Effectiveness of Loan Delinquency Management Strategies of Formal Lenders among Farmers in Akwa Ibom State, Nigeria

Abstract

This paper analyses the effectiveness of loan delinquency management strategies used on farmers in Akwa Ibom State, Nigeria. The specific objectives are to; assess the management strategies aimed at reducing loan delinquency; compare the extent of loan default among lending institutions and analyze the impact of some variables in reducing loan repayment problems, under the existing regime of loan delinquency management strategies. A multistage sampling technique was used to select 8 banks and 92 farmers included in this study. The questionnaire was the primary tool of data collection. Data analyses utilized descriptive statistics and the logit model. The results show that the loan delinquency reducing strategies used were not satisfactory, with a mean management quality score of 82. The loan default rate was still high despite these delinquency reducing strategies. In fact, 82% of the loan beneficiaries were delinquent. However, the mean delinquency rate was highest in the microfinance banks (27%) and lowest in the commercial banks (11%). The findings in this research confirm that the loan delinquency reducing strategies were not judiciously implemented by the lenders. Also, the behavior of selected variables under the going delinquency management regime suggest that primary occupation, loan size, loan use, duration of loans and visits of bank officials are some of the variables that need to be manipulated to achieve the desired level of loan repayment. Invariably, proper implementation of the existing loan delinquency management strategies and proper manipulation of factors that support loan repayment would be invaluable in enhancing the effectiveness of the existing loan delinquency management strategies in reducing loan repayment problems in Akwa Ibom State, Nigeria.