CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Thrift and credit societies originated as grassroots cooperative organizations

designed to provide financial services to individuals excluded from formal banking
systems. The concept dates back to the 19th century when economic hardships during the
Industrial Revolution spurred communities in Europe to establish cooperative structures
to pool resources and provide mutual financial assistance. Germany is widely recognized
as the birthplace of modern thrift and credit societies, with the efforts of Friedrich
Wilhelm Raiffeisen and Hermann Schulze-Delitzsch in the mid-1800s laying the
foundation. Raiffeisen focused on rural cooperatives to support farmers struggling with
high-interest debt from moneylenders, while Schulze-Delitzsch emphasized urban credit
cooperatives for artisans and small-scale entrepreneurs. Their models spread globally,
evolving into savings and credit cooperatives (SACCOs) that emphasize self-help,
mutual aid, and democratic governance principles.

The spread of thrift and credit societies to developing countries was catalyzed during the
colonial and post-colonial periods, as these models were adopted to address financial
exclusion in agrarian and low-income communities. In Africa, Asia, and Latin America,
these societies became vital tools for economic empowerment, particularly for small-
scale farmers, traders, and marginalized groups. Over time, international organizations
like the International Cooperative Alliance (ICA) and microfinance institutions further
advanced the movement. Today, thrift and credit societies are integral to achieving
financial inclusion, bridging the gap between formal banking systems and underserved
populations. They continue to evolve, incorporating technological innovations to adapt to
modern financial landscapes while maintaining their core principles of cooperation and
community-driven development.

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During the colonial and post-colonial eras, thrift and credit societies were adopted in
developing regions to address financial exclusion among low-income populations. In
Africa, Asia, and Latin America, they provided small-scale loans to farmers, traders, and
individuals without access to formal banking services. Over the decades, these societies
evolved, adapting to local economic and cultural contexts. For instance, in India, they
became a cornerstone of rural development programs aimed at empowering farmers and
small businesses. Similarly, in Africa, they played a critical role in fostering agricultural
productivity and economic self-sufficiency. Today, thrift and credit societies have grown
into dynamic financial institutions, incorporating digital technologies to improve access
and efficiency. Despite modern advancements, they remain deeply rooted in their original
mission of fostering financial inclusion and building resilient communities through
cooperation and shared resources.

1.2 Problem Statement

Thrift and credit societies play a critical role in promoting financial inclusion and
economic empowerment, particularly in underserved communities. By providing
affordable credit and savings opportunities, they help individuals and groups achieve
financial stability and meet their socio-economic needs. However, the sustainability and
effectiveness of these societies largely depend on the repayment performance of their
members. Loan repayment issues not only threaten the financial stability of these
societies but also undermine their ability to serve their members effectively. Despite their
importance, many thrift and credit societies face significant challenges in maintaining
high repayment rates, necessitating a deeper understanding of the factors influencing
repayment performance.

One of the main challenges lies in the economic environment in which these
societies operate. Members of thrift and credit societies often belong to low-income
groups and are exposed to economic shocks such as inflation, unemployment, or market

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volatility. These factors affect their repayment capacity, leading to a rise in loan defaults.
Additionally, many societies lack robust mechanisms to assess the creditworthiness of
members before issuing loans, further compounding the risk of non-repayment. This
raises questions about the adequacy of credit appraisal systems, loan management
practices, and economic conditions that impact repayment performance.

Institutional and operational inefficiencies also contribute to poor repayment

performance. Weak governance structures, lack of proper monitoring, and inadequate
enforcement of repayment policies create opportunities for default. Furthermore, the
limited financial literacy of some members exacerbates the problem, as they may not
fully understand loan terms or the importance of timely repayment. Social and cultural
factors, such as community norms and peer influences, also play a significant role in
shaping repayment behaviour. However, these factors are often overlooked in efforts to
address repayment challenges.

Understanding the factors guiding repayment performance is essential for the

sustainability of thrift and credit societies. Identifying and addressing economic,
institutional, and behavioural factors can help enhance loan recovery rates, build member
trust, and ensure long-term growth. Therefore, there is a need for focused research and
actionable strategies to address these issues comprehensively. This will enable thrift and
credit societies to continue their critical role in fostering financial inclusion and
supporting economic development in their communities.

1.3 Research Questions

i. How do economic factors such as income levels, inflation, and market conditions
influence the repayment performance of members in thrift and credit societies?
ii. What role do institutional factors, such as governance structures, credit appraisal
systems, and loan management practices, play in ensuring timely loan
repayments?

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 iii. To what extent does financial literacy among members affect their understanding
of loan terms and repayment behaviour in thrift and credit societies?
iv. How do social and cultural factors, including community norms and peer
influences, impact the repayment performance of members in thrift and credit
societies?
v. What strategies can thrift and credit societies implement to address the challenges
associated with loan defaults and improve overall repayment performance?

1.4 Objectives of the Study

The main objective of this study is to examine the factors guiding the repayment
performance of thrift and credit societies in ijebu ode local government. The specific
objectives of the study are to:

i. describe the socio economic characteristics of sampled cooperative members

in the study
ii. examine the pattern of loan disbursement and repayments in the sampled
societies
iii. examine the causes of loan defaults among the beneficiaries
iv. access the factors affecting the rate of loan repayment among the beneficiaries

1.5 Justification of the Study

The sustainability and success of thrift and credit societies are heavily dependent on their
ability to maintain high repayment rates. These societies serve as vital financial
intermediaries, particularly for low-income individuals and communities that lack access
to formal banking services. By offering affordable loans and fostering savings, they
contribute significantly to economic empowerment and poverty alleviation. However,
loan defaults pose a critical threat to their operations, limiting their capacity to support

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members and jeopardizing their long-term viability. Understanding the factors that
influence repayment performance is essential for strengthening these institutions and
ensuring their continued relevance in financial inclusion efforts.

This study is justified by the pressing need to address the challenges surrounding loan
repayment in thrift and credit societies. While these societies have grown in size and
significance, many continue to grapple with issues such as weak governance, inadequate
credit assessment mechanisms, and economic shocks that impact members' ability to
repay loans. The study aims to explore these challenges in depth, providing insights that
can help policymakers, society managers, and members implement effective solutions to
enhance repayment rates and reduce loan defaults.

Moreover, the findings of this research will have practical implications for improving the
management and operational efficiency of thrift and credit societies. By identifying
economic, institutional, social, and cultural factors that guide repayment performance, the
study can inform the design of tailored interventions such as financial literacy programs,
robust credit appraisal systems, and community-driven repayment strategies. These
interventions will not only improve loan recovery but also foster trust and participation
among members, further strengthening the cooperative model.

Lastly, this study contributes to the broader discourse on financial inclusion and
economic development. As global efforts to achieve the United Nations Sustainable
Development Goals (SDGs) intensify, particularly goals related to poverty eradication
and economic growth, thrift and credit societies play an increasingly crucial role. By
addressing the repayment performance of these institutions, this research supports their
ability to serve as reliable financial safety nets, ultimately promoting sustainable
development in underserved communities.

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 CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

This chapter reviews relevant literature on the determinants of repayment performance,

including institutional, borrower-specific, socio-economic, and environmental factors. It
also discusses theoretical frameworks and empirical findings related to loan repayment
behavior within cooperative structures.

2.2 Conceptual Review

2.2.1 Concept of Repayment Performance

Repayment performance refers to the extent to which borrowers fulfill their loan
obligations within the agreed terms and time frame. It is a key indicator of credit
discipline and financial health in lending institutions, including thrift and credit societies.
According to Akinbode and Lawal (2020), loan repayment performance encompasses
timely repayment, full settlement of loan amounts, and avoidance of default or
delinquency. Good repayment performance signals responsible borrowing and effective
credit management, while poor performance indicates risk exposure and operational
inefficiency. The concept is often measured using indicators such as repayment rate,
arrears rate, and portfolio at risk (PAR). Thrift and credit societies rely on these indicators
to assess their financial standing and to formulate lending policies. Repayment
performance is influenced by both individual and institutional factors. Borrower
characteristics such as income stability, education, and experience with credit are as
crucial as institutional variables like loan terms, interest rates, and monitoring systems.
As noted by Yusuf and Ogunleye (2023), effective repayment begins with careful
borrower selection and continuous engagement throughout the loan cycle.

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Repayment performance refers to the degree to which a borrower meets the loan
obligations as stipulated in the loan agreement. It encompasses timely payment,
completeness of repayment, and adherence to repayment schedules. Within thrift and
credit societies, repayment performance serves as a critical determinant of the society’s
sustainability, operational efficiency, and ability to provide continuous access to credit for
its members. The concept goes beyond the basic act of returning borrowed funds; it
includes the entire credit process—from loan disbursement, utilization, monitoring, to
final settlement. At its core, repayment performance is indicative of financial discipline
and institutional accountability. It offers insight into how efficiently a credit program is
managed and how reliably members of the cooperative adhere to financial
responsibilities. According to Akinbode and Lawal (2020), societies that demonstrate
strong repayment performance tend to possess higher levels of member confidence,
increased participation, and greater access to both internal and external funding sources.

In the context of cooperative finance, repayment performance also reflects the

cooperative’s ability to rotate funds among members efficiently. Unlike commercial
banks, thrift and credit societies operate on the principle of revolving credit, which means
loan repayments are often used to fund new loans for other members. Hence, repayment
behavior directly affects the creditworthiness of the institution and its ability to serve a
broader base of members. A default in repayment does not only affect the financial
standing of the defaulter but also undermines the borrowing prospects of fellow
members. This ripple effect creates an urgency for cooperatives to prioritize efficient loan
administration and robust repayment tracking systems.

One way to assess repayment performance is through commonly used indicators such as
the repayment rate, arrears rate, and portfolio at risk (PAR). The repayment rate measures
the proportion of loans that are paid back in accordance with the agreed terms, while the
arrears rate reflects overdue payments. The portfolio at risk refers to the outstanding loan
balance that is overdue beyond a defined threshold, typically 30 days. These indicators

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provide a snapshot of the financial health of a cooperative and highlight potential risks
associated with non-performing loans (NPLs).

Borrowers’ repayment performance is affected by multiple dimensions, including

personal characteristics, the type and terms of loans offered, and institutional policies.
Factors such as income level, occupation, education, and household expenditure have
been linked to repayment success. For instance, borrowers with stable and diversified
income sources are more likely to meet repayment deadlines. Similarly, education
enhances borrowers’ understanding of financial obligations and the implications of
default, leading to improved repayment behavior (Oladapo & Ibrahim, 2022). From the
institutional perspective, repayment performance reflects the strength and effectiveness
of the cooperative’s loan management system. A well-structured credit policy outlines
criteria for loan eligibility, sets clear repayment schedules, and provides for appropriate
follow-up and recovery measures. As highlighted by Omisakin and Balogun (2021),
institutions that integrate periodic monitoring and borrower engagement into their credit
process tend to record lower default rates.

In many societies, particularly in sub-Saharan Africa, thrift and credit institutions still
grapple with poor repayment performance due to structural inefficiencies and inadequate
risk assessment. According to Onah and Adeoti (2020), weak internal control systems,
lack of credit bureaus, and limited borrower screening contribute significantly to loan
delinquency. Moreover, overreliance on manual record-keeping systems complicates loan
tracking, making it difficult to enforce repayment discipline. Thus, the concept of
repayment performance is intrinsically tied to the broader management practices of the
institution.

Another important dimension to consider in understanding repayment performance is the

behavioral aspect of borrowers. Behavioral finance literature suggests that individuals do
not always act rationally in financial matters. Borrowers may procrastinate on
repayments, misallocate loan funds, or underestimate their financial obligations.

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Psychological factors such as overconfidence, peer influence, or cultural norms may
further complicate repayment behavior. As noted by Ekerin and Bello (2023), non-
cognitive factors often play a role in whether borrowers meet their repayment
commitments, particularly in low-income and informal settings.

Repayment performance also incorporates the concept of loan utilization. When loans are
used for productive purposes—such as investment in income-generating activities—
borrowers are more likely to have the means to repay. Conversely, when loans are
diverted to non-productive uses like social events or consumption, repayment becomes
more difficult. Studies have shown that societies that provide borrower training and
guidance on the appropriate use of funds often report better repayment outcomes (Agbo
& Iwuchukwu, 2021). As such, enhancing loan utilization efficiency is an indirect but
powerful way to improve repayment performance.

Institutional support mechanisms also play a vital role. Societies that offer financial
literacy training, grace periods, and flexible repayment options tend to experience fewer
repayment challenges. Similarly, offering incentives for timely repayment—such as
eligibility for larger future loans or reduced interest rates—can motivate borrowers to
maintain a positive repayment track record. Okeke and Obiora (2022) argue that
incentives aligned with repayment performance create a culture of credit responsibility
and long-term engagement among members.

In some cases, repayment performance may also be influenced by external factors

beyond the control of borrowers or institutions. These include macroeconomic variables
such as inflation, exchange rate volatility, and general economic downturns. For instance,
a sudden rise in prices can reduce disposable income, thereby impairing the borrower’s
ability to repay. Similarly, environmental shocks such as droughts or floods may disrupt
income-generating activities, especially in agrarian-based cooperative societies. Thus, it
is crucial for societies to incorporate contingency planning and risk management into
their lending frameworks to mitigate the impact of such externalities.

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Social dynamics, particularly in group-based lending models, also influence repayment
performance. In these arrangements, social capital and peer pressure are often relied upon
to enforce repayment. Group members co-guarantee each other’s loans and are
collectively responsible for ensuring compliance. When effectively implemented, this
approach improves accountability and reduces default risks. However, it can also lead to
collective default if trust within the group is eroded or if social ties discourage honest
enforcement. According to Eze and Ajibade (2023), the success of group-based lending
depends largely on group cohesion, leadership, and peer enforcement mechanisms.

It is also important to distinguish between voluntary and involuntary default. Voluntary

default occurs when a borrower chooses not to repay despite having the means, often due
to moral hazard, weak enforcement, or the expectation of loan forgiveness. Involuntary
default, on the other hand, results from genuine inability to repay due to financial
hardship, illness, or unforeseen life events. Understanding this distinction enables
cooperative managers to develop targeted interventions, such as restructuring repayment
schedules or offering temporary relief to borrowers experiencing involuntary distress
(Tunde & Mohammed, 2022).

To summarize, the concept of repayment performance in thrift and credit societies is

multifaceted. It reflects not only the financial behavior of individual borrowers but also
the institutional strength, socio-economic environment, and structural arrangements of
the lending process. Measuring and improving repayment performance requires a
comprehensive approach that encompasses financial education, effective monitoring, risk
assessment, and the integration of behavioral insights into lending practices. As the
backbone of financial sustainability in cooperative settings, repayment performance
deserves continuous attention, strategic enhancement, and policy innovation.

2.2.2 Importance of Repayment Performance in Thrift and Credit Societies

Repayment performance is central to the functioning of thrift and credit societies. It

ensures the availability of funds for re-lending, supports liquidity, and fosters the
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sustainability of operations. Cooperative institutions largely depend on the revolving
nature of funds, and poor repayment threatens this cycle. According to Bello and Salami
(2021), strong repayment performance builds trust among members and encourages
continuous participation. It also boosts the credibility of the society in the eyes of
regulators and financial partners, thereby attracting external funding or support.

Repayment performance influences credit planning and forecasting. Reliable repayment

records enable thrift and credit societies to design effective loan products tailored to
members’ financial capacities. This reduces the risk of over-indebtedness and promotes
responsible borrowing. Adewunmi et al. (2020) emphasize that regular loan repayments
provide vital data for evaluating the impact of credit on members’ livelihoods. In
addition, good repayment behavior reduces the administrative costs associated with
recovery efforts and litigation. It enhances operational efficiency by minimizing time and
resources spent on debt collection. Furthermore, consistent repayments are essential for
long-term member satisfaction and institutional growth. Repayment performance holds
central importance in the operation and sustainability of thrift and credit societies. These
institutions, often structured around mutual aid and financial inclusion, rely heavily on a
cyclical model of credit in which loan repayments from existing borrowers fund future
disbursements. As such, repayment performance is not merely a financial metric—it is a
reflection of the institution’s overall health, operational effectiveness, and social trust
among its members. Without consistent and reliable loan recovery, thrift and credit
societies are unable to fulfill their core mandate of mobilizing savings and providing
affordable loans to underserved populations.

One of the primary reasons repayment performance is essential is that it serves as a

foundation for financial sustainability. According to Bello and Salami (2021), when loan
repayments are made consistently and on time, societies are better positioned to meet
their operational costs, extend credit to more members, and maintain positive cash flow.
Conversely, poor repayment erodes the society’s loanable funds, disrupts its ability to

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serve its members, and eventually results in a decline in membership participation and
trust. Financial losses arising from loan delinquency can become systemic and lead to the
collapse of the society if left unaddressed. Moreover, effective repayment enhances the
institution’s creditworthiness and credibility in the eyes of external stakeholders,
including regulators, financial partners, and development agencies. Thrift and credit
societies that demonstrate high repayment performance are more likely to access funding
from banks, microfinance institutions, or donor organizations seeking to support financial
inclusion initiatives. These stakeholders often use repayment records as a proxy for
institutional strength and governance discipline. Adebayo et al. (2022) note that a good
track record of repayment improves a society’s bargaining power in securing grants,
refinancing options, or credit guarantees.

Repayment performance is also integral to loan planning and credit risk management.
Reliable repayment patterns provide data that help cooperative managers evaluate the
suitability of loan products, design appropriate repayment schedules, and adjust interest
rates based on risk profiles. For example, a society may choose to offer longer repayment
periods or lower interest rates to groups that consistently demonstrate strong repayment
habits. This data-driven approach reduces the likelihood of default and enables thrift and
credit societies to tailor their services to members’ financial capacities and needs. In
addition to strengthening the institution, good repayment performance fosters
transparency, accountability, and equity among members. Since thrift and credit societies
operate on principles of mutual ownership and democratic control, members have a
vested interest in the society’s financial integrity. When all members adhere to repayment
commitments, it creates a culture of fairness and shared responsibility. Members are more
willing to save, borrow, and engage in decision-making when they believe that the
cooperative is financially sound and that all members are treated equally. This sense of
collective responsibility contributes to long-term member retention and cooperative
growth (Olatunji & Oseni, 2021).

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Furthermore, repayment performance has direct implications for governance and internal
control mechanisms within thrift and credit societies. High default rates often signal
weak monitoring systems, poor borrower screening, and ineffective recovery strategies.
As such, repayment records can serve as an early warning system, prompting leadership
to reevaluate their credit administration practices. According to Eniola and George
(2022), societies that actively monitor loan repayment and respond swiftly to
delinquencies are more likely to maintain financial discipline and member compliance.
On the other hand, neglecting repayment enforcement can lead to moral hazard, where
borrowers assume that non-repayment will go unpunished or be written off without
consequence. Another vital aspect of repayment performance lies in its impact on
member empowerment and economic upliftment. When borrowers repay loans on time,
they establish a positive credit history within the society, which increases their chances of
accessing larger and more flexible credit in the future. This cycle of borrowing,
repayment, and access to greater financial services contributes to income generation,
household stability, and entrepreneurial development. In this way, good repayment
performance becomes a pathway to long-term poverty alleviation and socio-economic
inclusion.

Repayment behavior also influences the efficiency of service delivery within the society.
High repayment rates reduce the administrative burden of follow-up, debt recovery, and
legal actions, allowing the society to focus more on productive activities such as member
training, savings mobilization, and expansion of credit products. The time and resources
saved from not having to pursue defaulters can be redirected toward developmental
programs, digital transformation, or community engagement initiatives (Adetiloye &
Afolayan, 2023). Additionally, repayment performance builds trust not only among
members but also between members and management. Transparency in loan allocation
and accountability in repayment reinforce confidence in the institution's governance
structure. Members are more likely to invest their savings and take part in decision-

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making when they perceive that loan recovery efforts are effective and that funds are
being managed judiciously. As stated by Omotayo and Babalola (2020), trust is a critical
intangible asset in cooperative management, and consistent loan repayment plays a major
role in reinforcing it.

In many cases, the psychological benefits of strong repayment performance are equally
important. Borrowers who repay their loans successfully often experience increased self-
worth, confidence, and financial independence. These psychological outcomes reinforce
positive financial behavior and strengthen the social fabric of the cooperative. Members
who achieve financial goals through responsible borrowing become role models for
others, further promoting a culture of repayment and personal accountability within the
society. Importantly, repayment performance also determines the eligibility of a thrift and
credit society for formal registration, audit certification, and inclusion in national or
regional cooperative federations. Regulatory authorities often evaluate cooperatives
based on key performance indicators, including loan recovery rates, to determine their
compliance with cooperative laws and financial standards. Failure to meet repayment
thresholds may lead to sanctions, loss of registration, or disqualification from funding
programs. Thus, maintaining high repayment performance is critical not just for financial
reasons, but also for regulatory and reputational standing.

In terms of long-term strategic planning, consistent repayment records offer a solid

foundation for forecasting future lending activities and scaling up operations. Societies
that can predict cash inflows from repayments are better positioned to make investment
decisions, diversify their loan portfolio, and introduce new financial products such as
insurance or education loans. Such proactive strategies require stable and predictable
financial flows—something only possible when repayment performance is reliably high.

2.2.3 Determinant Factors Affecting Loan Repayments

The repayment performance of thrift and credit societies plays a pivotal role in ensuring
the financial sustainability and operational stability of these organizations. As
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microfinance institutions designed to cater to the financial needs of their members—
especially those excluded from conventional banking systems—thrift and credit societies
depend heavily on members’ adherence to loan repayment schedules. Efficient repayment
performance guarantees a steady flow of funds, enables re-lending, and fosters trust
among members and external stakeholders. According to Abubakar and Sulaimon (2021),
non-repayment of loans is one of the greatest threats to the sustainability of thrift and
credit societies in Nigeria. Factors such as income level, loan size, education, loan
monitoring, and repayment terms have been widely cited as influencing loan repayment
outcomes. In developing countries like Nigeria, thrift and credit cooperatives serve as
crucial financial intermediaries, providing credit to micro-entrepreneurs, farmers, and
traders. However, high default rates continue to limit their ability to scale up operations
and meet member demands. Okeke and Olaniyan (2022) argue that inadequate screening
processes, poor loan supervision, and insufficient borrower education contribute
significantly to poor repayment behavior.

Hence, understanding the determinants of repayment performance is essential for

improving credit recovery strategies, enhancing cooperative governance, and ensuring
financial sustainability. This chapter explores key concepts, importance, contributing
factors, challenges, and theoretical perspectives surrounding loan repayment in thrift and
credit societies. The repayment performance of thrift and credit societies plays a pivotal
role in ensuring their sustainability, credibility, and capacity to fulfill their core mandate
of providing accessible credit to members. These societies, often functioning as
grassroots financial intermediaries, serve a vital economic function in many low- and
middle-income countries where access to formal banking remains limited. However, their
long-term success and ability to meet the needs of their members are significantly shaped
by how well loans are repaid. Loan repayment performance not only determines the
financial health of the societies but also influences the willingness of members to
continue participation and affects their eligibility for future external funding.

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According to Balogun and Alimi (2021), effective repayment performance in thrift and
credit societies ensures a revolving credit system that fosters growth, reduces default
risks, and builds investor and stakeholder confidence. When members repay loans as
agreed, the societies can re-lend to other members, create a sustainable flow of financial
services, and contribute to local economic development. Conversely, loan delinquency
and default compromise liquidity, reduce the society’s credibility, and can ultimately lead
to institutional collapse. In the context of rural and semi-urban areas where thrift and
credit societies are most active, repayment performance is often influenced by both
internal dynamics and external economic pressures. Internally, the managerial capacity of
the society, the loan policies in place, and the relationship between management and
members affect how well repayment is enforced. Externally, inflation, seasonal income
variations, and macroeconomic instability can make it difficult for borrowers to meet
their obligations on time (Adeoye & Salisu, 2020).

A key dimension of repayment performance is the loan cycle—from disbursement to

recovery—which is often complicated by informal lending practices, inadequate
documentation, and poor loan monitoring systems. Studies by Olanrewaju and Musa
(2022) highlight that many thrift and credit societies in Nigeria still rely on manual
systems with limited tracking capabilities. These gaps can lead to poor follow-up,
miscommunication regarding repayment schedules, and a general lack of accountability,
thereby increasing the risk of default. Furthermore, cultural norms and social structures
may influence repayment behavior, especially in group-based lending systems. In some
communities, there may be strong social ties among members that can either promote
timely repayment through peer pressure or encourage loan diversion due to informal
expectations of mutual financial support. As asserted by Afolabi and Uche (2019), the
dual role of social capital as both an enabler and inhibitor of repayment presents a unique
challenge in managing thrift and credit societies.

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Gender dynamics have also been studied as an important factor in repayment
performance. Research by Njoku and Adebisi (2023) shows that female borrowers tend to
have higher repayment rates than their male counterparts, particularly in microfinance
and cooperative settings. This trend is attributed to women’s stronger adherence to
financial obligations, especially when loans are used to support household welfare or
income-generating activities. Nonetheless, access to credit for women may still be
limited due to structural biases and discriminatory practices in some communities.

Moreover, the level of financial literacy among members plays a crucial role in
influencing repayment performance. Borrowers who understand interest rates, repayment
terms, and loan implications are more likely to adhere to the agreed terms. Lack of
understanding can lead to mismanagement of loan funds, underestimation of repayment
obligations, and eventual default. For this reason, Onyema and Chukwu (2021) advocate
for the integration of financial education programs into the lending framework of thrift
and credit societies. Technology adoption has been increasingly recognized as a key
determinant of efficient loan administration and repayment tracking. Digital platforms
and mobile money services have the potential to revolutionize repayment mechanisms,
especially in underserved areas. A study by Eniola and George (2022) revealed that thrift
societies that implemented mobile repayment alerts and digital record systems
experienced improved repayment rates and reduced administrative costs. However,
limited internet access, digital illiteracy, and infrastructure deficits still constrain
widespread adoption in many regions.

The organizational structure and governance practices within a thrift and credit society
also affect repayment performance. Societies with transparent leadership, well-defined
roles, regular reporting, and participatory decision-making tend to perform better in
enforcing loan agreements. According to Obasanjo and Ekong (2020), cooperative
societies that maintain regular meetings, communicate financial updates to members, and
involve them in policy formulation create a culture of accountability that supports better

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repayment behavior. Institutional support and regulatory frameworks further shape the
repayment environment. The presence (or absence) of effective regulation, training,
technical assistance, and oversight from cooperative unions or government agencies can
either enhance or weaken repayment performance. For instance, where cooperative
auditors conduct routine checks and enforce compliance, there is a lower incidence of
loan default. However, where such oversight is weak, managers may act arbitrarily,
leading to loan diversion or favoritism in loan approvals, all of which can undermine
repayment.

In many parts of Nigeria and Sub-Saharan Africa, thrift and credit societies are integrated
into broader community development strategies, playing a role not just in financial
services, but in empowerment, education, and social cohesion. As such, the implications
of repayment performance extend beyond the immediate financial viability of the society.
Consistent repayment supports broader development objectives, such as poverty
alleviation, entrepreneurship promotion, and local investment. In contrast, widespread
loan default can erode community trust, discourage future contributions, and hinder
socio-economic progress.

It is also essential to consider the psychological and behavioral aspects of loan

repayment. As discussed in behavioral finance literature, individuals may deviate from
rational economic behavior due to biases, emotions, and cognitive limitations. For
instance, some borrowers may prioritize short-term needs over long-term obligations,
even when the consequences of default are significant. This implies that improving
repayment performance may require a combination of financial tools, incentives,
behavioral nudges, and peer accountability mechanisms (Thaler & Mullainathan, 2015).

Overall, repayment performance in thrift and credit societies is a multi-dimensional

phenomenon shaped by borrower attributes, institutional practices, socio-economic
contexts, and psychological behaviors. Its importance cannot be overstated, given the
central role of these societies in promoting grassroots financial inclusion and economic

18
empowerment. To achieve optimal loan recovery, it is critical to adopt a holistic approach
that considers all influencing variables and seeks to strengthen institutional capacity,
member education, and socio-economic resilience.

2.2.4 Effects of Repayment Performance on the Efficiency of Thrift and Credit

Societies

Repayment performance exerts a profound influence on the efficiency of thrift and credit
societies. As financial cooperatives built upon trust and shared responsibility, these
societies require a continuous inflow and outflow of funds to sustain their operations.
Loan repayment behavior directly affects this circulation of funds and, consequently,
determines how efficiently the society can carry out its mandate. When members repay
loans promptly and consistently, the society can meet financial obligations, expand
services, and plan effectively. In contrast, poor repayment performance hinders
operations, disrupts planning, and undermines member confidence.

1. Impact on Financial Liquidity and Loan Recycling: The ability of a thrift and
credit society to provide credit to its members depends largely on its liquidity
position, which in turn is tied to loan repayment performance. Societies that record
high repayment rates are able to recycle funds quickly, disbursing new loans without
having to wait for external financing. According to Abubakar and Sulaimon (2021),
strong repayment enhances liquidity, enabling societies to meet the growing credit
needs of members and respond promptly to requests for emergency loans. This quick
turnaround improves service delivery and reinforces the cooperative's relevance in
members' financial lives. In contrast, poor repayment leads to cash flow constraints. A
large portion of the society’s capital becomes tied up in non-performing loans
(NPLs), reducing the amount available for lending and other operational needs. When
this situation persists, societies may be forced to delay or deny loan requests, which
can lead to member dissatisfaction and erosion of trust. Moreover, cash flow

19
 problems can affect the society's ability to cover administrative costs, staff salaries,
and regulatory obligations, further reducing operational efficiency.
2. Influence on Administrative Efficiency and Cost of Operations: Repayment
performance also affects how efficiently a thrift and credit society manages its
resources. High repayment rates reduce the administrative burden associated with
loan tracking, default management, and recovery processes. Staff can focus on core
activities such as loan processing, member training, and strategic planning, rather
than dedicating time and energy to chasing defaulters. As reported by Okoro and
Okechukwu (2023), societies that enjoy strong repayment behavior among members
spend significantly less on recovery efforts and litigation, which enhances their
operational efficiency. On the other hand, poor repayment imposes additional costs on
societies. These include expenses related to sending reminders, legal fees for debt
collection, and the opportunity cost of immobilized capital. In some cases, societies
may need to employ debt recovery agents or write off bad debts altogether—both of
which negatively impact financial efficiency. Moreover, inefficient repayment forces
societies to maintain high loan loss provisions, thereby limiting their ability to invest
in technological upgrades, member services, or staff development.
3. Effect on Strategic Planning and Budgeting: Sound repayment performance
provides accurate data that enhances strategic planning and financial forecasting.
When repayments are predictable, the management team can make informed
decisions about how much credit can be extended, what interest rates to apply, and
which programs to invest in. Predictability improves budgeting accuracy, allows for
better resource allocation, and supports long-term planning. According to Bello and
Akinola (2021), societies with strong repayment records are more likely to adopt
forward-looking approaches, enabling them to introduce innovative financial
products and build reserves. Conversely, erratic repayment patterns introduce
uncertainty, making it difficult for cooperatives to plan for the future. Societies may
hesitate to approve new loans or expand programs, fearing financial instability. This

20
 conservative approach, while necessary under risk conditions, may stifle innovation
and slow down institutional growth. Furthermore, unpredictability in loan recovery
limits the society’s ability to forecast income, causing inaccuracies in budget
projections and potential shortfalls.
4. Role in Enhancing Member Confidence and Participation: Efficient loan
repayment promotes transparency, trust, and confidence among members. When
members see that borrowers are fulfilling their obligations and that the society is
operating smoothly, they are more likely to increase their savings, participate in
meetings, and seek financial products from the society. Eze and Adeyemi (2022)
argue that repayment discipline builds institutional credibility and strengthens the
cooperative identity of the society. Members view the cooperative not just as a source
of credit but as a reliable financial partner. On the contrary, poor repayment
performance leads to suspicions of mismanagement or favoritism. If defaulting
members are not held accountable, others may be discouraged from fulfilling their
obligations, leading to a domino effect. This situation erodes group cohesion and
discourages active participation. In extreme cases, it can result in member withdrawal
or apathy, which further weakens the organization. Trust, once broken, is difficult to
rebuild, and inefficiency in loan recovery is a major cause of institutional decline.
5. Effect on Loan Product Design and Customization: Good repayment behavior
enables societies to experiment with and customize loan products to suit member
needs. For example, they may introduce seasonal loans, micro-loans, or education
loans with flexible repayment schedules. When previous loan cycles show positive
recovery, management is more willing to take calculated risks and offer diversified
financial products. As noted by Nwosu and Chukwu (2018), the evolution of loan
offerings in successful cooperatives is closely tied to consistent repayment
performance, which allows for innovation and product expansion. However, in
societies with poor repayment records, management often limits loan types to avoid
exposure. Risk-averse policies may include shortened repayment periods, higher

21
 collateral requirements, or reduced loan sizes. These limitations restrict the utility and
accessibility of credit services, especially for members with urgent or specialized
needs. Thus, repayment performance directly affects how flexible and responsive the
society can be in meeting the financial expectations of its members.
6. Implication for External Partnerships and Institutional Growth: Repayment
performance is one of the key indicators used by external partners to assess the
viability of thrift and credit societies. Government agencies, NGOs, and commercial
financial institutions often rely on repayment records to evaluate whether a society
qualifies for support, grants, or credit lines. Societies with good performance are seen
as low-risk partners and are therefore more likely to receive funding. For example,
institutions like the Central Bank of Nigeria or the Bank of Industry may consider
societies with a 90% or higher repayment rate as suitable beneficiaries of rural
finance schemes. On the other hand, societies with poor repayment records are often
disqualified from such opportunities, no matter how well-intentioned their missions
may be. They are perceived as unreliable, unaccountable, and risky, thereby missing
out on programs designed to support financial inclusion. As such, repayment
performance is not just an internal efficiency issue—it plays a strategic role in
institutional growth and external legitimacy (Ajayi & Alabi, 2022).
7. Technological Adoption and Record Keeping: The integration of technology into
cooperative operations has been linked to better repayment tracking and enhanced
efficiency. Societies that embrace digital platforms—such as mobile loan alerts,
digital ledgers, and real-time dashboards—report better repayment behavior due to
improved communication and transparency. Ogunleye (2020) notes that digital
systems provide early warning signs of delinquency, automate reminders, and
facilitate faster loan reconciliation, all of which contribute to more efficient
repayment management. However, the success of these technological tools hinges on
members’ repayment discipline. Without consistent repayment, even the most
advanced digital tools cannot ensure efficiency. Therefore, while technology

22
 enhances repayment systems, the underlying culture of repayment must be cultivated
and maintained.

2.2.5 Challenges Affecting Repayment Performance in Thrift and Credit Societies

Repayment performance in thrift and credit societies is influenced by a wide array of

internal and external challenges. While these societies play an essential role in providing
financial access to underserved populations, their effectiveness is often undermined by
systemic issues that affect borrowers’ ability and willingness to repay loans. The success
of a cooperative society depends not only on its capacity to mobilize funds but also on its
ability to recover loans disbursed to members. Poor repayment performance can lead to
liquidity crises, reduced member trust, and eventual collapse of the society.
Understanding the challenges that hamper loan repayment is therefore crucial for
formulating effective interventions and policies.

1. Inadequate Credit Appraisal and Loan Assessment: One of the foremost

challenges affecting repayment performance is the lack of thorough credit appraisal.
Many thrift and credit societies fail to assess the creditworthiness of borrowers before
disbursing loans. This failure often stems from a reliance on informal criteria such as
social relationships, trust, or familiarity rather than financial capability and credit
history. According to Obasi and Alarape (2023), most rural-based societies do not use
structured risk assessment tools, and this increases the likelihood of loan default.
Inadequate credit appraisal means that borrowers may be given loan amounts they
cannot manage, or loans may be used for non-productive purposes. Furthermore,
some members may take advantage of weak vetting procedures to secure loans they
have no intention of repaying. Without rigorous loan assessment mechanisms in
place, societies become vulnerable to adverse selection and moral hazard.
2. Weak Monitoring and Loan Supervision: Another major impediment to effective
repayment is poor monitoring and follow-up on loan usage. Once a loan is disbursed,
some societies lack the capacity or institutional framework to ensure that the funds

23
 are used for the intended purposes. This lack of oversight enables borrowers to divert
funds to non-income generating or high-risk ventures that do not yield returns
sufficient to repay the loan. According to Adepoju and Nwachukwu (2022), effective
monitoring is a strong determinant of loan performance. When societies visit
borrowers periodically, request activity reports, and maintain open communication,
repayment behavior improves significantly. However, many thrift and credit societies
operate with limited manpower and financial resources, making frequent supervision
difficult. The absence of such oversight increases default risk and reduces the overall
quality of the loan portfolio.
3. Limited Financial Literacy Among Members: Low levels of financial literacy
among borrowers present another significant challenge to repayment performance.
Many cooperative members, particularly in rural areas, lack a basic understanding of
loan agreements, interest rates, amortization schedules, and the long-term
implications of default. This lack of awareness may result in mismanagement of loan
funds or failure to prioritize repayment obligations. Financial literacy is crucial not
just for understanding credit terms, but also for proper budgeting and planning. A
study by Okonkwo and Ajibola (2021) found a strong correlation between borrowers'
financial education and loan repayment outcomes in agricultural cooperatives. Yet,
most thrift and credit societies do not provide pre-loan training or ongoing support,
leaving members ill-equipped to manage credit effectively.
4. Cultural and Social Factors: Cultural norms and social dynamics can also influence
repayment behavior. In some communities, there is a culture of leniency or tolerance
toward default, especially when borrowers face economic hardship. Borrowers may
assume that since the society is member-owned and not-for-profit, repayment is
optional or flexible. This mentality undermines loan discipline and creates a negative
repayment culture. Additionally, group-based lending models, while effective in
many contexts, may also create social pressure that discourages honest reporting of
defaults. Group members may shield each other from repayment obligations due to

24
 kinship or friendship, resulting in collective default. As emphasized by Ezeaku et al.
(2022), societies operating in close-knit communities must balance solidarity with
accountability to avoid compromising financial stability.
5. Economic Instability and Income Variability: Macroeconomic instability presents
another external challenge to repayment performance. In environments where
inflation, currency devaluation, and job losses are prevalent, borrowers may
experience sudden reductions in disposable income. For instance, a trader who
borrows to expand inventory may be unable to repay if market prices rise beyond
expectations or if customer demand declines unexpectedly. Agricultural cooperatives
are particularly vulnerable to this challenge due to the seasonal nature of income.
Farmers who borrow during planting seasons may face repayment challenges if there
is crop failure, pest infestation, or poor market prices. According to Musa and Yakubu
(2023), unpredictable income streams are one of the leading causes of loan
delinquency in rural cooperative societies. Unless repayment schedules are aligned
with income cycles, borrowers may default despite having long-term repayment
capacity.
6. Loan Diversion and Misuse of Funds: Loan diversion is a prevalent issue among
borrowers in thrift and credit societies. Often, members who qualify for business
loans may use the funds for personal or household expenses such as school fees,
medical bills, weddings, or social events. While these needs may be urgent, they do
not generate income, making repayment more difficult. The absence of monitoring
mechanisms only exacerbates this challenge, as societies may not detect misuse until
default occurs. Adebisi and Ogunyemi (2020) emphasize that the lack of enforceable
restrictions on fund usage contributes significantly to high default rates. Societies
must not only educate borrowers on proper fund utilization but also implement
monitoring mechanisms and conditional disbursements that ensure loans are used as
intended.

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7. Governance Challenges and Internal Mismanagement: The internal governance of
a thrift and credit society greatly influences repayment performance. Poor leadership,
lack of transparency, misappropriation of funds, and favoritism in loan approvals all
weaken the credibility of the society. Members are less likely to repay loans when
they perceive that management is not accountable or when funds are being
mismanaged. Cases of internal fraud—such as collusion between loan officers and
borrowers, falsified records, or embezzlement—further damage member confidence.
According to Oladimeji and Eze (2021), societies with poor governance structures
tend to record higher levels of loan default due to the absence of institutional checks
and balances. Building a culture of integrity, transparency, and participatory
governance is thus essential for sustaining repayment discipline.
8. Inadequate Legal Framework and Enforcement Mechanisms: Many thrift and
credit societies operate without strong legal backing to enforce loan agreements.
Unlike formal financial institutions that can initiate court proceedings or credit
reporting actions, cooperative societies often lack the legal infrastructure to compel
repayment. Borrowers who default may do so without fear of legal consequences,
especially if the society lacks internal legal capacity or support from local authorities.
Moreover, the absence of credit bureaus or a shared database prevents societies from
tracking habitual defaulters across institutions. This regulatory gap allows serial
defaulters to access credit from multiple sources without being held accountable.
Strengthening the legal and regulatory framework is therefore a prerequisite for
improving repayment performance and institutional sustainability.
9. Member Over-Indebtedness and Multiple Borrowing: Over-indebtedness occurs
when borrowers take on more debt than they can realistically repay. In many cases,
cooperative members borrow from multiple sources—including moneylenders,
microfinance institutions, and other societies—without informing their cooperative.
The resulting debt burden makes it difficult for them to prioritize repayments, leading
to delinquency. Multiple borrowing is often a symptom of insufficient loan amounts

26
 or unmet financial needs. However, it can lead to a vicious cycle of refinancing and
late payments. Research by Nkosi and Dlamini (2021) found that thrift and credit
societies with weak internal controls and poor member tracking systems are more
susceptible to high default rates due to undetected over-indebtedness.

2.2 Theoretical Framework

A theoretical framework serves as the foundation for understanding the various factors
influencing repayment performance in thrift and credit societies. It provides a lens
through which relationships between variables can be interpreted, and offers explanations
for borrower behavior, institutional efficiency, and credit outcomes. Several economic,
financial, and behavioral theories have been developed to explain credit behavior, loan
performance, and institutional sustainability in the context of microfinance and
cooperative finance. For this study, the theoretical exploration is anchored on four major
theories: Agency Theory, Credit Risk Theory, Behavioral Economics Theory, and
Institutional Theory. Each of these theories provides distinct yet interrelated perspectives
on why repayment performance varies among individuals and institutions.

2.3.1 Agency Theory

Agency Theory, as proposed by Jensen and Meckling (1976), examines the relationship
between principals (owners) and agents (managers) in an organization. The theory posits
that when the interests of the principal and agent diverge, and there is asymmetry of
information, the agent may act in a self-interested manner that does not align with the
principal’s goals. In the context of thrift and credit societies, the members (as owners)
delegate loan administration and financial decisions to elected or appointed management
(agents). This delegation can lead to inefficiencies if agents act without adequate
oversight or in pursuit of personal benefit.

Repayment performance in such societies is often influenced by how well agency

problems are managed. If management lacks transparency or accountability, members

27
may lose trust, become reluctant to repay loans, or even engage in opportunistic behavior
themselves. According to Adebayo and Yusuf (2021), poor loan recovery often results
from internal agency problems where loan officers or committee members approve loans
without proper due diligence, sometimes due to favoritism or corruption.

Agency Theory also highlights the importance of monitoring mechanisms and incentive
structures. When agents are properly incentivized and monitored, they are more likely to
act in the best interests of the society. Effective repayment enforcement, periodic audits,
and member involvement in decision-making are key tools to minimize agency conflicts.
Societies that implement strict internal controls and transparent reporting mechanisms
tend to have better repayment outcomes.

2.3.2 Credit Risk Theory

Credit Risk Theory is rooted in traditional financial management and focuses on the risk
that a borrower will default on loan obligations. It addresses the probability of default
and the expected loss from credit exposure. According to Stiglitz and Weiss (1981), credit
markets are often characterized by information asymmetry, where the lender does not
have complete information about the borrower’s ability or willingness to repay. This
asymmetry can lead to two problems: adverse selection (where high-risk borrowers are
more likely to seek loans) and moral hazard (where borrowers may not use the loan
responsibly after approval).

In the context of thrift and credit societies, these risks are heightened due to the informal
nature of operations, limited access to credit bureaus, and lack of standardized borrower
assessment tools. Poor repayment performance is often the result of lending to high-risk
individuals without sufficient background checks or credit profiling. Furthermore, the
lack of collateral and legal enforcement mechanisms makes it difficult for societies to
recover funds in the event of default.

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Credit Risk Theory emphasizes the need for effective screening, monitoring, and loan
structuring to mitigate default risks. Societies that invest in credit evaluation procedures,
establish repayment terms suited to borrower cash flows, and closely monitor loan
utilization tend to manage credit risk more effectively. According to Ogunleye (2020),
tailoring loan products to match income patterns (e.g., seasonal repayment for farmers)
significantly reduces credit risk and improves loan performance.

2.3.3 Behavioral Economics Theory

Behavioral Economics integrates insights from psychology and economics to explain

why individuals sometimes make irrational financial decisions. Unlike classical
economic theory, which assumes rational decision-making, behavioral economics
recognizes that people often act in ways that contradict their long-term best interests.
This framework is especially relevant in explaining borrower behavior within thrift and
credit societies.

One core concept in behavioral economics is time inconsistency, the tendency for
individuals to prioritize short-term needs over long-term obligations. Borrowers may take
out loans with the intention to repay but later divert funds to immediate consumption or
emergencies, undermining repayment performance. According to Thaler and Sunstein
(2008), such decisions are influenced by present bias, limited self-control, and poor
financial planning.

Another relevant concept is mental accounting, where individuals compartmentalize

money based on its source or intended use. For example, a borrower may perceive loan
funds as “extra” money, and therefore use it for non-productive purposes, such as social
ceremonies or non-essential purchases. These behavioral tendencies, if not addressed
through education and support, contribute significantly to repayment challenges.

Thrift and credit societies can mitigate the impact of behavioral biases through member
sensitization, pre-loan training, flexible repayment terms, and behavioral nudges. Simple

29
interventions like automated repayment reminders, peer accountability groups, and small
financial incentives for timely repayment have been shown to improve loan behavior. As
noted by Ajayi and Alabi (2022), societies that incorporate behavioral insights into their
credit management strategies experience improved repayment performance.

2.3.4 Institutional Theory

Institutional Theory offers a macro-level explanation of how organizational structures,

norms, and environments influence behavior. The theory posits that institutions are
shaped by formal rules (laws, policies) and informal norms (culture, values), which
together determine how organizations operate. In the context of repayment performance,
Institutional Theory explains how the regulatory environment, governance practices, and
social expectations shape borrower behavior and institutional capacity.

Thrift and credit societies operate within institutional frameworks that include
cooperative laws, bylaws, financial reporting standards, and oversight from apex
cooperative bodies. Where these frameworks are strong and enforced, societies tend to
demonstrate higher levels of repayment and operational efficiency. Conversely, weak
institutions characterized by limited supervision, legal loopholes, and lack of
accountability often record poor repayment outcomes.

According to Williamson (2000), institutions that embed accountability, transparency,

and member participation are more resilient and better able to enforce repayment
obligations. Furthermore, societies embedded in strong social institutions—such as
religious organizations or ethnic groups—often experience peer-enforced repayment
behavior due to reputational concerns. Institutional Theory thus underscores the need for
strengthening governance, policy enforcement, and member education to create an
environment conducive to repayment.

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2.3.5 Interrelationship of Theories

While each of the above theories offers unique insights, they are interrelated and
collectively explain the complex phenomenon of repayment performance. Agency
Theory and Credit Risk Theory emphasize institutional structures and loan administration
processes, while Behavioral Economics and Institutional Theory address individual
behavior and broader socio-cultural influences. For instance, poor repayment may result
from weak loan appraisal systems (Credit Risk), a lack of managerial accountability
(Agency Theory), borrower overconfidence (Behavioral Economics), or a weak
regulatory environment (Institutional Theory). Effective repayment performance thus
requires a holistic approach that integrates good governance, risk management, member
training, and policy reform.

2.4 Empirical Review

The issue of repayment performance in thrift and credit societies has attracted significant
scholarly attention across different contexts, particularly in developing economies where
access to formal credit remains limited. Numerous empirical studies have examined the
various factors influencing loan repayment, ranging from borrower-specific attributes to
institutional policies and external macroeconomic conditions. This section synthesizes
findings from recent studies, highlighting key variables that affect repayment
performance, methodologies employed, and major conclusions drawn. The review
provides valuable insights into how academic research has approached the subject and
informs the present study by identifying research gaps and policy implications.

A considerable body of literature identifies socioeconomic characteristics of borrowers as

crucial predictors of repayment performance. Factors such as income level, educational
background, household size, and employment status are frequently examined. For
example, Adebayo and Akinwale (2021) conducted a study among rural cooperative
societies in Kwara State, Nigeria, using logistic regression analysis to determine the

31
influence of socioeconomic variables on loan repayment. Their findings revealed that
income level and educational attainment had statistically significant positive relationships
with repayment performance. Borrowers with higher income and formal education were
more likely to understand loan terms and meet repayment obligations.

Similarly, Osei and Boateng (2023) analyzed repayment performance in 50 credit unions
in Ghana. Their study found that gender and household size were also significant
predictors, with female borrowers showing higher repayment discipline. This was
attributed to women’s higher involvement in small-scale trading and home-based
businesses, which ensured more consistent income flows. These studies suggest that
borrower characteristics play a central role in determining credit outcomes, and tailoring
loan products to borrower profiles can enhance performance.

Apart from borrower characteristics, institutional variables and loan-related terms

significantly influence repayment behavior. These include loan size, repayment period,
interest rate, monitoring practices, and the quality of loan officers. Obasi et al. (2023)
examined 30 thrift and credit societies in South-East Nigeria and identified that loan size
and repayment period were inversely related to repayment performance. Borrowers with
larger loan amounts and shorter repayment timelines were more likely to default. The
study recommended aligning loan disbursement with the productive capacities and cash
flow cycles of borrowers to reduce default risk.

In another study, Ogundipe and Oyedele (2021) used a cross-sectional survey design to
investigate the impact of institutional governance on repayment among societies in
Lagos. The results showed that transparency in loan allocation, consistent borrower
follow-up, and managerial accountability positively influenced loan repayment rates. The
researchers emphasized that societies with democratic decision-making and routine
financial reporting were more likely to experience high repayment compliance. Ogunbiyi
and Adebisi (2021) focused on loan administration procedures and repayment
performance in Osun State. Their study used multiple regression models to assess the

32
effects of interest rate structure and loan monitoring. They found that societies with
flexible interest rates and structured monitoring mechanisms had better loan recovery
rates. This underscores the importance of internal policies and managerial practices in
ensuring credit discipline.

Behavioral economics has gained traction in recent empirical studies on microfinance

and cooperative credit. Scholars have sought to understand how cognitive biases, peer
influence, and cultural norms affect repayment decisions. A notable study by Njoku and
Adebisi (2023) explored behavioral predictors of repayment among women in savings
groups in South-West Nigeria. Using qualitative interviews and a structured survey, the
study revealed that emotional spending, peer expectations, and “social pressure to save
face” often influenced repayment priorities. Women were more likely to prioritize
repayments in order to preserve their social reputation, even in the face of financial
hardship. This demonstrates the utility of peer group accountability as a non-financial
incentive in credit enforcement. Furthermore, Mutiso and Kamau (2022) examined
group-based lending models in Kenya and reported that strong group cohesion, mutual
trust, and shared liability significantly reduced default rates. The study concluded that
social capital is a critical non-financial asset in maintaining repayment discipline,
particularly in contexts where formal enforcement mechanisms are weak. These findings
emphasize the need for thrift and credit societies to consider social and psychological
dynamics in loan management strategies. Behavioral nudges such as repayment
reminders, public recognition for good repayment, and peer feedback loops may be
effective in reinforcing positive repayment behavior.

The integration of digital tools and efficient record-keeping systems has also emerged as
a significant factor influencing repayment performance. Several empirical studies suggest
that societies adopting technological solutions for loan tracking, member communication,
and data management report higher levels of efficiency and repayment. Ahmed and
Rahman (2022) investigated the effect of digital record-keeping on cooperative

33
performance in Bangladesh. Their quasi-experimental design compared societies using
traditional manual systems with those using digital platforms. The digital societies
experienced a 25% increase in timely repayments over a 12-month period. The study
attributed this improvement to enhanced loan tracking, automated reminders, and real-
time access to member repayment histories.

In a similar vein, Adetiloye et al. (2020) conducted a study across 15 cooperatives in

three Nigerian states. Their research confirmed that digital systems reduce human error,
improve accountability, and support transparent member engagement. However, they also
noted that digital adoption is often constrained by lack of infrastructure, inadequate
training, and resistance to change—especially in rural communities. These studies point
to the dual role of technology as both an enabler and a challenge. While it can enhance
repayment through better oversight and member interaction, its successful
implementation requires strategic investment and capacity building.

Despite the positive findings, empirical research has consistently highlighted several
barriers to achieving high repayment performance in thrift and credit societies. Nkosi and
Dlamini (2021), in a comprehensive study of cooperatives in South Africa, identified
institutional weaknesses such as poor governance, inadequate member training, and
limited financial oversight as core obstacles. Their mixed-methods study showed that
many societies lack clear policies on loan default, contributing to a culture of leniency
and non-compliance. Brown and Miller (2023) conducted policy-oriented research in
East Africa and concluded that government intervention—such as legal frameworks for
debt recovery and financial literacy campaigns—can significantly enhance repayment
behavior. However, they cautioned that overregulation without grassroots involvement
may stifle cooperative autonomy and innovation. These findings highlight the importance
of a multi-stakeholder approach, where government bodies, cooperative unions, and
members work together to strengthen loan repayment systems and reduce default.

34
2.5 Summary of Literature

This chapter provided a comprehensive review of the relevant literature on the

determinants of repayment performance in thrift and credit societies. As microfinance-
oriented institutions, these societies play a vital role in promoting financial inclusion,
economic empowerment, and poverty alleviation, particularly in developing economies.
However, the sustainability and effectiveness of these societies largely depend on their
ability to manage loan repayment performance efficiently. The chapter systematically
explored conceptual clarifications, theoretical underpinnings, empirical findings, and the
multifaceted challenges related to loan repayment behavior and outcomes. The theoretical
framework drew from multiple established theories to explain repayment dynamics.
These theories, though distinct, collectively provide a holistic view of the structural and
behavioral determinants of loan repayment. The empirical review analyzed studies
conducted in Nigeria, Ghana, Kenya, Bangladesh, South Africa, and other relevant
contexts. These studies identified key determinants of repayment performance, including
income level, education, loan size, group solidarity, institutional monitoring, and access
to digital tools. Evidence from multiple sources pointed to the positive influence of peer
accountability, financial education, and record-keeping innovations. However, a recurring
theme was the need for capacity-building and regulatory support to enhance cooperative
governance and enforce repayment obligations.

The reviewed literature also highlighted significant policy and operational implications.
First, there is a pressing need to develop tailored credit policies that match the repayment
capabilities and income patterns of members. Seasonal loan products, flexible terms, and
grace periods should be part of loan structuring, especially in agriculture-dependent
communities. Second, societies must invest in capacity-building for both staff and
members. Training in credit risk management, financial planning, and cooperative
governance can greatly improve repayment outcomes. Finally, there is a need for legal
and regulatory reforms that enhance enforcement capabilities without undermining the

35
community-based nature of thrift and credit societies. The literature also revealed several
gaps that warrant further research. Many of the existing studies focused on either
borrower characteristics or institutional factors, but few examined the interplay between
social, psychological, and policy variables. Similarly, while the impact of digital
technologies has been acknowledged, more in-depth studies are needed to explore how
societies in rural or underserved areas can overcome barriers to adoption.

36
 CHAPTER THREE

METHODOLOGY

The focus of this chapter is the research methodology, giving the detailed account of the
method used in collecting the data for this study. It explains the nature of the data that
were collected and data analytical methods that were employed in the study. The chapter
enumerates the background by which the findings and conclusion of the study are based.
The characteristics of the study population are well explained as well as the data
collection instrument

3.1 Study area

Ijebu Ode Local Government Area (LGA) in Ogun State, Nigeria. Its headquarters is in
the town of Ijebu Ode, located at coordinates 6°49′N and 3°56′E. It covers an area of
approximately 192 square kilometers and had a population of 154,032 as per the 2006
census. The postal code of the area is 120. Ijebu Ode Local Government in Ogun State,
Nigeria, offers diverse study areas. Its rich history and culture provide opportunities to
explore the role of the Ijebu Kingdom, festivals like Ojude Oba, and their socio-economic
impacts. Economic studies can focus on SMEs, agro-processing, and rural development.
Urbanization challenges, waste management, and infrastructure development are key for
urban planning research. Education-related studies could examine disparities between
rural and urban schools or the integration of indigenous knowledge. Healthcare delivery,
malaria prevalence, and environmental concerns like deforestation and water
management are critical for health and environmental studies, offering insights into
sustainable development in the region.

37
3.2 Sources and Methods of Data Collection

Both primary and secondary data were used for the study. The primary data were
collected through the use of well-structured (pre-tested) questionnaire, while the
secondary data were obtained d from published journals, books, internet, periodicals,
government official websites other relevant sources

3.3 Sampling Techniques

A two-stage sampling technique was employed in this study to select a cross section of
Eighty(80) cooperative societies in the areas. Two (2) major Cooperative Unions were
randomly selected in the study Area. Five (5) cooperative societies were randomly
selected from each of the Cooperative Unions and each of the cooperative societies
twelve (12) members were selected making a total of one hundred and twenty
(120)cooperative societies sampled for the study.

3.4 Methods of Data Analysis

The data obtained from this study were analyzed using both descriptive and tobit
regression models. The statistical tools used are presented below in line with the study
objectives.

3.4.1 Socio economic characteristics of sampled cooperative members in the study

Descriptive statistical tools were used in analyzing this objective. The statistical tools
included frequency distribution tables and percentages, charts, measures of central
tendency and proportions.

3.4.2 Loan disbursement and repayments in the sampled societies

38
Descriptive statistical tools were used in analyzing this objective. The statistical tools
included frequency distribution tables and percentages, charts, measures of central
tendency and proportions.

3.4.3 Examine the causes of loan repayment problems among the beneficiaries

Descriptive statistical tools were used in analyzing this objective. The statistical tools
included frequency distribution tables and percentages, charts, measures of central
tendency and proportions.

3.4.4 Determine factors affecting the rate of loan repayment among the
beneficiaries

Regression analysis tools were used in analyzing the objective. The statistical tools
included using different functional forms such as double -log and experimental function.

Experimental Function (Non-Linear) Regression

Formula:

● Y = B0 + B1 X1 + B2 X2+ B3 X3 + B4 X4 + B5 X5 + ϵ

Y = β0 +β1 X1 (Age) + X2 (Education Level) + β3 X3 (Income) + β4 X4 (Employment

Status) + β5 X5 (Loan Size) + ……… β13 X13+ ϵ

Where:

● Y = Loan repayment rate (dependent variable)

● β₀ = Intercept term

● β₁, β₂, ..., β₅ = Coefficients (weights) for each independent variable

0 X₁, X₂, ..., X₁₀) = Independent variables (factors influencing repayment)

ε = Error term (captures unexplained variation in loan repayment rate)

39
X₁: Age X₂: Educational level X₃ : Marital status (1 = Married, 0 = Otherwise) X₄ :
Household size (number of dependents) X₅ : Net income (₦) X₆: Repayment period
X₇: Interest rate X₈: Value of loan disbursed (₦) X₉ : Contact with extension agents
(frequency) X₁₀ : Experience (years) X11: Borrowing frequency (number/year) X12:
Average income per annum X13: Position in the society (1 = Executive member, 0 =
Ordinary member)

40
 CHAPTER FOUR
RESULTS AND DISCUSSION
4.0 Preamble

This chapter presents the analysis and interpretation of data collected from
respondents in Ijebu Ode Local Government Area on the factors guiding loan repayment
in thrift and credit cooperative societies. Data collected were analyzed using descriptive
and inferential statistical tools, including frequency tables and percentages, as well as
multiple regression analysis. The findings are discussed in line with the research
objectives and relevant literature, providing insights into the repayment behavior of
cooperative members.

4.1 Socio-economic Characteristics of Respondents

Table 4.1: Distribution of Respondents by Age

Age Frequency Percentage

21-30 19 15.8%
31-40 26 21.7%
41-50 40 33.3%
Above 50 35 29.2%
Total 120 100%
Source: Field Survey, 2025

Table 4.1 shows the distribution of the respondents age. However, it shows that
the highest number of participants (40 respondents, representing 33.3%) fall within the
41–50 years age group. This is followed closely by those above 50 years, with 35
respondents (29.2%). The 31–40 years category had 26 respondents (21.7%), while the
21–30 years group had the least number of respondents, with 19 individuals (15.8%).

41
This distribution indicates that the majority of the respondents are adults aged 41 years
and above.

42
Table 4.2: Distribution of Respondents by Gender

Gender Frequency Percentage

Male 54 45%
Female 66 55%
Total 120 100%
Source: Field Survey, 2025

The gender distribution of the respondents presented in Table 4.2 shows that out
of the 120 individuals who completed the questionnaire, 66 were female, representing
55.0% of the total respondents, while 54 were male, accounting for 45.0%. This indicates
that female participants slightly outnumbered their male counterparts in the survey.

Table 4.3: Distribution of Respondents by Marital Status

Marital Status Frequency Percentage

Single 19 15.8%
Married 56 46.7%
Divorced 21 17.5%
Widowed 24 20%
Total 120 100%
Source: Field Survey, 2025

As shown in Table 4.3, the marital status distribution of the respondents indicates that the
majority were married, with 56 individuals, representing 46.7% of the total sample. This
was followed by widowed respondents, who accounted for 24 individuals (20.0%), and
divorced respondents, with 21 individuals (17.5%). The single category had the fewest
participants, totaling 19 individuals (15.8%). This distribution shows that a significant
portion of the respondents are or have been in marital relationships, with only a small
percentage being single.

43
44
Table 4.4 Distribution of Respondents by Level of Education

Education Level Frequency Percentage

No formal education 26 21.7%
Primary 22 18.3%
Secondary 29 24.2%
Tertiary 43 35.8%
Total 120 100%
Source: Field Survey, 2025.

In Table 4.4, the educational background of the respondents reveals that the
highest number of participants, 43 individuals (35.8%), attained tertiary education. This
is followed by those with secondary education, totaling 29 respondents (24.2%), and
those with no formal education, who make up 26 respondents (21.7%). The least
represented category is those with primary education, accounting for 22 respondents
(18.3%). This distribution indicates that a significant portion of the respondents are
educated, with over half having at least secondary education.

Table 4.5: Distribution of Respondents by Occupation

Occupation Frequency Percentage

Farming 23 19.2%
Trading 41 34.2%
Civil service 36 30%
Others 20 16.7%
Total 120 100%
Source: Field Survey, 2025

The occupational distribution of the respondents in Table 4.5 shows that the
largest group is engaged in trading, with 41 individuals (34.2%), followed by those in the

45
civil service, who account for 36 respondents (30.0%). Farming is the occupation of 23
respondents (19.2%), while 20 respondents (16.7%) fall under the ‘others’ category,
which may include artisans, private sector workers, or unemployed individuals. This data
indicates that a majority of the respondents are involved in economic activities such as
trading and civil service, reflecting a mix of both formal and informal sector
participation.

Table 4.6: Monthly Income Range of Respondents

Income Range Frequency Percentage

150,000 – 250,000 51 42.5%
Above 250,000 69 57.5%
Total 120 100%
Source: Field Survey, 2025

As presented in Table 4.6, the monthly income distribution of the respondents shows that
the majority, 69 individuals (57.5%), earn above ₦250,000, while 51 respondents
(42.5%) fall within the ₦150,000 – ₦250,000 income range. This indicates that most of
the respondents are relatively high earners, suggesting a financially stable membership
base within the thrift and credit societies surveyed. The presence of a substantial
proportion of respondents within the ₦150,000–₦250,000 range also reflects moderate
income levels.

Table 4.7: Distribution of Respondents Years of Cooperative Experiences

Years Frequency Percentage

Below 3 years 18 15.0%
3-6 years 31 23.8%
Above 6 years 71 59.2%

46
Total 120 100%
Source: Field Survey, 2025

Table 4.7 shows the distribution of respondents based on their years of cooperative
experience. The majority of the respondents, accounting for 71 individuals (59.2%), have
more than six years of experience in cooperative societies. This is followed by 31
respondents (23.8%) who have between three to six years of experience. Only 18
respondents, representing 15.0%, have less than three years of cooperative experience.
This suggests that most of the respondents are well-experienced in cooperative activities.

Table 4.8: Distribution of Respondents by Household Size

Size Frequency Percentage

Less than 4 29 24.2%
4-8 57 47.5%
9-12 23 19.2%
Above 12 11 9.2%
Total 120 100%
Source: Field Survey, 2025

Table 4.8 presents the distribution of respondents based on household size. The largest
proportion of respondents, 57 (47.5%), reported having between 4 to 8 household
members. This is followed by 29 respondents (24.2%) with fewer than 4 members, and
23 respondents (19.2%) with household sizes ranging from 9 to 12. A smaller group, 11
respondents (9.2%), reported having more than 12 members in their household.

4.2. Loan Disbursement and Repayment in the Sample Societies

Table 4.9: Distribution of Receipt of Loans from Thrift or Credit Societies

Options Frequency Percentage

47
Yes 114 95%
No 6 5%
Total 120 100%
Source: Field Survey, 2025

The findings reveal that a significant majority of the respondents, about 95% (114
individuals) indicated "Yes", while only 6 respondents (5%) reported "No". This clearly
shows that thrift or credit societies play a crucial role in meeting the financial needs of
the respondents through loan facilities. The high percentage of loan recipients suggests
that these societies are accessible, trusted, and likely serve as an essential source of credit
for their members.

Table 4.10: Distribution of Loan amount previously accessed from a thrift or credit
society

Amount Frequency Percentage

Less than 500,000 36 30%
500,001 – 1,000,000 59 49.2%
Above 1,000,000 25 20.8%
Total 120 100%
Source: Field Survey, 2025

The data reveal important insights into the lending patterns of thrift and credit
societies. Out of 120 respondents, about 49.2% (59 respondents), which covers the study
majority claimed to received loan amounts ranging between ₦500,001 and ₦1,000,000.
In addition, 30% of the respondents (36 individuals) indicated that they received loans
less than ₦500,000. Meanwhile the remaining, 20.8% (25 respondents) reported
receiving loan amounts above ₦1,000,000. This data shows that thrift and credit societies

48
are capable of providing a range of loan amounts tailored to the varying needs of their
members.

Table 4.11: Distribution of Loan Repayment Period

Repayment Period Frequency Percentage

Less than 6 months 23 19.2%
6 – 12 months 58 48.3%
Above 12 months 39 32.5%
Total 120 100%
Source: Field Survey, 2025

The data provide insight into the typical loan repayment durations among
members of thrift or credit societies. Out of the 120 respondents surveyed, the majority,
about 48.3% (58 respondents), indicated a repayment period of 6 to 12 months.
Additionally, 19.2% of the respondents (23 individuals) reported a shorter repayment
period of less than 6 months.

On the other hand, 32.5% (39 respondents) had a repayment period of more than
12 months, indicating that some members access larger loan amounts or require extended
timeframes to comfortably repay their debts. This however shows that that thrift and
credit societies offer flexible loan repayment options, accommodating the varying
financial capacities and preferences of their members. This flexibility enhances borrower
satisfaction and promotes responsible loan management within the cooperative system.

Table 4.12: Distribution of Loan repayment Completion Status

Options Frequency Percentage

Yes 62 51.7%

49
No 58 48.3%
Total 120 100%
Source: Field Survey, 2025

The distribution of loan repayment completion status indicates that a slight majority of
respondents, 62 (51.7%), have fully repaid their loans obtained from thrift or credit
societies. In contrast, 58 respondents (48.3%) have not yet completed their loan
repayment. This near-equal distribution suggests a fairly balanced repayment trend
among the respondents, with a marginally higher number having met their repayment
obligations. The close margin between those who have completed repayment and those
who have not may point to the need for enhanced loan monitoring and support systems
within the societies.

Table 4.13: Distribution of Rating of ease of the Loan Repayment Period

Frequency Percentage
Very easy 41 34.2%
easy 53 44.2%
difficult 17 14.2%
Very difficult 9 7.5%
Total 120 100%
Source: Field Survey, 2025

The data above shows a clear picture of members' experiences with repaying
loans obtained from thrift or credit societies. Out of 120 respondents, a significant
majority, about 44.2% of the study respondents described the repayment process as
"easy", while 34.2%rated it as "very easy". Combined, this means that nearly 80% of the
respondents found the loan repayment process to be generally manageable and user-
friendly. However, not all respondents shared the same positive experience. 14.2% of the

50
respondents found the process "difficult", and 7.5% rated it as "very difficult". Thus, the
data indicates that while most members view the loan repayment process as
straightforward and accessible, there is still a notable minority who encounter difficulties.

Table 4.14: Distribution of Interest Rate on the Loan

Rates Frequency Percentage
12.5% 64 53.3%
5% 56 46.7%
Total 120 100%
Source: Field Survey, 2025

The data presented in response to the question on interest rates charged on loans
shows a fairly even distribution between two interest rate categories. Out of 120
respondents, 53.3% of the respondents reported being charged an interest rate of 12.5%,
while 46.7% (56 respondents) indicated that they were charged 5%. This distribution
suggests that while a slight majority of members were subject to a higher interest rate of
12.5%, a significant portion also benefited from a lower rate of 5%.

51
4.3 Causes of Loan Repayment Problem
Table 4.15: Distribution of Loan Type and Associated Attributes
Attribute Loan Type
Normal Loan Special Loan
Respondents (%) 85 (70.8%) 35 (29.2%)
Average Amount Collected ₦100,000 ₦200,000
Average Amount Repaid ₦85,000 ₦160,000
Average Duration (Months) 12 18
Average Interest Rate (%) 5% 7%
Major Purpose Family Consumption Business Investment
Source: Field Survey, 2025

The analysis of loan types and associated attributes reveals that a majority of the
respondents, 85 out of 120 (70.8%), obtained normal loans, while the remaining 35
respondents (29.2%) accessed special loans. For normal loans, the average amount
collected was ₦100,000, with an average repayment of ₦85,000, repayment duration of
12 months, and an interest rate averaging 5%. In contrast, special loans had a higher
average amount collected of ₦200,000, with ₦160,000 repaid on average, over a longer
duration of 18 months, and a higher average interest rate of 7%. The main purpose for
normal loans was family consumption, whereas special loans were predominantly used
for business investment, suggesting that the latter may be more productive in intent but
come with higher financial obligations.

Table 4.16: Distribution on the Purpose of Last Loan Collected

Purpose Category Frequency Percentage (%)

Investment 46 38.3%
Family Consumption 63 52.5%
Social Function 22 18.3%

52
Acquisition of Assets 30 25.0%
Others (e.g., Education) 9 7.5%
Source: Field Survey, 2025

As presented in the table above, concerning the purpose of last loan collected,
respondents were allowed to select multiple purposes for which they used their most
recent loans. The results show that family consumption was the most common purpose,
reported by 63 respondents (52.5%), followed by investment, mentioned by 46
respondents (38.3%). Acquisition of assets was cited by 30 respondents (25.0%), while
22 respondents (18.3%) used the loan for social functions such as weddings or
ceremonies. Additionally, 9 respondents (7.5%) specified other purposes, including
education or health emergencies. This suggests that a significant proportion of loans were
directed toward non-income-generating activities, which may contribute to repayment
challenges.

Table 4.17: Distribution of Respondents’ Experience of Loan Repayment Challenges

Response Frequency Percentage (%)

Yes 68 56.7%
No 52 43.3%
Total 120 100%
Source: Field Survey, 2025

On the experience of Loan Repayment Challenges, if the respondents had experienced

any difficulty repaying their loans, 68 respondents (56.7%) answered “Yes”, while 52
respondents (43.3%) responded “No”. This indicates that more than half of the
respondents faced challenges in meeting their loan repayment obligations. This high rate
of difficulty may reflect broader financial constraints or misalignment between loan
terms and the borrowers’ income or repayment capacity.

53
54
Table 4.18: Distribution of Major Challenges Faced in Loan Repayment

Challenge Type Frequency Percentage (%)

Insufficient Income 40 58.8%
High Interest Rates 28 41.2%
Poor Financial Planning 36 52.9%
Unexpected Emergencies 33 48.5%
Others (e.g., job loss) 12 17.6%
Source: Field Survey, 2025

Among the 68 respondents who reported repayment challenges, several reasons were
cited, with many selecting more than one option. The most common issue was
insufficient income, reported by 40 respondents (58.8%), followed by poor financial
planning, noted by 36 respondents (52.9%). Unexpected emergencies (e.g., illness or job
loss) were mentioned by 33 respondents (48.5%), and high interest rates were a concern
for 28 respondents (41.2%). Additionally, 12 respondents (17.6%) cited other reasons,
including job loss or business failure. These findings indicate that both internal (planning,
income) and external (emergencies, interest rates) factors significantly influence loan
repayment success.

Table 4.19: Perception of Fairness of Loan Terms

Response Frequency Percentage (%)

Yes 77 64.2%
No 43 35.8%
Total 120 100%
Source: Field Survey, 2025

As presented in the table, from the total of 120 respondents, 77 (64.2%) considered the
loan terms, including interest rates and repayment schedules, to be fair, while 43 (35.8%)

55
did not. This indicates that the majority of respondents found the loan conditions
acceptable, though a significant minority expressed dissatisfaction, possibly due to
unfavorable terms such as high interest rates or short repayment durations.

Table 4.20: Receipt of Financial Literacy Training before Loan Disbursement

Response Frequency Percentage (%)

Yes 49 40.8%
No 71 59.2%
Total 120 100%
Source: Field Survey, 2025

Table 4.20 shows that a total of 49 respondents (40.8%) received financial literacy
training prior to receiving their loan, whereas the majority, 71 respondents (59.2%), did
not. This suggests a gap in pre-loan education, which may contribute to loan
mismanagement, poor financial planning, and eventual repayment challenges among
beneficiaries.

Table 4.21: Distribution by Support or Advice Received During Repayment Period

Response Frequency Percentage (%)

Yes 55 45.8%
No 65 54.2%
Total 120 100%
Source: Field Survey, 2025

When asked whether they received any form of support or advice during the repayment
period, 55 respondents (45.8%) answered ‘Yes’, while 65 respondents (54.2%) said ‘No’.
This reveals that slightly more than half of the respondents went through the repayment

56
process without structured support, which could impact their ability to successfully meet
repayment obligations, especially in times of financial strain.

57
4.4. Factors Affecting Loan Repayment

Table 4.22: Distribution of Motivation for Prompt Loan Repayment

Motivation Factor Frequency Percentage (%)

Fear of penalties 66 55.0%
Moral obligation 59 49.2%
Reputation 72 60.0%
Access to future loans 84 70.0%
Others (e.g. peer pressure) 18 15.0%
*Multiple responses
Source: Field Survey, 2025

Amongst the above listed motivation factors, the leading motivation for prompt
repayment among respondents was access to future loans (70%), followed by reputation
(60%), and fear of penalties (55%). This implies that loan continuity and social standing
are significant drivers of repayment compliance in cooperative societies.

Table 4.23: Distribution of Factors Making Loan Repayment Difficult

Difficulty Factor Frequency Percentage (%)

Poor business returns 63 52.5%
Low income 79 65.8%
Family responsibilities 56 46.7%
High interest rates 41 34.2%
Others (e.g. health issues) 23 19.2%
*Multiple responses
Source: Field Survey, 2025

From the above data, the most cited challenges affecting loan repayment were low
income (65.8%) and poor business returns (52.5%). These financial constraints, coupled
with family responsibilities (46.7%), reveal that many borrowers struggle to balance
household needs with debt obligations.

58
Table 4.24: Distribution of Perceived Influence of External Economic Factors on
Repayment
Response Frequency Percentage (%)
Yes 85 70.8%
No 35 29.2%
Total 120 100%
Source: Field Survey, 2025

A majority of respondents (70.8%) believe that external factors such as inflation and
economic downturns negatively impact their ability to repay loans. This perception
highlights the vulnerability of borrowers to broader macroeconomic conditions beyond
their control.

Table 4.25: Distribution of Methods Used by Cooperatives to Monitor Loan

Repayment

Monitoring Method Frequency Percentage (%)

Regular reminders 92 76.7%
Incentives for early repayment 48 40.0%
Penalties for late payment 63 52.5%
Others (e.g., peer monitoring) 16 13.3%
*Multiple responses
Source: Field Survey, 2025

Most cooperatives monitor repayment through regular reminders (76.7%), and over half
also employ penalties for late payment (52.5%). Only 40% offer incentives for early
repayment, suggesting more focus on punitive than reward-based strategies.

59
Table 4.26 Value of Loan Disbursed

Statistic Value (₦)

Minimum ₦50,000
Maximum ₦3,500,000
Average ₦135,000
Source: Field Survey, 2025

The average loan disbursed across respondents was approximately ₦500,000, with
amounts ranging between ₦50,000 and ₦3,500,000, reflecting both small-scale and
larger loan needs within the cooperative system.

Table 4.27: Average Income Per Annum

Statistic Value (₦)

Minimum ₦500,000
Maximum ₦5,100,000
Average ₦3,600,000
Source: Field Survey, 2025

The average annual income of respondents was ₦1,800,000, indicating modest earning
levels. This may explain the high percentage of repayment challenges and the demand for
more accessible loan terms.

Table 4.28: Distribution of Respondents Position in the Society

Position Frequency Percentage (%)

Executive Members 36 30.0%
Ordinary Members 84 70.0%
Total 120 100%
Source: Field Survey, 2025

60
Out of the total 120 respondents, 84 (70%) were ordinary members, while 36 (30%) held
executive positions. This implies that most insights reflect the experiences of regular
cooperative members who are more likely to be directly affected by loan policies.

61
4.5 Regression Analysis
Table 4.29: Tobit Regression Results on Determinant Factors of Loan Repayment
Performance

Variable Coefficient Std. t- p-Value Marginal

(β) Error Statistic Effect
Constant 0.391 0.118 3.31 0.001 -
Age (X₁) 0.024 0.011 2.18 0.031 0.009
Educational Level 0.155*** 0.042 3.69 0.000 0.061
(X₂)
Marital Status (X₃) 0.128** 0.051 2.51 0.013 0.049
Household Size (X₄) -0.037** 0.016 -2.31 0.022 -0.014
Net Income (X₅) 0.081*** 0.027 3.00 0.003 0.032
Repayment Period -0.046* 0.024 -1.92 0.058 -0.018
(X₆)
Interest Rate (X₇) -0.097** 0.038 -2.55 0.012 -0.039
Loan Value Disbursed 0.029 0.018 1.61 0.110 0.011
(X₈)
Experience in 0.062** 0.025 2.48 0.015 0.024
Cooperatives (X₁₀)
Borrowing Frequency 0.047* 0.026 1.81 0.073 0.019
(X₁₁)
Average 0.089*** 0.029 3.07 0.003 0.035
Income/Annum (X₁₂)
Position in Society 0.170*** 0.045 3.78 0.000 0.068
(X₁₃)
*, Significant at 1%; **, significant at 5%.
No. of Observations: 120
Pseudo R-squared: 0.412 Log-likelihood: -32.67
LR Chi-square (13 df): 47.89 Prob > Chi2: 0.0000

62
The Tobit regression analysis revealed that age, educational level, and marital status
significantly influence loan repayment behavior. Respondents aged 41 years and above
were more likely to meet their repayment obligations compared to younger individuals,
with age showing a positive coefficient (β ≈ 0.01), indicating that maturity and financial
responsibility improve repayment rates. Education also had a statistically significant and
positive effect (β ≈ 0.05), suggesting that those with secondary or tertiary education
understand loan conditions better and manage finances more efficiently. Marital status
was also influential; being married contributed positively (β ≈ 0.3) to repayment, likely
due to shared family income and pressure to maintain financial integrity within the
community.

Several financial and loan-related factors showed strong significance in predicting

repayment behavior. Household size had a negative and significant relationship with
repayment (β ≈ –0.01), meaning that individuals with more dependents struggle more
with loan repayment. Conversely, both net income and average annual income had
positive and statistically significant effects (β ≈ 0.00001), affirming that higher earnings
enhance repayment capacity. The repayment period was negatively associated with
repayment success (β ≈ –0.01); borrowers with longer repayment schedules were more
prone to delays or defaults. Similarly, interest rate showed a significant negative effect (β
≈ –0.02), highlighting that higher interest burdens reduce borrowers’ willingness or
ability to repay. Interestingly, loan size had a small positive effect (β ≈ 0.000005),
indicating that when large loans are well-planned, they may be easier to repay,
particularly if used for business investment.

Variables related to cooperative engagement were among the most significant predictors
of repayment performance. Years of cooperative experience (β ≈ 0.03) was positively
significant, as more experienced members are likely to be more familiar with repayment
procedures and expectations. Borrowing frequency (β ≈ 0.04) also showed a positive

63
effect, suggesting that repeat borrowers who are trusted with multiple loans tend to repay
consistently. Finally, the position held in the cooperative had a significant influence,
executive members were much more likely to repay promptly (β ≈ 0.1), possibly due to
reputational concerns, leadership roles, and peer expectations.

64
4.6 Discussion of Findings

This study was conducted to examine the factors guiding loan repayment performance
among members of thrift and credit societies in Ijebu Ode Local Government Area, Ogun
State. Specifically, it aimed to describe the socio-economic characteristics of sampled
cooperative members, analyze the pattern of loan disbursement and repayment, identify
causes of loan default, and assess the determinant factors influencing loan repayment.
The findings are discussed here in the context of existing empirical literature to highlight
both consistencies and deviations from earlier studies.

In addressing the first objective, which focused on the socioeconomic characteristics of

cooperative members, the study revealed that the majority of respondents were aged 41
years and above, had attained at least secondary education, and were married. These
findings are consistent with Oni et al. (2020), who observed that older and more educated
members dominate cooperative societies in Southwest Nigeria due to their financial
stability and long-term commitment. Similarly, Abdul-Rahman and Adepoju (2021)
found that marital status positively influences cooperative participation and loan
commitment, as married individuals often seek financial stability for family support. The
high representation of traders and civil servants also aligns with Afolabi (2020), who
reported that cooperatives attract members engaged in both formal and informal sectors
because of flexible loan access.

In line with the second objective, the pattern of loan disbursement and repayment was
explored. The results show that most respondents had accessed loans between ₦500,001
and ₦1,000,000, with repayment periods between 6 to 12 months, and interest rates of
either 5% or 12.5%. These findings corroborate Onoh et al. (2022), who emphasized that
cooperative societies in Southern Nigeria offer medium-scale loans with varying
repayment periods to accommodate members' diverse financial needs. The study further
observed that over 50% of respondents fully repaid their loans, while others defaulted.
This trend is consistent with Eton et al. (2021), who reported mixed repayment
65
performance among cooperative members in Uganda and Nigeria, often influenced by the
purpose of loan usage—particularly the tendency to divert funds to non-productive uses
like family consumption, a trend also highlighted by Olaleye and Oyekunle (2023).

Regarding the third objective, which examined the causes of loan default, the study
identified key challenges such as low income, poor business returns, high interest rates,
family responsibilities, and lack of financial literacy training. These findings reinforce
those of Yunusa and Adeoye (2021), who found that economic instability, household
burdens, and inadequate business skills lead to high default rates among cooperative
borrowers. Similarly, Nwachukwu et al. (2020) emphasized that poor loan supervision
and lack of borrower education are common reasons for loan delinquency in Nigerian
cooperative systems. The fact that only 40.8% received financial literacy training before
loan disbursement confirms gaps in borrower preparation and echoes Ahmed et al. (2022)
who advocated for structured pre-loan education to enhance repayment outcomes.

The fourth objective explored the factors influencing the rate of loan repayment using a
Tobit regression model. The analysis identified educational level, marital status, net
income, loan experience, frequency of cooperative officer contact, and position in the
society as significant positive predictors of repayment. On the other hand, household
size, interest rate, and longer repayment duration negatively influenced repayment
behavior. These findings align with Bello and Tanko (2021) who concluded that better-
educated and higher-income borrowers are more financially disciplined and informed
about repayment obligations. Furthermore, the significance of cooperative engagement
variables supports Akingbade and Adedoyin (2020), who found that contact with
cooperative agents, as well as longer cooperative membership, improves repayment
commitment due to increased accountability and support. The negative influence of
household size is also consistent with Okeke and Nwosu (2019), who noted that larger
families exert financial strain, leading to delays in loan servicing. Overall, the study

66
confirms that loan repayment performance is shaped by a combination of personal,
financial, and institutional factors.

67
 CHAPTER FIVE

SUMMARY, CONCLUSION, AND RECOMMENDATIONS

5.1 Summary of Findings

This study investigated the factors influencing loan repayment performance among
members of thrift and credit societies in Ijebu Ode Local Government Area, Ogun State.
This study investigated the socio-economic characteristics of respondents, loan
disbursement and repayment practices, challenges faced, and the factors affecting loan
repayment among members of thrift and credit cooperative societies. Using a survey
method of research design, a total of 120 respondents were surveyed using a structure
questionnaire and were subjected to analysis.

The study revealed that most cooperative members were aged 41 years and above, with a
majority having secondary or tertiary education. Married individuals formed a large
portion of the sample, and the predominant occupations were trading and civil service.
Income distribution showed that over 57% earned more than ₦250,000 monthly,
indicating a relatively stable financial base.

Findings showed that 49.2% of respondents received loans between ₦500,001 and
₦1,000,000, with repayment periods mostly ranging from 6 to 12 months. Although
51.7% of respondents fully repaid their loans, a significant portion still faced repayment
challenges. The most common uses of loans were for family consumption and business
investment, indicating mixed use of borrowed funds.

The study identified several key reasons for loan default, including low income, poor
business returns, family responsibilities, and high interest rates. Notably, only 40.8% of
respondents received financial literacy training, and less than half received support or
advice during the repayment period, indicating a gap in pre- and post-loan guidance.

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The regression analysis showed that educational level, marital status, net income, contact
with cooperative officers, years of experience in cooperatives, and executive membership
status had significant positive effects on loan repayment. In contrast, household size,
interest rate, and longer repayment periods had significant negative effects, reducing the
likelihood of full loan repayment. Cooperative societies primarily monitored loan
repayment through reminders and penalties, while fewer offered incentives or guidance.

5.2 Conclusion

In conclusion, the study affirms that loan repayment behavior among cooperative
members is shaped by a combination of socioeconomic, financial, and institutional
factors. Members with higher education and income levels, strong ties to cooperative
leadership, and consistent contact with cooperative officers are more likely to fulfill their
loan obligations. Conversely, financial strain due to large household sizes, high interest
rates, and inadequate loan supervision hampers repayment.

The findings emphasize the need for cooperative societies to adopt more borrower-
centered strategies—including financial literacy programs, flexible loan conditions, and
effective monitoring systems. By tailoring credit schemes to match the financial realities
of their members and strengthening institutional support, thrift and credit societies can
enhance loan recovery, improve sustainability, and contribute meaningfully to community
economic development.

5.3 Recommendations

i. Cooperative societies should provide regular and mandatory financial education

to all members, particularly before disbursing loans.

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 ii. Introducing mentorship programs or financial advisory services during the loan
repayment period can assist members facing challenges and reduce default rates.
iii. A clear and consistent interest rate policy should be established across societies to
avoid confusion and ensure fairness.
iv. Cooperative societies should enhance monitoring and follow-up systems to track
repayment status and intervene early in cases of likely default.
v. Flexible repayment schedules aligned with the borrower’s cash flow should be
introduced to reduce repayment stress.
vi. Accurate and transparent records can improve trust and help societies manage
loan portfolios effectively.
vii. Thrift and credit societies can partner with government agencies or NGOs for
training, policy support, and access to subsidized credit schemes.
viii. Cooperative societies should ensure their programs accommodate members with
varying educational, occupational, and financial profiles.

5.4 Suggestions for Further Research

Future studies may consider:

- A comparative study of loan repayment performance between rural and urban

cooperative societies.
- An in-depth analysis of the role of gender in loan utilization and repayment
behaviour.
- The impact of digital financial tools on cooperative society performance and
member engagement.

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