Title: Interest Rate and Loan Repayment in Karugutu Savings and Credit Cooperative in Karugutu Town Council, Ntoroko District, Uganda
Authors: Mbambu Jannet , Dr. Tugume Patience, Rutaro Abas
Volume: 8
Issue: 11
Pages: 196-209
Publication Date: 2024/11/28
Abstract:
This study examines the relationship between interest rates, liquidity risk, and loan repayment behavior at Karugutu Savings and Credit Cooperative (SACCO) in Ntoroko District, Uganda. Specifically; The study examined the relationship between liquidity risk and loan repayment, explored the impact of multiple loans on loan repayment, and evaluated the influence of risk analysis on loan repayment behavior. A descriptive cross-sectional survey design was employed, with a target population of 3,643 members and a sample size of 370, yielding a response rate of 81.1%. The study utilized Pearson correlation coefficients to analyze the data. The results revealed a moderate positive correlation between liquidity risk and loan repayment (Pearson correlation coefficients of 0.514**, 0.852**, and 0.697** for interest rates). Similarly, the correlation between multiple loans and loan repayment showed that liquidity risk plays a significant role, with correlations of -0.056 for multiple loans, and 0.492* for the interest rate. In risk analysis, significant positive correlations were found between risk factors and loan repayment (0.514**, 0.852**, and 0.697**). Furthermore, loan repayment had correlations of 0.169, 0.644**, and 0.415** with risk analysis factors. The study concludes that liquidity risk and interest rates have a significant impact on loan repayment at Karugutu SACCO. Furthermore, multiple loans are negatively correlated with loan repayment, suggesting that members who take multiple loans are at a higher risk of default. Risk analysis factors also play a crucial role in influencing loan repayment behavior. The study recommended; Karugutu SACCO should adopt more robust risk management strategies, particularly in assessing liquidity risk, to improve loan repayment rates. Regular monitoring of members' loan statuses, especially those with multiple loans, should be implemented to mitigate the risk of default. Interest rates should be carefully calibrated to balance between encouraging borrowing and ensuring repayment capacity.