Determinants of loan repayment in micro credit, the case of ghanaian-danish community development programme (gdcp) in Savelugu/Nantong District of northern region of Ghana

This paper discusses the major Determinants of loan Repayments of GDCP micro credit scheme. Levels of poverty in the northern part of Ghana have been so alarming therefore many non-governmental organizations have intervened to ameliorate the situation. Most of these non-governmental efforts at alleviating poverty are directed at micro credit to the poor and vulnerable in society. The repayment performance of credits granted by the microfinance institutions determines the sustainability or otherwise of such programmes. Structured questionnaire was used to elicit primary information from respondents (microcredit beneficiaries). Secondary data was obtained from financial reports of the microfinance institution via the loan officers. Linear regression model was used to evaluate the major determinants of loan repayment under the micro credit scheme. The study reveals that interest payments on loans and values of output which capture the effect of changes in income on loan repayment were significant at 5% significance level. Thus, increase in income has positive impact on loan repayment. On the other hand, levels of education of micro credit beneficiaries have no significant effect on loan repayment because of the solidarity group methodology applied by the microfinance institution. Though illiterates, microfinance beneficiaries record high loan repayment in contravention of the a priori expectation.