The objective of this research is to identify the risk factors that\ninfluence loan defaults by customers in the microfinance sector and to\ndevelop a model that links these factors to credit default by customers in the\nsector. Data from a microfinance institution based in Accra Ghana was used.\nA binomial logistic regression analysis was fitted to a data of 548 customers\nwho were granted credit from January 2013 to December 2014. The results\nof the study revealed that six factors: X3 (Marital Status); X7 (Dependents);\nX11 (Type of Collateral or Security); X13(Assessment); X15 (Duration); and\nX16 (Loan Type) were statistically significant in the prediction of loan\ndefault payment with a predicted default rate of 86.67%. It is therefore\nsuggested that microfinance institutions adopt among others, the default risk\nmodel to ascertain the level of risk since it�s relatively efficient and cost\neffective. There should also be up to date training for loan officers of\nmicrofinance institutions in order to improve on their assessment skills and\nmethodology. The supervising body of microfinance institutions (Bank of\nGhana) should also consider enacting laws that will ensure that all such\ninstitutions in Ghana are roped into centralized database to check multiple\nborrowing and also serve as an internal control measure for the sustainability\nof these institutions.
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