Determinants of Microcredit Loan Repayment in Trincomalee District

Microcredit loans are able to improve the economic and social situation of the poor because they provide a job opportunity. Apart from the challenges of reaching the poor in microcredit lending, microfinance institutions also face challenges in repaying loans. The rate of default has affected the sustainability of microcredit initiatives. Many rural credit schemes have sustained heavy losses because of poor loan collection. And yet a lot more have been dependent on government subsidy to financially cover the losses they faced through loan default. Therefore, this study examines the determinants of loan repayment problems among microfinance borrowers with the main objective of finding the causes of loan default within micro finance institutions. The findings of this research will have several important implications for academics, microfinance institutions and policy makers. As output of the analysis, identifying factors that contribute to successful loan repayment will help policy makers to formulate successful credit policies and programs that will again help in allocating financial resources effectively and efficiently.