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Resea ch A icle
Fac o s In luencing Loan Repaymen in Mic o inance Ins i u ions
‘The Case o Mic oloan Founda ion Malawi Limi ed’
Lloyd S. Mwagomba1*, D . N. Sanka a Nayagam2
1Mas e O Comme ce, Accoun s and Finance, School o Business & Comme ce, DMIS. Eugene Uni e si y,
Lusaka, Zambia
2Senio Lec u e , School o Business & Comme ce, DMI-S . Eugene Uni e si y, Lusaka, Zambia
Co esponding Au ho : *Lloyd S. Mwagomba DOI: h ps://doi.o g/10.5281/zenodo.17278334
Abs ac
Manusc ip In o ma ion
This s udy in es iga ed he impac o loan p oduc design, clien sc eening p ac ices, and c edi
o ice s’ compe ence on loan de aul a es a Mic oloan Founda ion Malawi Limi ed. The
ins i u ion has ecen ly expe ienced inc easing le els o loan de aul , posing signi ican h ea s
o i s p o i abili y, ope a ional e iciency, and long- e m sus ainabili y. While simila s udies
ha e been conduc ed in he b oade mic o inance sec o , li le empi ical e idence exis s on
how hese speci ic ac o s in luence epaymen pe o mance in he con ex o Mic oloan
Founda ion Malawi.
A desc ip i e esea ch design was employed, and da a we e collec ed h ough s uc u ed
ques ionnai es adminis e ed o 44 c edi o ice s ac oss six b anches. The analysis, conduc ed
using Mic oso Excel, e ealed ha loan de aul s a e s ongly associa ed wi h he compe ence
o c edi o ice s, pa icula ly hei wo k expe ience. Findings also sugges ha well-s uc u ed
loan p oduc s and igo ous clien sc eening can play an impo an ole in mi iga ing de aul
isks.
The s udy concludes ha s eng hening c edi o ice s’ aining and p o essional de elopmen ,
alongside e ining loan design and clien app aisal mechanisms, could signi ican ly imp o e
epaymen ou comes. P ac ical ecommenda ions a e p o ided o ins i u ional policy and
p ac ice, and a eas o u he esea ch a e p oposed, including explo ing bo owe - ela ed
ac o s and he in luence o ex e nal economic condi ions on loan epaymen beha iou .
▪ ISSN No: 2583-7397
▪ Recei ed: 13-08-2025
▪ Accep ed: 22-09-2025
▪ Published: 06-10-2025
▪ IJCRM:4(5); 2025: 259-272
▪ ©2025, All Righ s Rese ed
▪ Plagia ism Checked: Yes
▪ Pee Re iew P ocess: Yes
How o Ci e his A icle
Mwagomba LS, Nayagam NS.
Fac o s in luencing loan epaymen
in mic o inance ins i u ions: The case
o Mic oloan Founda ion Malawi
Limi ed. In J Con emp Res
Mul idiscip. 2025;4(5):259-272.
Access his A icle Online
www.mul ia iclesjou nal.com
KEYWORDS: Mic o inance, Loan De aul , Malawi, C edi O ice s, Clien Sc eening, Loan P oduc Design.
1. INTRODUCTION
1.1 Backg ound
Mic o inance has eme ged as a c i ical ool o p omo ing
inancial inclusion and educing po e y, pa icula ly in
de eloping economies. I in ol es he p o ision o inancial.
Se ices such as c edi , sa ings, and insu ance a e p o ided o
low-income indi iduals and sel -employed people who a e
ypically excluded om he o mal inancial sec o (O e o,
1999; Ledge wood, 1999; Sch eine & Colombe , 2001). By
o e ing small wo king capi al loans, mic o inance empowe s
indi iduals, especially women, o engage in income-gene a ing
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ac i i ies, build asse s, and enhance hei esilience agains
economic shocks.
In Malawi, mic o inance ins i u ions (MFIs) play a pi o al ole
in expanding access o inance. Since he coun y’s democ a ic
ansi ion in 1993, he numbe o MFIs has inc eased
signi ican ly, suppo ed by go e nmen ini ia i es, dono
p og ams, and he o ma ion o he Malawi Mic o inance
Ne wo k (MAMN). Despi e hese ad ances, loan de aul s
emain a pe sis en challenge, unde mining he inancial
sus ainabili y o MFIs and h ea ening hei con ibu ion o
inclusi e economic g ow h.
1.2 E olu ion o he Mic o inance Sec o in Malawi
The Malawi Mic o inance Ne wo k (MAMN) was o mally
es ablished in 2001 as a no - o -p o i , membe -based
o ganiza ion o add ess he agmen a ion o he sec o . Be o e
i s es ablishmen , mic o inance ac i i ies ope a ed
independen ly, acing go e nance challenges, weak ins i u ional
capaci y, and a lack o s anda dized p ac ices. MAMN p o ided
a uni ying pla o m o coo dina ion, ad ocacy, and echnical
suppo , aligning mic o inance ope a ions wi h he Rese e
Bank o Malawi (RBM) and na ional inancial inclusion
s a egies. I s objec i es included s eng hening ins i u ional
capaci y, enhancing go e nance and anspa ency, p omo ing
esponsible inancial se ice deli e y, and ep esen ing
Malawi’s MFIs in egional and global o ums.
Alongside MAMN, he RBM plays a cen al ole in supe ising
and egula ing inancial ins i u ions, including MFIs. Th ough
he Mic o inance and Capi al Ma ke s Supe ision Depa men ,
RBM en o ces p uden ial s anda ds o ensu e inancial s abili y,
consume p o ec ion, and esponsible lending. Se e al
egula o y ins umen s guide he sec o , including he Financial
Se ices Ac (2010), he Mic o inance Ac (2010), he
Mic o inance (Mic oc edi Agency) Di ec i e (2018), and
di ec i es o bo h deposi - aking and non-deposi - aking MFIs.
These amewo ks collec i ely aim o sa egua d clien s while
ensu ing he sus ainabili y and c edibili y o he sec o .
1.3 Mic oloan Founda ion Malawi Limi ed
Mic oloan Founda ion Malawi, a non-deposi - aking
mic o inance ins i u ion, commenced ope a ions in 2002 unde
he leade ship o B i ish en ep eneu Pe e Ryan. I s mission is
o empowe u al communi ies, pa icula ly women and he
physically challenged, h ough access o inancial and non-
inancial se ices. Ope a ing 22 b anches and 8 sa elli es
na ionwide, he ins i u ion p o ides loans, business
de elopmen se ices, and inancial li e acy aining o
unde se ed popula ions. Gi en Malawi’s anking o 169 on he
Human De elopmen Index, Mic oloan Founda ion’s se ices
a e c ucial o p omo ing li elihoods in u al a eas, whe e
a ming emains he p ima y income sou ce.
The ins i u ion elies on a g oup lending model, in luenced by
he G ameen Bank me hodology, which emphasizes solida i y,
pee moni o ing, and join liabili y. Clien s, p ima ily women,
o m g oups o a ound i e membe s, unde go aining, and
access indi idual loans backed by g oup gua an ees. Regula
mee ings ein o ce epaymen discipline while also se ing as
pla o ms o inancial educa ion, men o ship, and communi y
empowe men . This app oach has success ully expanded
inancial access and p omo ed women’s empowe men .
Howe e , loan de aul s ha e become a g owing conce n.
Be ween 2018 and 2022, de aul a es inc eased om 9% o
22%, h ea ening p o i abili y and sus ainabili y.
1.4 Impo ance and Pu pose o he S udy
Loan epaymen is cen al o he sus ainabili y o mic o inance
ins i u ions (MFIs) because loans cons i u e hei p ima y
e enue-gene a ing asse s. Pe sis en loan de aul s unde mine
ins i u ional liquidi y, weaken p o i abili y, and inc ease
ope a ional isks. Fo Mic oloan Founda ion Malawi Limi ed,
ising de aul a es om 9% in 2018 o 22% in 2022 pose a
se ious h ea o i s inancial heal h and i s abili y o se e
ulne able u al popula ions.
The impo ance o his s udy lies in i s ocus on ins i u ion-
speci ic ac o s ha in luence epaymen pe o mance, namely,
loan p oduc design, clien sc eening p ac ices, and he
compe ence o c edi o ice s. Unlike many exis ing s udies ha
emphasize bo owe - ela ed cha ac e is ics o mac oeconomic
condi ions, his esea ch highligh s in e nal ins i u ional
p ac ices ha a e wi hin manage ial con ol. By doing so, i
p o ides ac ionable insigh s o imp o ing loan po olio
quali y and sa egua ding ins i u ional sus ainabili y.
The pu pose o he s udy is he e o e wo old:
1. To gene a e empi ical e idence on how loan design, clien
sc eening, and o ice compe ence shape epaymen
pe o mance a Mic oloan Founda ion Malawi.
2. To p o ide p ac ical ecommenda ions ha can guide
managemen decisions, s eng hen policy amewo ks, and
con ibu e o he wide mic o inance li e a u e in Malawi
and Sub-Saha an A ica.
By add essing hese aims, he s udy no only suppo s
Mic oloan Founda ion Malawi in imp o ing i s ope a ions bu
also in o ms policymake s, egula o s, and p ac i ione s
commi ed o enhancing inancial inclusion and educing
po e y h ough mic o inance.
1.5 OBJECTIVE OF THE STUDY
The gene al objec i e o his s udy is o examine and iden i y
he majo causes o loan de aul s in Mic oloan Founda ion
Malawi Limi ed.
The s udy is guided by he ollowing speci ic objec i es:
a) To assess he ex en o which c edi o ice s’ job
compe ence in luences he loan de aul a e a Mic oloan
Founda ion Malawi.
b) To e alua e he e ec o loan p oduc design on he loan
de aul a e among clien s o Mic oloan Founda ion
Malawi.
c) To examine how clien sc eening p ac ices impac he loan
de aul a e a Mic oloan Founda ion Malawi.
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1.6 Scope o he S udy
This s udy is con ined o he ope a ions o Mic oloan
Founda ion Malawi Limi ed, wi h a pa icula ocus on selec ed
b anches loca ed in Balaka, Mangochi, Machinga, Zomba,
Mulanje, and Chikwawa dis ic s. These b anches we e
pu posi ely selec ed on he basis o hei ela i ely high loan
de aul a es and hei longs anding ope a ional his o y wi hin
he ins i u ion. The s udy co e s he assessmen pe iod om
2018 o 2022, which was deemed app op ia e o cap u ing
his o ical da a and ends ha e lec he pe sis en challenges
aced by he o ganiza ion in managing loan epaymen de aul s.
2.0 LITERATURE REVIEW
2.1 Empi ical Re iew
2.1.1 G oup Lending and Social Cohesion
G oup lending has been widely used in mic o inance o mi iga e
in o ma ion asymme y and educe de aul isk. Wenne (1995)
and Zelle (2008) emphasize ha social cohesion, pee
moni o ing, and collec i e esponsibili y inc ease epaymen
discipline in g oup-based c edi . Field and Pande (2008) ound
ha s uc u ed g oup mee ings enhanced compliance wi h
epaymen schedules, while McIn osh (2008) no ed ha
s onge g oup ies posi i ely in luenced epaymen ou comes.
Howe e , Giné and Ka lan (2014) challenge he uni e sali y o
g oup liabili y, demons a ing ha shi ing clien s om g oup o
indi idual con ac s in he Philippines did no signi ican ly
a ec epaymen a es. This sugges s ha while g oup cohesion
emains an impo an ac o , i may no be he sole de e minan
o epaymen pe o mance.
2.1.2 Ag icul u al C edi and Ru al Lending
Loan epaymen challenges a e o en mo e p onounced in
ag icul u al se ings due o seasonali y and ex e nal shocks.
Chi wa (1997) ound ha in Malawi, bo owe income le els,
loan amoun s, and inpu cos s signi ican ly a ec ed epaymen
among smallholde a me s. Simila ly, Sha ma and Zelle
(1997) emphasized ha aligning epaymen schedules wi h
ag icul u al cycles educed de aul s. Onyeagocha and
Chidebelu (2010) con i med ha la ge loan sizes ela i e o
bo owe s’ epaymen capaci y inc eased de aul isk,
pa icula ly in u al con ex s. These indings unde sco e he
impo ance o ailo ing c edi design o he cash low eali ies o
ag icul u al households.
2.1.3 Loan Size and P oduc Design
The s uc u e o loan p oduc s, including size, in e es a es, and
epaymen equency, has di ec implica ions o epaymen
pe o mance. Ka lan and Zinman (2006) demons a ed ha loan
ea u es such as g ace pe iods and in e es a e adjus men s
in luence clien beha iou . Sha ma and Zelle (1997) ound ha
high epaymen equency may s ain bo owe s, while
Onyeagocha and Chidebelu (2010) highligh ed ha la ge loan
sizes, wi hou adequa e capaci y assessmen , o en inc ease
delinquency. Collec i ely, hese s udies indica e ha p oduc
design should balance accessibili y wi h epaymen easibili y.
2.1.4 Clien Sc eening and C edi Policies
E ec i e sc eening mechanisms a e essen ial o loan po olio
quali y. Padmanabhan (1988) and Rose (1992) a gue ha poo
app aisal p ocedu es and weak c edi policies di ec ly
con ibu e o de aul s. Ase a e al. (2013) emphasized ha
inadequa e business assessmen s o en esul in misma ched
loans. Jack e al. (2006) simila ly ound ha weaknesses in
sc eening p ocesses unde mine epaymen pe o mance. These
indings sugges ha c edi policies mus inco po a e bo h
cha ac e -based and capaci y-based assessmen s o educe
lending isks.
2.1.5 Loan O ice Compe ence and Incen i es
The compe ence and incen i es o loan o ice s signi ican ly
shape epaymen ou comes. Aga wal and Ben-Da id (2018)
obse ed ha misaligned incen i es can lead o excessi e isk-
aking, inc easing de aul s. Cole e al. (2015) and Goedde-
Menke and Inge mann (2024) emphasize he ole o o ice
expe ience and skills in e ec i e loan app aisal. Enoch e al.
(2014) ound ha inadequa e aining con ibu ed o poo c edi
decisions, while Van den Be g e al. (2015) highligh he need
o ongoing p o essional de elopmen . Toge he , hese s udies
show ha loan o ice s’ expe ise and mo i a ion a e cen al o
loan po olio pe o mance.
2.1.6 T aining, Moni o ing, and Non-Financial Se ices
Beyond inancial se ices, non- inancial suppo s eng hens
epaymen discipline. Agbeko e al. (2017) demons a ed ha
inancial li e acy aining imp o es epaymen ou comes, while
Valdi ia (2015) ound ha business aining enhanced clien s’
abili y o manage loans e ec i ely. Yang e al. (2019) u he
a gue ha con inuous moni o ing and men o ing educe de aul
isk by p omo ing be e inancial p ac ices among bo owe s.
This sugges s ha epaymen pe o mance is no solely a
inancial issue bu also depends on knowledge and beha io al
suppo .
2.1.7 Ex e nal Shocks and Supe ision
Loan epaymen is also in luenced by ex e nal shocks and
supe iso y mechanisms. Ngonyani and Mapesa (2013)
highligh ha poo supe ision and moni o ing weaken
epaymen pe o mance in MFIs. Czu a e al. (2021) ound ha
COVID-19 dis up ed epaymen cycles, inc easing delinquency
in se e al coun ies. These indings sugges ha e ec i e
supe ision and esilience mechanisms a e i al o managing
de aul isk in ola ile en i onmen s.
2.2 Theo e ical F amewo k
Unde s anding loan de aul in mic o inance equi es d awing on
se e al heo e ical pe spec i es ha explain bo owe beha io ,
ins i u ional p ac ices, and social dynamics. This s udy is
g ounded in he ollowing heo ies:
2.2.1 Liquidi y P e e ence Theo y
Keynes’ Liquidi y P e e ence Theo y posi s ha indi iduals
p e e holding liquid asse s o secu i y and lexibili y in imes
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o unce ain y. In mic o inance, u al bo owe s wi h i egula
incomes o en p io i ize liquidi y o eme gencies ( ood, heal h,
o social obliga ions) o e loan epaymen . De aul s may hus
e lec a ional choices o p ese e sho - e m secu i y. This
heo y unde sco es he impo ance o aligning epaymen
schedules wi h income cycles and o e ing lexible c edi
p oduc s o educe de aul isk.
2.2.2 In o ma ion Asymme y Theo y
In o ma ion asymme y c ea es wo co e challenges: ad e se
selec ion and mo al haza d. MFIs may inad e en ly lend o
high- isk bo owe s (ad e se selec ion) and, a e disbu semen ,
s uggle o moni o loan use (mo al haza d). Inadequa e
sc eening and weak moni o ing heigh en de aul isk. The
heo y highligh s he impo ance o igo ous clien assessmen ,
con inuous ollow-up, and he use o ools such as c edi
bu eaus and digi al sco ing o educe in o ma ion gaps.
2.2.3 G ameen Solida i y G oup Theo y
De i ed om Yunus’ G ameen Bank model, his heo y
explains how join liabili y, pee moni o ing, and social
p essu e enhance epaymen . G oup membe s selec and
supe ise each o he , c ea ing social colla e al ha subs i u es
o physical colla e al. Howe e , g oup lending can ail i
cohesion is weak o membe s ace common shocks. This heo y
is especially ele an o MFIs like Mic oloan Founda ion
Malawi, which a ge u al communi ies whe e social ne wo ks
a e s ong.
2.2.4 C edi Assessmen and Sc eening Theo y
This heo y s esses ha igo ous app aisal ( e i ica ion o
income, analysis o cash lows, and cha ac e assessmen )
educes he isk o lending o unsui able clien s. Weak
sc eening p ac ices lead o highe de aul a es, while
con inuous supe ision pos -disbu semen helps de ec
epaymen challenges ea ly. Fo MFIs, s eng hening c edi
policies di ec ly imp o es po olio quali y and sus ainabili y.
2.2.5 Loan O ice Moni o ing Theo y
Loan o ice s se e as he c i ical link be ween MFIs and
clien s. Thei supe ision, sc eening, and con inuous
engagemen wi h bo owe s in luence epaymen beha io .
Regula isi s, po olio acking, and inancial guidance educe
de aul s. Con e sely, poo ly ained o o e s e ched o ice s
a e less e ec i e. This heo y di ec ly connec s o he s udy
a iable o c edi o ice compe ence.
2.2.6 Social Capi al and Pee P essu e Theo y
Social ne wo ks, us , and epu a ion wi hin bo owe g oups
play a majo ole in epaymen . Pee moni o ing and
accoun abili y discou age de aul , while mu ual suppo helps
s uggling membe s mee obliga ions. Howe e , his
mechanism depends on s ong g oup cohesion and cul u al
no ms. The heo y highligh s he non- inancial incen i es
(shame, epu a ion, and us ) ha complemen ins i u ional
en o cemen .
2.2.7 Beha io al Economics Theo y
Beha io al economics shows ha bo owe s’ epaymen
decisions a e shaped by biases such as p esen bias,
o e con idence, and limi ed inancial li e acy. De aul s may
a ise no only om inabili y bu also om beha io al
endencies ha p io i ize immedia e consump ion o mismanage
unds. Beha io al in e en ions (nudges, eminde s, inancial
li e acy, and aligned epaymen cycles) can educe hese isks.
3.0 MAIN CONTENT/DISCUSSION
3.1 Explana ion o key concep s
This s udy ocuses on h ee in e ela ed cons uc s ha shape
loan epaymen pe o mance in mic o inance ins i u ions: loan
p oduc design, clien sc eening p ac ices, and c edi o ice s’
compe ence.
Loan P oduc Design
The s uc u e and ea u es o loan p oduc s di ec ly in luence
epaymen ou comes. App op ia ely ailo ed loans enable
p oduc i e in es men s and imp o e epaymen capaci y, while
misma ched designs o en inc ease inancial s ess and de aul
isk (Ledge wood, 1999; A mendá iz & Mo duch, 2010). Key
dimensions include loan size, epaymen schedule, in e es
a es, and secu i y measu es. E idence shows ha loans aligned
wi h bo owe s’ cash low pa e ns, such as seasonal epaymen
schedules in ag icul u al con ex s, educe delinquency a es
(Giné & Ka lan, 2014). Simila ly, a o dable in e es cha ges
and easible colla e al equi emen s p omo e bo h clien loyal y
and ins i u ional sus ainabili y (Cull, Demi güç-Kun , &
Mo duch, 2009).
Clien Sc eening P ac ices
Sc eening emains a c i ical mechanism o minimizing c edi
isk and in o ma ion asymme y in mic o inance. E ec i e
app oaches combine cha ac e -based assessmen s (e alua ing
hones y and communi y epu a ion) wi h capaci y-based
assessmen s, which examine income gene a ion and business
iabili y (Chu chill & F ankiewicz, 2006). S udies indica e ha
weak sc eening p ocesses o en esul in lending o high- isk
clien s, he eby inc easing de aul a es (Sch eine , 2003).
Con e sely, igo ous sc eening p ac ices enhance po olio
quali y and ins i u ional esilience (Ahlin & Townsend, 2007).
C edi O ice s’ Compe ence
As on line agen s, c edi o ice s a e ins umen al in loan
app aisal, disbu semen , moni o ing, and epaymen
en o cemen . Thei compe ence (shaped by expe ience,
aining, and ela ional skills) has been consis en ly linked o
epaymen pe o mance (Hol mann & G ammling, 2005;
Goedde-Menke & Inge mann, 2024). Expe ienced o ice s can
be e iden i y ea ly wa ning signals o delinquency, while
con inuous aining enhances c edi app aisal and eco e y
s a egies. Mo eo e , e ec i e clien ela ionship managemen
os e s accoun abili y, which in u n s eng hens epaymen
discipline (W igh & Ge oy, 2001).
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3.2 Analysis wi h suppo ing e idence
3.2.1 Loan p oduc design
Loan applican s mee ing he eligibili y c i e ia
Sou ce: Compiled by he Au ho on MS Excel esul s, 2016
The indings e eal ha all esponden s ei he ag eed (50%) o
s ongly ag eed (50%) ha loans we e g an ed only o clien s
who me he eligibili y c i e ia. This consensus indica es ha
he ins i u ion main ained igo ous sc eening mechanisms in i s
loan alloca ion p ocess. Such p ac ices
a e consis en wi h Chu chill and F ankiewicz (2006), who
a gue ha adhe ence o eligibili y c i e ia enhances po olio
quali y and educes mo al haza d. By ensu ing ha only
quali ied clien s access c edi , he ins i u ion mi iga es de aul
isks a ising om inapp op ia e bo owe selec ion.
Highe in e es a es and ees a e cha ged o iskie clien s.
Sou ce: Compiled by he Au ho on MS Excel esul s, 2016
Con a y o common isk-based p icing models, a majo i y o
esponden s (59% disag eeing and 27% s ongly disag eeing)
epo ed ha highe in e es a es and ees we e no cha ged o
iskie clien s. This sugges s ha he ins i u ion applies a uni o m
policy. P icing s uc u e ega dless o isk p o ile. While his
may enhance equi y and anspa ency in lending, i may also
educe he incen i e o bo owe s o main ain low- isk p o iles.
Cull, Demi güç-Kun , and Mo duch (2009) cau ion ha uni o m
0
10
20
30
40
50
ag ee
s ongly ag ee
%
50
%
50
Ca ego y
0
20
40
60
s ongly disag ee
disag ee
ag ee
s ongly ag ee
27
%
%
59
%
9
%
5
Pe cen age
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p icing can c oss-subsidize isky bo owe s a he expense o sa e ones, po en ially weakening epaymen incen i es.
Loan Pe iod and Sizes
Sou ce: Compiled by he Au ho on MS Excel esul s, 2016
Resul s show s ong ag eemen (73% ag ee, 23% s ongly
ag ee) ha sho - e m loans we e pe cei ed as less isky han
long- e m ones. This pe cep ion aligns wi h empi ical e idence
ha sho - e m c edi educes exposu e o income shocks and
de aul isk (A mendá iz & Mo duch, 2010). Howe e , o e -
eliance on sho - e m lending may cons ain clien s’ abili y o
inance la ge , long- e m in es men s, po en ially limi ing
business g ow h (Ledge wood, 1999). Thus, while sho - e m
loans enhance ins i u ional secu i y, hey may inad e en ly
unde mine clien de elopmen objec i es.
Repaymen s S uc u e
Sou ce: Compiled by he Au ho on MS Excel esul s, 2016
Mos esponden s (68%) ag eed ha epaymen schedules we e
aligned wi h clien s’ cash lows, hough a mino i y (18%)
disag eed. Flexible epaymen s uc u es a e widely ecognized
as essen ial o clien s engaged in seasonal o i egula income.
Ac i i ies, such as ag icul u e (Giné & Ka lan, 2014). The
p esence o dissen ing iews may indica e ha while gene al
alignmen exis s, epaymen igidi y emains a challenge o
some bo owe s, possibly con ibu ing o s ess and e en ual
delinquency.
4
%
73
%
23
%
disag ee
ag ee
s ongly ag ee
18
%
68
%
14
%
disag ee
ag ee
s ongly
ag ee
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Loan Secu i y Measu es
Sou ce: Compiled by he Au ho on MS Excel esul s, 2016
An o e whelming majo i y (86%) conside ed loan secu i y
mechanisms adequa e, e lec ing s ong ins i u ional emphasis
on isk mi iga ion. Colla e al equi emen s (whe he physical,
g oup-based, o social) ha e been shown o imp o e epaymen .
By os e ing bo owe accoun abili y (Besley & Coa e, 1995).
The posi i e pe cep ion among esponden s sugges s ha he
The ins i u ion’s eliance on secu i y measu es e ec i ely
complemen s o he isk managemen ools.
3.2.2 Clien Sc eening P ac ices
Cha ac e Assessmen
Sou ce: Compiled by he Au ho on MS Excel esul s, 2016
Cha ac e eme ged as he mos c i ical sc eening c i e ion, wi h
91% o esponden s emphasizing i s impo ance o e colla e al.
This inding e lec s he mic o inance sec o ’s eliance on social
epu a ion and us wo hiness as p oxies o epaymen
willingness. P e ious s udies con i m ha cha ac e -
Based sc eening educes in o ma ion asymme y and mo al
haza d by le e aging communi y knowledge abou bo owe s
(A mendá iz & Mo duch, 2010; Chu chill & F ankiewicz,
2006). In con ex s such as Malawi, whe e o mal c edi
his o ies a e o en absen , cha ac e se es as a i al indica o o
epaymen eliabili y.
disag ee
ag ee
s ongly
ag ee
9
%
55
%
36
%
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Business Viabili y.
In o ma ion on he capaci y o he business in line wi h he loan epaymen
Sou ce: Compiled by he Au ho on MS Excel esul s, 2016
O e hal o he esponden s (54%) conside ed business capaci y
when e alua ing epaymen abili y, unde sco ing he
signi icance o cash low analysis in clien sc eening. This esul
aligns wi h Ahlin and Townsend (2007), who a gue ha
capaci y-based sc eening ensu es ha loans a e ma ched o
En e p ises wi h su icien and s able income-gene a ing
po en ial. Howe e , he ela i ely modes emphasis compa ed o
cha ac e sugges s ha ins i u ional p ac ices may s ill p io i ize
social us o e echnical assessmen s, which could expose
MFIs o business- ela ed isks, especially in ola ile ma ke s.
Colla e al Requi emen s
In o ma ion on colla e al equi emen s o Mic oloan
Sou ce: Compiled by he Au ho on MS Excel esul s, 2016
Colla e al emained an in eg al pa o sc eening, wi h 68% o
esponden s ag eeing ha i e ec i ely mi iga es de aul isk.
This suppo s indings by Besley and Coa e (1995), who show
ha colla e al—whe he physical, social, o g oup-based—
s eng hens bo owe commi men and epaymen discipline.
Howe e , 9% o esponden s highligh ed he challenges.
Colla e al poses o low-income clien s, who may lack su icien
asse s. This ension e lec s a b oade deba e in mic o inance:
while colla e al equi emen s p o ec ins i u ional sus ainabili y,
hey isk excluding he mos ulne able bo owe s, he eby
limi ing ou each (Cull, Demi güç-Kun , & Mo duch, 2009).
%
0
20
%
40
%
60
%
s ongly
disag ee
disag ee
ag ee
s ongly
ag ee
23
%
5
%
54
%
18
%
%
0
%
10
%
20
%
30
40
%
%
50
%
60
%
70
s ongly
disag ee
disag ee
ag ee
s ongly
ag ee
14
%
%
9
%
68
9
%
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3.2.3 C edi O ice s’ Compe ence
T aining and De elopmen
Sou ce: Compiled by he Au ho on MS Excel esul s, 2016
None o he esponden s epo ed ha ing a ended e eshe
aining, poin ing o a c i ical gap in capaci y-building. This lack
o con inuous p o essional de elopmen unde mines s a
e ec i eness in loan app aisal and delinquency managemen .
W igh and Ge oy (2001) emphasize ha ongoing aining
enhances s a adap abili y, mo i a ion, and pe o mance. The
absence o e eshe aining may explain weaknesses in
epaymen ollow-up and isk assessmen , highligh ing he
impo ance o ins i u ional in es men in human capi al.
Wo k Expe ienceWo k Expe ience
Sou ce: Compiled by he Au ho on MS Excel esul s, 2016
The majo i y o esponden s (45%) had wo ked o Mic oloan
Founda ion o one yea o less, while only 23% had mo e han
i e yea s o enu e. This dis ibu ion sugges s a wo k o ce
skewed owa d less expe ienced o ice s. Hol mann and
G ammling (2005) a gue ha expe ience is c ucial o de ec ing
ea ly wa ning signs o de aul and applying e ec i e eco e y
s a egies. The p edominance o sho - enu e o ice s may
he e o e weaken ins i u ional capaci y o manage loan
po olios, leading o highe de aul isks.
0
%
100
%
Yes
No
1
yea and below
1
o 2 yea s
3
o 4 yea s
5
yea s and abo e
45
%
27
%
5
%
23
%
