Influence of Financial Skills of Group Members on Loan Repayment at Equity Bank in Nakuru County, Kenya

Abstract

Just like other commercial banks, Equity Bank experiences cases of poor loan repayment. The purpose of the study is to assess the influence of the financial skills of group members on loan repayment at Equity Bank in Nakuru County. The study was informed by the social capital theory and financial self–efficiency theory. The study adopted a descriptive research design. The study's target population was 72 credit officers in the six Equity Bank Branches in Nakuru County. The study also targeted 492 chairpersons of groups that are servicing their loans in the six Equity Bank Branches. Since the target population of credit officers was manageable census technique was adopted to incorporate all the 72 targeted officers. For the group of chairpersons, the study adopted slovins' formula to get a sample of 221 groups. In addition, the study adopted stratified random sampling to get the sample of a group in each branch. The study collected primary data. Primary data was collected using questionnaires and an interview schedule. A questionnaire was used to collect primary data from the credit officers. An interview schedule was used to collect primary data from the group chairpersons. Data was collected using the drop-and-pick-later method. A pilot research was carried out at Equity Bank Nyahururu Town in Laikipia County, whereby 7 questionnaires were sent to employees in the credit department. Descriptive and inferential statistics were employed in the study. Descriptive statistics involves using proportions, frequencies, mean and standard deviation. For inferential statistics, correlation and multiple regression analysis were employed to determine the association between the dependent and the independent variables. The results of the analysis were presented in the form of tables. The study concluded that there was a statistically significant relationship between the financial skills of group members and loan repayment at Equity Bank in Nakuru County, with r=0.213 and p=0.004. The study recommended that Equity Bank should encourage their loan officer or the head of each group to have enough information on borrowers' income. This is because information on borrowers' income helps the group make decisions to help, pressure, or impose a penalty on defaulting borrower/s that ensures higher repayment performance and reduces willful defaulters.