Effect of the credit outreach programme on non-performance loans agriculture finance in Zambia's Lusaka Province

Abstract

Sustainability of funds is crucial in implementing rural credit programs and those relying on their services. Understanding the impact of outreach on nonperforming loans performance would contribute to better information for policy decision making. To investigate the effect of credit outreach on non-performing loans, a study was conducted in Lusaka Province specifically in Chongwe and Kafue. The study specifically targeted Harmos Micro-Enterprise Development Ltd (HMDL) customers. A sample of 576 households was randomly selected from the 2450 beneficiaries in the areas of study. The sample consisted of smallholder farmers that are beneficiaries of these credit facilities. Regression analysis was used to determine how the non-performing loan ratio of Harmos microfinance Development limited (HMDL) branches can be explained by the debt suspension program implementation and the average loan of customers. Results of the multiple regression analysis tests showed that debt suspension program and average loan were both statistically significant at p-value = 0.05 i.e. they were 0.000 and 0.039 significant respectively, meaning that the both hypotheses were accepted. It was also shown that debt suspension program has negative impact on the non-performing loan ratio of HMDL branches, while and average loan has positive impact on the non-performing loan ratio of HMDL branches. The marginal effect of average loan indicates that one kwacha change will result in an increase in the non-performing loan by 0.117 percent, while the marginal effect of debt suspension programme indicates that year of implementation will resuk in a decrease in the non-performing loan by 0.209 percent

Criteria should be set for branches concerning the expansion of total outstanding loans. Expansion of loan amount should go together with the expansion of number of borrowers. Thus, reaching out to poorer customers (higher outreach depth) can go together with lower nonperforming loan ratio..