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 Repayment Performance in Microfinance Programs: An Individual Lending Approach


Mohd Noor Bin Mohd Shariff

School of Business Management

University Utara Malaysia, 06010 Sintok, Kedah


Norhaziah Binti Nawai

Universiti Sains Islam Malaysia




This paper analyzes the repayment performance in microfinance programs in Malaysia that apply individual lending approach. The research framework of this study is built by four factors namely individual/borrower factors, firm/business factors, loan factors and institutional/lender factors as independent variables and repayment performance either paid on time, delinquent and default as dependent variables. The study used a mixed-method combining between quantitative and qualitative data through questionnaire survey, in-depth interviews, published and unpublished reports. The data of this study is gathered from 401 respondents in Peninsular Malaysia through multistage random sampling. The data is analysed by descriptive analysis and multinomial logit model. Meanwhile, for qualitative data, a total of 21 respondents (7 respondents who paid on time, 7 respondents who delinquent and 7 respondents who default) were selected randomly and structured interviews with 6 MFI?s State Managers. The results show that in terms of borrower characteristics, only micro entrepreneur?s religious education level is statistically significant in the relationship between delinquent and good borrowers and between default and good borrowers. Whereas, in firm/business characteristics, the result shows that distance, business formality and total sales are statistically significant. The finding shows that total loan received, loan type and repayment schedule are the loan characteristics that affect micro entrepreneur?s loan repayment. In terms of institutional/lender characteristics, the finding shows that loan monitoring is statistically significant in the relationship between delinquent and good borrowers. This study contributes significantly to the knowledge of microfinance program at large, wherein it explains the factors affecting repayment performance and repayment performance plays an important role to ensure that MFIs can continue providing microfinance to the micro entrepreneurs without depending on subsidies.



KEYWORDS: Repayment Performance, Individual Lending, Microfinance, Malaysia