Advertisement

Perception of Microfinance Debtors and Loan Officers on the Importance of Entrepreneurial and Business Skills for Loan Repayment Rates

Chapter
  • 545 Downloads

Abstract

Entrepreneurial and business skills are widely recognized as important prerequisites for successful microbusiness entrepreneurship in developing countries and, therefore, loan repayment rates of microfinance institution (MFI) debtors. In the literature, it remains, however, unclear exactly what set of skills are most important. The present paper examines the extent to what microfinance debtors and loan officers agree on the relevance of various entrepreneurial and business skills for microbusiness performance and loan repayment. Results from two focus group discussions show that neither microfinance debtors nor loan officers agree on the ranking of skills. This suggests that microfinance debtors have specific needs for training and skills development, which, consequently, should be addressed on an individual basis. For loan officers to be effective in their duties of evaluating loan applications and supporting microfinance debtors, they need training to better understand the relevance of entrepreneurial and business skills for microfinance debtors’ loan repayment probabilities.

References

  1. Alby, P., Auriol, E., & Nguimkeu, P. (2011). Social barriers to entrepreneurship in Africa: The forced mutual help hypothesis. Unpublished Manuscript.Google Scholar
  2. Balogun, E., & Alimi, A. (1998). Loan delinquency among small farmers in developing countries: A case study of the small-farmer credit programme in Lagos State of Nigeria. CBN Economic and Financial Review, 26(3).Google Scholar
  3. Baron, R. A., & Ensley, M. D. (2006). Opportunity recognition as the detection of meaningful patterns: Evidence from comparisons of novice and experienced entrepreneurs. Management Science, 52(9), 1331–1344.CrossRefGoogle Scholar
  4. Baum, J. R., & Locke, E. A. (2004). The relationship of entrepreneurial traits, skill, and motivation to subsequent venture growth. Journal of Applied Psychology, 89(4), 587.CrossRefGoogle Scholar
  5. Becker, G. S. (1993). Nobel lecture: The economic way of looking at behavior. Journal of Political Economy, 101(3), 385–409.CrossRefGoogle Scholar
  6. Bichanga, W., & Aseyo, L. (2013). Causes of loan default within micro finance institutions in Kenya. Interdisciplinary Journal of Contemporary Research in Business, 4(12), 316–335. Retrieved from http://journal-archieves31.webs.com/316-335.pdf.
  7. Bloem, A., & Goerter, C. (2001). The macroeconomic statistical treatment of non-performing loans: Discussion paper, Statistics Department of the IMF.Google Scholar
  8. Chandler, G. N., & Jansen, E. (1992). The founder’s self-assessed competence and venture performance. Journal of Business Venturing, 7(3), 223–236.CrossRefGoogle Scholar
  9. Chen, C. C., Greene, P. G., & Crick, A. (1998). Does entrepreneurial self-efficacy distinguish entrepreneurs from managers? Journal of Business Venturing, 13(4), 295–316.CrossRefGoogle Scholar
  10. Cook, P. (2001). Finance and small and medium-sized enterprise in developing countries. Journal of Developmental Entrepreneurship, 6(1), 17.Google Scholar
  11. Dumas, C. (2001). Micro enterprise training for low-income women: The case of the community entrepreneurs programme. Journal of Entrepreneurship, 10(1), 17–42.CrossRefGoogle Scholar
  12. Echtner, C. M. (1995). Entrepreneurial training in developing countries. Annals of Tourism Research, 22(1), 119–134.CrossRefGoogle Scholar
  13. Edgcomb, E. L. (2002). What makes for effective microenterprise training? Journal of Microfinance/ESR Review, 4(1), 99–114.Google Scholar
  14. Ekpe, I., Mat, N. B., & Razak, R. C. (2010). The effect of microfinance factors on women entrepreneurs’ performance in Nigeria: A conceptual framework. International Journal of Business and Social Science, 1(2), 255–263.Google Scholar
  15. Gatewood, E. J., Shaver, K. G., & Gartner, W. B. (1995). A longitudinal study of cognitive factors influencing start-up behaviors and success at venture creation. Journal of Business Venturing, 10(5), 371–391.CrossRefGoogle Scholar
  16. Gray, B., Gash, M., Revees, S., & Crookston, B. (2011). Microfinance: A sustainable platform for non-financial services, progress in economics research (Vol. 20). Hauppauge: Nova Science.Google Scholar
  17. Idris, A. J., & Agbim, K. C. (2015). Micro-credit as a strategy for poverty alleviation among women entrepreneurs in Nasarawa State, Nigeria. Journal of Business Studies Quarterly, 6(3), 122.Google Scholar
  18. Karlan, D., & Valdivia, M. (2011). Teaching entrepreneurship: Impact of business training on microfinance clients and institutions. Review of Economics and Statistics, 93(2), 510–527. doi: 10.1162/Rest_a_00074.CrossRefGoogle Scholar
  19. Kitzinger, J. (1994). The methodology of focus groups: The importance of interaction between research participants. Sociology of Health & Illness, 16(1), 103–121.CrossRefGoogle Scholar
  20. Kitzinger, J. (1995). Qualitative research. Introducing focus groups. BMJ: British Medical Journal, 311(7000), 299.CrossRefGoogle Scholar
  21. Kohansal, M. R., & Mansoori, H. (2009). Factors affecting on loan repayment performance of farmers in Khorasan-Razavi province of Iran. Paper presented at the Conference on International Research on Food Security, Natural Resource Management and Rural Development, University of Hamburg.Google Scholar
  22. Kumar, K., Roberts, C., Rothnie, I., Du Fresne, C., & Walton, M. (2009). Experiences of the multiple mini-interview: A qualitative analysis. Medical Education, 43(4), 360–367.CrossRefGoogle Scholar
  23. Ledgerwood, J. (1999). Microfinance handbook: An institutional and financial perspective. Washington: World Bank.Google Scholar
  24. Lensink, R., Mersland, R., & Nhung, V. T. H. (2011). Should microfinance institutions specialize in financial services. Paper presented at the Second International Research Conference on Microfinance, Groningen, The Netherlands.Google Scholar
  25. Mano, Y., Iddrisu, A., Yoshino, Y., & Sonobe, T. (2012). How can micro and small enterprises in Sub-Saharan Africa become more productive? The impacts of experimental basic managerial training. World Development, 40(3), 458–468.CrossRefGoogle Scholar
  26. Martin, B. C., McNally, J. J., & Kay, M. J. (2013). Examining the formation of human capital in entrepreneurship: A meta-analysis of entrepreneurship education outcomes. Journal of Business Venturing, 28(2), 211–224.CrossRefGoogle Scholar
  27. McKenzie, D., & Woodruff, C. (2013). What are we learning from business training and entrepreneurship evaluations around the developing world? The World Bank Research Observer, 29(1), 48–82. Retrieved from http://elibrary.worldbank.org. doi:https://doi.org/10.1093/wbro/lkt007.
  28. Mensah, C., Raphael, G., Dorcas, O., & Kwadwo, B. Y. (2013). The relationship between loan default and repayment schedule in microfinance institutions in Ghana: A case study of Sinapi Aba trust. Research Journal of Finance and Accounting, 4(19), 165–175.Google Scholar
  29. Mutisya, E., & Yarime, M. (2014). Microcredit for the development of the bottom of the pyramid segment: Impact of access to financial services on microcredit clients. Institutions and Urban Sustainability: Working Paper Series.Google Scholar
  30. Ntiamoah, E. B., Oteng, E., Opoku, B., & Siaw, A. (2014). Loan default rate and its impact on profitability in financial institutions. Research Journal of Finance and Accounting, 5(14), 67–72.Google Scholar
  31. Olomola, A. (2000). Determinants of the smallholder loan repayment performance: Evidence from the Nigerian microfinance system. Accessed 9 May 2010.Google Scholar
  32. Oosterbeek, H., Van Praag, M., & Ijsselstein, A. (2010). The impact of entrepreneurship education on entrepreneurship skills and motivation. European Economic Review, 54(3), 442–454.CrossRefGoogle Scholar
  33. Seuneke, P., Lans, T., & Wiskerke, J. S. (2013). Moving beyond entrepreneurial skills: Key factors driving entrepreneurial learning in multifunctional agriculture. Journal of Rural Studies, 32, 208–219.CrossRefGoogle Scholar
  34. Sharma, M., & Zeller, M. (1997). Repayment performance in group-based credit programs in Bangladesh: An empirical analysis. World Development, 25(10), 1731–1742.CrossRefGoogle Scholar
  35. Silverman, D. (2010). Qualitative research. Thousand Oaks, CA: Sage.Google Scholar
  36. Smith, E., & Perks, S. (2006). Training interventions needed for developing black micro-entrepreneurial skills in the informal sector: A qualitative perspective. SA Journal of Human Resource Management, 4(1), 17–26.CrossRefGoogle Scholar
  37. Ucbasaran, D., Westhead, P., & Wright, M. (2008). Opportunity identification and pursuit: Does an entrepreneur’s human capital matter? Small Business Economics, 30(2), 153–173.CrossRefGoogle Scholar
  38. Verhees, F. J., Lans, T., & Verstegen, J. A. (2012). The influence of market and entrepreneurial orientation on strategic marketing choices: The cases of Dutch farmers and horticultural growers. Journal on Chain and Network Science, 12(2), 167–179.CrossRefGoogle Scholar
  39. Viera, A. J., & Garrett, J. M. (2005). Understanding interobserver agreement: The kappa statistic. Fam Med, 37(5), 360–363.Google Scholar
  40. Yunus, M. (1999). The Grameen bank. Scientific American, 281(5), 114–119.CrossRefGoogle Scholar

Copyright information

© The Author(s) 2017

Authors and Affiliations

  1. 1.University of WageningenWageningenThe Netherlands
  2. 2.Management Studies Group, School of Social SciencesWageningen UniversityWageningenThe Netherlands
  3. 3.Wageningen University Management StudiesDe Leeuwenborch, WageningenThe Netherlands

Personalised recommendations