Institutional Factors and Loan Repayment Culture Among SMEs Credit Takers of Microfinance Banks in Kwara State, Nigeria

The sustainability and efficacy of microfinance banks are greatly aided by their culture of loan repayment; however, Nigerian microfinance banks have been dealing with high default rates and excessive debt from loans given to credit takers across various categories. Hence, this study investigates the effect of institutional factors on the loan repayment culture of the credit takers of microfinance banks in Kwara State. The study gathered primary data from loan officers, account officers and marketers of the 33 microfinance banks in Kwara State as of 2023. Using multi-stage sampling technique, 160 microfinance banks’ staff across the 3 senatorial districts in Kwara State were sampled. The study utilized robust OLS regression to evaluate the model, which confirmed that regulatory shortcomings along with operational inefficiencies and governance issues impact microfinance bank loan repayment practices among SMEs in Kwara State. However, the loan repayment culture of Kwara State microfinance banks’ credit takers is not affected by government policy. The study concluded that institutional factors influence the payment culture of microfinance bank borrowers in Kwara State. Hence, it was recommended that regulatory frameworks and stringent parameters be designed to eliminate operational inefficiencies and monitor credit disbursement and recovery.