Determinants of willing to pay micro credit loans: evidence from women guaranteed loans in Uganda

This paper presents findings of a study undertaken to analyze the influence of socio-economic factors on the extent of women’s willingness to pay back microcredit loans in Uganda under the women guaranteed loans scheme. The study was undertaken between April and June 2018 in central Uganda within the Zirobwe Brac micro finance branches. A structured questionnaire was used to collect primary data from a random sample of 75 respondents who consisted of 40 women guaranteed clients and the rest being non WGL clients. Descriptive statistics and multiple linear regression models were used to analyse the factors that influence women’s willingness to pay back the guaranteed microcredit loans. The results show that majority (98%) of the surveyed respondents were willing to pay back the women guaranteed microcredit loans nevertheless, over 70% were not satisfied with finance services such as interest rates paid and the loan term duration. The results indicate that actually women are paying interest rates of 36% per year, yet would be willing and able to pay 6.5% per year, the loan term duration given is 10 months yet the appropriate one would be 24 months. The results further show that willingness to pay back women guaranteed microcredit loan product is statistically and significantly influenced by increasing total family income, experience in business and frequency of credit officer visits in a month as well as frequency of trainings conducted in a year. However, willingness to payback women guaranteed microcredit loans is statistically and significantly decreased by increasing the number of people living in the household, total annual household expenses, loan owed to other credit providers and distance between residence and bank. Overall, the respondents were willing to pay back women guaranteed loans and thus there is need to promote and scale up access to women guaranteed loans in the communities at an interest rate that is affordable. Also, the duration of the loan should be given much focus as it affects loan recovery. Lastly, the socio economic characteristics like education, number of trainings and visits to clients should be given priority so as to improve recovery and proper utilization of women guaranteed loan.