector had the highest default rate .

NOBLE GROUP

4/22/2012

Volume of Credit received by Clients It appears that the loan size has effect on the repayment rate ,the lower the loan size, the lower the defaults rate.

Interest Rate Charge Interest charge increases the cost of the loan, higher interest means a higher cost and reduction of returns on investment, reduced returns on investment increases the chance of default. The opposite is expected to be the case, thus the lower interest rate, the lower rate of default.

NOBLE GROUP

4/22/2012

Repayment period When the loan repayment is long there could be a lax in loan monitoring activities. This could result in poor repayment.

Gurantorship Usually, the union requires that prospective borrowers give the union a lien on their account with union, the lower the lien, the higher the default. It appears that borrowers do not see lien as enough inducement for repayment.
NOBLE GROUP 4/22/2012

The following were found to have contributed immensely to the loan delinquency of St. martins de Porres thus educational level of beneficiaries, gender of beneficiaries, type of economic activities, volume of credit per beneficiaries. However the following were realised to be unimportant as far as loan delinquency of St. Martin de Porres is concerned Interest rate, repayment period, guarantorship and pledge on account balance, Beneficiaries awareness of benefit of project

Recommendations The following recommendations were made to St martin de porres credit union I. Thorough education should be given to prospective beneficiaries II. Certain economic activities, especially those known to bring about high rate of default such as long term farming, should as much possible be excluded from microfinance schemes. III. Women should be encouraged to play leading role in microfinance schemes involving group since women were seen to honour their financial obligations more then men. IV. Proper appraisal should be conducted to determine appropriate size of loans for various activities to forestall misapplication of excess funds.

NOBLE GROUP

4/22/2012

NOBLE GROUP

4/22/2012