Abstract:
The study was carried out in the Upper West Region of Ghana. The main objective of the
study was to compare the repayment performance of group clients and individual clients
of microfinance institutions in order to bring to light factors that determine repayment
performance in groups and individual credit beneficiaries. Two financial institutions
namely WACCU and SRB were involved in the study. Finding showed that individual
lending yielded a better repayment performance than group lending. This outcome was
attributed to the fact that most individual clients as compared to group clients presented
collateral before loans were given out and a large proportion of group members were
relatives. Finding also suggests that the mobilization of savings by MFIs improves
repayments in both group and individual lending. Client’s access to loans from other FIs
did not have any effect on repayment. However access to future and bigger loans
enhanced repayment. In addition access to future and bigger loans served as the lead
motivator for repayment in both lending methodologies. Regular repayment and visits in
a form of monitoring enhances repayment. The ability of a group to self-select each other
and the rejection of someone from the group as a measure of screening improves
repayments. The study also showed that social ties in form of mediation and borrowing to
make timely payments did not affect repayment. However a large proportion of relatives
in groups lower repayment performance.
