A Study on Factors Affecting to Loan Defaults of Micro Credit (Special Reference to People’s Bank Branches in Anuradhapura Region, Sri Lanka)

Abstract- This research investigatesthe factors affecting to loan defaults of micro credit (special reference to people’s bank branches in Anuradhapura region, Sri Lanka).The study addresses the critical need to understand the factors contributing to loan defaults, arrears, and loan restructuring, providing valuable insights for microfinance institutions to enhance their risk management strategies. The primary objectives of this study are to identify, analyse, and comprehend the factors influencing loan repayment behaviour among microfinance clients at People’s Bank branches in the Anuradhapura region. The research aims to contribute to the existing body of knowledge in microfinance and provide practical recommendations for enhancing the loan repayment process. A quantitative research approach was employed, utilizing Likert scale questionnaires to gather data on socioeconomic factors, loan characteristics, institutional practices, and borrower financial behaviours. The survey was distributed to a representative sample of microfinance clients in the Anuradhapura region. Data analysis was conducted using SPSS and Microsoft Excel, employing statistical methods to draw meaningful insights. The research revealed significant correlations between certain socioeconomic factors and loan repayment behaviour. Income levels, educational background, and employment status demonstrated notable associations with loan default rates. Additionally, institutional factors, such as the loan approval process and collection procedures, played a crucial role in shaping repayment behaviour. This research contributes valuable insights into the multifaceted aspects of loan repayment behaviour in microfinance. By understanding the key determinants, microfinance institutions can tailor their practices to mitigate risks and foster a more sustainable and inclusive financial environment. While efforts were made to ensure the reliability and validity of the research, certain limitations, such as sample size constraints and potential biases, should be acknowledged. Future research endeavours could delve deeper into the cultural and social dimensions influencing loan repayment behaviour. Longitudinal studies may also provide a dynamic perspective on the evolving nature of microfinance clients’ financial behaviours.