Analyzing the Causes and Evolution of Loan Delinquency/Arrears within Microfinance Institutions. A Critical Path of Action

This paper investigates the impact of External Factors (EF) on the Loan Delinquency (LD) of Microfinance Institutions (MFIs). Drawing upon a field level survey developed in line with Likert scale (5) and conducted in 2014- 2015 to 416 respondents in 78 MFIs located in seven different regions of Cameroon, the paper examines if external variable such as Legislative Issues (LI), Economic Contagion (EC) and Economic Down Turn (EDT) are root causes of loan Delinquency in MFIs. While acknowledging other contributing factors to LD such as late disbursements, poor timing, high interest rate, poor training to staff/ beneficiaries, management inefficiency etc. Multiple regression analysis was used to establish relationship between LD and the identified external factors. The regression results obtained indicates Legislative Issue is the core external cause of Microfinance Institutions Loan Delinquency. Contagion Effect and Economic Downturn were identified to be statistically insignificant. Therefore, we conclude that in addition to profit motive (internal cause), LI as an external factor contribute significantly to the alarming rate of Loan Delinquency in Microfinance institutions. To overcome this challenge requires a collective effort both from the regulatory authorities, the government the banking commission and above all the general assembly of these institutions. The paper finally contends that major stakeholders in our sampled institutions have failed in their roles to strengthened MFIs sufficiently to cope with rising challenges in the market. The paper considers delinquency management as a gauge not only for MFIs sustainability but as a means to boost deteriorating customers' confidence