Repayment behaviour in credit and savings cooperative societies: Empirical and theoretical evidence from rural Rwanda

Abstract

Purpose – Like other developing countries, Rwandan rural credit market is repressed, shallow, segmented, inefficient and dual structured where both formal and informal financial systems operate side by side. While the later has been playing a predominant role, cooperative societies have emerged as an apt method of increasing the delivery of formal rural credit and savings facilities on sustainable and non-exploitative terms albeit of financial imprudence stemming from poor credit repayment records. Thus, the purpose of this paper is to examine the factors contributing to credit repayment behaviour among the members of savings and credit cooperative societies in rural Rwanda. Design/methodology/approach – Both exploratory and descriptive designs are used for primary data collection on variables contributing to the repayment behaviour in savings and cooperative societies. Thereafter, a binary logistic regression empirical model is employed to estimate the contribution of each variable to credit repayment rate. Findings – The results from the tested empirical model show that age, gender and size of the household, purpose for credit, interest rate charges and number of official visits to the credit societies, have a strong effect on loan repayment performance (statistically significant at pCo-operative societies, Credit, Loans, Rural areas, Rwanda