Microfinance Bank Lending Rate and Repayment Capability of Borrowers in Some Selected Microfinance Banks in Oyo State, Nigeria

Abstract

The research investigated the lending rate and repayment capability of microfinance banks’ (MFBs) borrowers in Oyo State in the southwest, Nigeria with a case study of some selected microfinance banks. The researcher selected twenty microfinance banks through the use of random sampling technique from a population of fifty-three. The Cox regression was used for the analysis of data obtained from the primary source through the use of a questionnaire. It was found out that there is significant relationship between lending rate and repayment capability of borrowers with hazard ratio of 1.0000 and 1.00019 at 0.01% which implies that loan size, and lending rate do significantly contribute to the repayment capability hazard, indicating inability of the bank’s clients to meet up with their instalment payment. It was suggested that loan size should be based on client’s cash-flow and financial capability, and there should be consideration for re-negotiation of loan term to avoid outright loss of loan and interest.