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Tobit Analysis of Factors Influencing Loan Repayment Performance: A Case Study of Lift Above Poverty Organization (LAPO) Micro-Credit Agency in Nigeria

Received: 28 January 2017    Accepted: 13 February 2017    Published: 13 November 2017
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Abstract

The Microfinance system in Nigeria and many sub-Sahara countries has suffered serious setback due to poor loan repayment. This study attempt at assessing the loan-repayment performance of Lift Above Poverty Organization (LAPO). LAPO in Nigeria was chosen to be investigated because of its profile of attaining one million borrowers and disbursement of one billion dollars in micro-credits to smallholders. Secondary data on LAPO micro-credits from different sources from 1990 to 2014 were analyzed using Simple descriptive statistics such as percentages, mean, t-tests and regression techniques. The results of the analyses showed at 0.92 repayment rate and 0.08 default rate, LAPO enjoys high level of repayment and a low default rate. As further shown by the results, this is spurred by the borrower experience, positive effects of the volume of loans borrowed, number of borrowers, number of credit agency staff, and volume of loans repaid. Incentive-driven system and further administrative re-engineering towards enhancing repayment performance is recommended.

DOI 10.11648/j.ml.20170306.11
Published in Mathematics Letters (Volume 3, Issue 6, December 2017)
Page(s) 58-64
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

LAPO Microfinance, Micro Credit Repayment Performance, Repayment Rate, Default Rate, Nigeria

References
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[3] Awoyemi, T. T and Olowa, O. W. (2010). Determination of Loan Repayment Potentials of Group Borrowers in Oyo State of Nigeria. Agricultural Journal, 5, 12-18. http://dx.doi.org/10.3923/aj.2010.12.18.
[4] Arene, C. J. (1992). Loan repayment and technical assistance among smallholder maize clients in Nigeria. African Review of Money and Banking. A Supplement of Savings and Development Journal, 1, 64-72. Retrieved from http://www.jstor.org/stable/i23027445.
[5] Copisarow, R. (2000). The application of micro credit technology to the UK: Key Commercial and Policy Issues.Journal of Microfinance, 2 (1), 13-42. Retrieved from https://ojs.lib.byu.edu/spc/index.php/ESR/issue/view/153.
[6] Coyle, B. (2000). Framework for credit risk management. CIB Publishing. London. UK.
[7] Derban, W. K., Binner, J. M., & Mullineux, A. (2005). Loan repayment performance in community development finance institutions in the UK. Small Business Economics, 25 (4), 319-332. http://dx.doi.org/10.1007/s11187-004-6483-y.
[8] Dunford, C. (1998). Microfinance: A means to what end? Monday Developments, 16; (17): 6 Retrieved on May 1, 2015 from http://www.alternative-finance.org.uk/cgibin/summary.
[9] Falaiye, C. A. (2003). Assessing the household impact of microcredit on rural Nigerian women. MSc dissertation. University of Guelph, Canada.
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[15] Lift above Poverty organisation (LAPO). (2014). Annual Report: Nigeria.
[16] Mohammad, R. (2004). Some features of rural finance in the Near East and North Africa Region-Studies and Remarks (2nd ed.). Amman, Nigeria: Near East North Africa Regional Lift above Poverty organisationAssociation (NENARACA).
[17] Nannyonga, H. L. (2000). Determinants of repayment behavior in the Centenary Rural Development Bank inUganda. Doctoral Dissertation. The Ohio State University. United States. Retrieved from http://rave.ohiolink.edu/etdc/view?LAPO_num=osu1224271432.
[18] Njoku, J. E., & Obasi, P. C. (2001). Loan repayment AGF - Lift above Poverty organisationguarantee scheme and its determinants under the (ALGS) in Imo State, Nigeria. Africa Review of Money, Finance and Banking.
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[20] Oke, J., Adeyemo, R., & Agbonlahor, M. (2007). An empirical analysis of micro credit repayment in Southwestern Nigeria. Humanity and Social Sciences Journal, 2 (1), 63-74.
[21] Ozdemir, O., & Boran, L. (2004). An empirical investigation on consumer credit default risk. Discussion Paper. 2004/20. Turkish Economic Association, Turkey. Retrieved from http://www.tek.org.tr/dosyalar/O-OZDEMIR-CREDR.pdf.
[22] Pischke, J. P. (1980). Rural credit project design, implementation and loan collection performance. Saving and Development Quarterly Review, 4 (2), 81-91.
[23] Roslan, A. H., & Zaini, M. (2009). Determinants of micro credit repayment in Malaysia: the case of Agrobank. Humanity & Social Sciences Journal, 4 (1), 45-52. Retrieved from http://www.idosi.org/hssj/hssj4 (1)09/6.pdf.
[24] Shepelwich, S. C. (2003). Remedial loan associations: A historical contribution to current microfinance practice. Msc. Dissertation Abstract, Michigan State University.
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Author Information
  • Department of Agricultural Education, Federal College of Education (Technical) Akoka, Lagos, Nigeria

  • Department of Agricultural Education, Federal College of Education (Technical) Akoka, Lagos, Nigeria

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  • APA Style

    Olatomide Waheed Olowa, Omowumi Ayodele Olowa. (2017). Tobit Analysis of Factors Influencing Loan Repayment Performance: A Case Study of Lift Above Poverty Organization (LAPO) Micro-Credit Agency in Nigeria. Mathematics Letters, 3(6), 58-64. https://doi.org/10.11648/j.ml.20170306.11

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    Olatomide Waheed Olowa; Omowumi Ayodele Olowa. Tobit Analysis of Factors Influencing Loan Repayment Performance: A Case Study of Lift Above Poverty Organization (LAPO) Micro-Credit Agency in Nigeria. Math. Lett. 2017, 3(6), 58-64. doi: 10.11648/j.ml.20170306.11

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    AMA Style

    Olatomide Waheed Olowa, Omowumi Ayodele Olowa. Tobit Analysis of Factors Influencing Loan Repayment Performance: A Case Study of Lift Above Poverty Organization (LAPO) Micro-Credit Agency in Nigeria. Math Lett. 2017;3(6):58-64. doi: 10.11648/j.ml.20170306.11

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  • @article{10.11648/j.ml.20170306.11,
      author = {Olatomide Waheed Olowa and Omowumi Ayodele Olowa},
      title = {Tobit Analysis of Factors Influencing Loan Repayment Performance: A Case Study of Lift Above Poverty Organization (LAPO) Micro-Credit Agency in Nigeria},
      journal = {Mathematics Letters},
      volume = {3},
      number = {6},
      pages = {58-64},
      doi = {10.11648/j.ml.20170306.11},
      url = {https://doi.org/10.11648/j.ml.20170306.11},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.ml.20170306.11},
      abstract = {The Microfinance system in Nigeria and many sub-Sahara countries has suffered serious setback due to poor loan repayment. This study attempt at assessing the loan-repayment performance of Lift Above Poverty Organization (LAPO). LAPO in Nigeria was chosen to be investigated because of its profile of attaining one million borrowers and disbursement of one billion dollars in micro-credits to smallholders. Secondary data on LAPO micro-credits from different sources from 1990 to 2014 were analyzed using Simple descriptive statistics such as percentages, mean, t-tests and regression techniques. The results of the analyses showed at 0.92 repayment rate and 0.08 default rate, LAPO enjoys high level of repayment and a low default rate. As further shown by the results, this is spurred by the borrower experience, positive effects of the volume of loans borrowed, number of borrowers, number of credit agency staff, and volume of loans repaid. Incentive-driven system and further administrative re-engineering towards enhancing repayment performance is recommended.},
     year = {2017}
    }
    

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    T1  - Tobit Analysis of Factors Influencing Loan Repayment Performance: A Case Study of Lift Above Poverty Organization (LAPO) Micro-Credit Agency in Nigeria
    AU  - Olatomide Waheed Olowa
    AU  - Omowumi Ayodele Olowa
    Y1  - 2017/11/13
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    N1  - https://doi.org/10.11648/j.ml.20170306.11
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    JF  - Mathematics Letters
    JO  - Mathematics Letters
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    PB  - Science Publishing Group
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    UR  - https://doi.org/10.11648/j.ml.20170306.11
    AB  - The Microfinance system in Nigeria and many sub-Sahara countries has suffered serious setback due to poor loan repayment. This study attempt at assessing the loan-repayment performance of Lift Above Poverty Organization (LAPO). LAPO in Nigeria was chosen to be investigated because of its profile of attaining one million borrowers and disbursement of one billion dollars in micro-credits to smallholders. Secondary data on LAPO micro-credits from different sources from 1990 to 2014 were analyzed using Simple descriptive statistics such as percentages, mean, t-tests and regression techniques. The results of the analyses showed at 0.92 repayment rate and 0.08 default rate, LAPO enjoys high level of repayment and a low default rate. As further shown by the results, this is spurred by the borrower experience, positive effects of the volume of loans borrowed, number of borrowers, number of credit agency staff, and volume of loans repaid. Incentive-driven system and further administrative re-engineering towards enhancing repayment performance is recommended.
    VL  - 3
    IS  - 6
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