An investigation into the causes of customer loan default at the Agricultural Bank of Namibia, Oshakati branch
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Date
2021
Authors
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Publisher
University of Namibia
Abstract
Agribank has faced credit risk of borrowers not repaying loans on time as per the loan
contract. This has resulted in financial losses to the ban . The Bank is concerned with
the low rate of loan recovery on its scheduled loan instalments. This concem is due to
clients defaulting, resulting in a persistent growth in the arrear loan book. Though the
bank has adequate security in place for its loan portfolio, the impact of a low rate of
debt collection on its liquidity remains a cause for concern. This study sought to
investigate factors that cause customers to default on loan repayments on loans
financed by Agribank. Due to strict privacy of the Bank, information was only
assessable to the authorised persons. The mixed method approach was adopted for the
study. The study used a semi-structured questionnaire for customers and a semi structured interview guide for staff members. The sample size was 187 participants
that comprising of 37% female and 63% male, with the biggest age group of 41-50
years contributing 44.9%. The loan accounts represented in the study were livestock,
h01iiculture, tractor, and poultry. The study identified that poor loan-monitoring and
follow-up, poor credit risk assessment, high interest rates, and grace period were the
specific factors from the bank's side that affected the level of loan repayment. On the
other hand, business experience, loan size and multiple loans, loan diversion and, other
income were the reasons for defaulting from the customer's side. This study
recommends that Agribank should enforce its loan monitoring officers to always
follow up on the loans taken and to strengthen credit risk assessment. Training
workshops were suggested for customers in areas that concern credit or loans, its
sustainability, and activities that are considered to help the repayment of the loans or
that lead to defaults thereof
Description
A thesis submitted in partial fulfilment of the requirements for the degree of Master of Business Administration (Management Strategy)
Keywords
University of Namibia, Namibia, Agricultural Bank of Namibia, Oshakati, Customer loan default, Agribank, Loan, Defaults, Borrowers, Customers, Factors, Cause, Repayment