Factors affecting VUP- Financial services loans repayment in Rwanda: A case study of Gisagara District.

Abstract

The purpose of this study was to analyze factors affecting VUP- Financial services loan repayment in Rwanda with specific reference to Gisagara District from 2010 to June 2019. The study achieved its goal through three objectives namely to determine the extent to which lender factors affect VUP financial services loan repayment, to determine the extent to which borrower factors affect VUP financial services loan repayment and finally to determine the extent to which business factors affect VUP financial services loan repayment in Gisagara District. The study reviewed applicable literature for defining the gap which the research has filled. The study included VUP-FS beneficiaries as target population and the sample size of 254 beneficiaries was selected for modelling a binary dependent variable. The research adopted descriptive research design where data were collected using questionnaire and analyzed using the binary logistic regression method. This study revealed that lender and business related factors are the most important factors, affecting VUP-FS loan repayment. Getting the profit from the business, full affection of the loan to the intended business, sufficiency of the loan to start the business, shifting responsibilities of delivering loans from the Sector to Umurenge SACCO and supervising the loan utilization have been found as the most significant determinants of VUP-FS loan repayment. The level of education is positively associated with the likelihood of repaying VUP-FS loan while the number of dependents is negatively affecting the VUP-FS loan repayment. The study recommends that lender be obliged to have a compulsory monitoring and control the use and repayment of loans. Borrowers should also affect the loan to its purpose and not implementing other activities not related to the project. The study also recommends to fully finance the project and increase the loan ceiling by not only basing on the number of borrowers but also basing on the size and type of business. The study further recommends to extend the repayment period and to reduce the interest rate as they were considered as challenge for loan repayment. The study finally recommends the training of borrowers before and after receiving loans with an emphasis on project preparation, the management of the business, saving, book keeping and loan repayment as some borrowers were not aware of if the loan will be repaid back.