Causes of loan defaults within Microfinance institutions: Learning from micro and small business owners in Rwanda: A case of MSEs in Kigali

Abstract

The study analyse the factors that causes loan defaults within Microfinance institutions learning from the perception of entrepreneurs in Rwanda. Explanatory research design was used. Data was collected from primary and secondary sources using questionnaire and documentation. The study population included microfinance institutions within Kigali. The target population included MSEs that are classified within a portfolio of nonperforming loans. Structural Equation Modeling (SEM) was used to analyse the correlation between the study variables. The findings from the survey showed that loan delay, loan shortage, loan deviation, interest rate, improper management, business environment have a significant impact on nonperformance. The researcher recommended that entrepreneurs should be trained on financial discipline and how to manage the loan finance