THE INFLUENCE OF BUSINESS SKILLS OF GROUP MEMBERS ON REPAYMENT OF GROUP LOANS AMONGST MICROFINANCE INSTITUTIONS IN NAKURU TOWN

Abstract

The Microfinance Institutions (MFIs) play a critical role in financial inclusion leading to poverty eradication
and economic empowerment of financially marginalized persons such as people of low economic status. In the
provision of access to credit facilities to the financially marginalized persons, the MFIs often adopt the group
lending policy with a view of mitigating credit risks in lending to their target customers. The majority of MFIs
across the globe have adapted the use of joint liability in group lending as a means of enhancing loan
performance. The business skills of group members have a critical influence on the repayment of the group
loans in the context that most of the loans are meant for business activities. Since the small loans often acquired
through group lending are used for business activities then any factor impacting on profitability of the
businesses impacts on capacity to repay the loan. The lack of necessary knowledge and skills can therefore
significantly impact on the group borrowers prudently utilizing funds allocated to them. This paper examines
the influence of joint liability of group members on repayment of group loans amongst microfinance institutions
in Nakuru town. This study seeks to determine the influence of business skills of group members on repayment of
group loans amongst microfinance institutions in Nakuru town. The p value for one way ANOVA for business
skills and loan repayment terms was 0.283 which was above 0.05 (p=0.283> 0.05). This lead to the acceptance
of the null hypothesis that the business skills of group members have no statistical significant influence on
repayment performance of group loans amongst microfinance institutions in Nakuru. The study found that the
business skills of group members do not have a statistically significant influence on the loan repayment
performance of group loans amongst microfinance institutions in Nakuru. It recommended that group members
focus on delivering excellent customer service in their businesses order to ensure that customers are satisfied
with the services and products offered.