African Journal of
Business Management

  • Abbreviation: Afr. J. Bus. Manage.
  • Language: English
  • ISSN: 1993-8233
  • DOI: 10.5897/AJBM
  • Start Year: 2007
  • Published Articles: 4188

Full Length Research Paper

The failure of farmers' organizations to repay microcredits granted by MFIs: Determining factors in the Cameroonian context

Romuald Koye
  • Romuald Koye
  • Department of Accounting and Finance, Faculty of Economics and Management, University of Maroua, Cameroon.
  • Google Scholar
Léopold Djoutsa Wamba
  • Léopold Djoutsa Wamba
  • Department of Accounting and Finance, Faculty of Economics and Management, University of Maroua, Cameroon.
  • Google Scholar
Halidou Mamoudou
  • Halidou Mamoudou
  • Department of Accounting and Finance, Faculty of Economics and Management, University of Maroua, Cameroon.
  • Google Scholar


  •  Received: 28 December 2023
  •  Accepted: 13 February 2024
  •  Published: 31 March 2024

Abstract

The aim of this article is to analyze and identify the factors that explain the failure of farmers' organizations (FOs) to repay microcredits received from microfinance institutions (MFIs) to finance their projects. Default of a FO is observed when the monthly installment of a loan is partially reimbursed, reimbursed late, or not at all. Through the prism of agency theory, informational asymmetry, and contingency theories, it is postulated that FO failure may be due not only to the characteristics of the FO but also to credit conditions and the activity carried out. The analysis of logistic regression tests on data collected by questionnaire between July and December 2021 from a sample of 266 FOs yielded interesting results. Overall, these results show that FO characteristics (group homogeneity, solidarity between members), credit conditions (amount, repayment period), and FO activity (agricultural production, marketing, pest attacks) significantly explain FO loan repayment defaults. In light of these results, recommendations have been formulated for FOs and MFIs to reduce FO default rates and, indirectly, MFI bankruptcy rates.

 

Key words: Farmers' organizations, microfinance institutions (MFIs), non-repayment, agricultural financing, contingency theory, information asymmetry theory.