An investigation into the relationship between training and credit repayment on rural women enterepreneurs in Malawi. The case of Kasungu district

Abstract

This paper investigates the relationship between training and credit repayment in microfinance clients. The case is set in Kasungu District, the central part of Malawi. The case study follows the lending and training methodology of Microloan Foundation Ltd, a non-deposit taking microfinance institution, regulated by the Reserve Bank of Malawi (RBM). A sample of 100 women were sampled using selection methodology for the Microloan Foundation Ltd. Five groups of twenty clients in five different villages were formed as follows; Mtanda Credit Group (Control group), Limbikani Credit Group, Tigwirizane Credit Group, Lunyangwa Credit Group, and Makungulu Credit group. The control group was denied training and granted loans as the treatment group. The treatment group was thoroughly trained and advanced loans according to their business requirements. Loans were granted for two cycles for both groups. Training knowledge level for the treatment groups was found to be at 23% in the first cycle and 53.4% in the second cycle. Repayment rate improved from 86% in the first cycle to 91.25% in the second cycle. The results of the training level for the treatment group were correlated with the repayment rate using the Pearson Correlation coefficient. Calculating the coefficient r, using business knowledge level as an independent variable x, and the repayment rate as the dependent variable y, the result was found to be +1. The conclusion of the research shows that there exists a positive correlation between training of clients and their repayment ability such that when the level of business knowledge increases so does the repayment rate. The research also observed other influencing factors on the repayment rate, such as cultural influence, fear of reprisal by community members, and the effectiveness of the training officer.