Paper title: What Drives Default Loans in Microfinance in Urban Settings?
Abstract: This study aims to address this performance gap by examining the causes and factors contributing to the increasing overdue rates of microfinance in Bangladesh, with a specific focus on DSK. A mixed-methods research design was employed. The main causes of loan default (LD) were found as operational deficiencies, economic factors, and borrower-related factors. Operational deficiencies include flaws in the operational process, e.g. inefficiency in member selection, and deficiency in project evaluation, selection, and monitoring. Borrower-related factors include skills deficiency, health and family issues, and attitudes towards default loans. Recommendations for enhancing operational efficiency include ensuring staff adherence to DSK’s microcredit operation rules and regulations, developing a centralized database, enhancing project evaluation, selection, and monitoring, and providing staff training. To overcome external factors, it is recommended that DSK promote investment in profitable projects, provide skill development training, address personal issues, and monitor and address multiple loan behaviors. DSK and similar organizations have to set a specific overdue collection strategy. Keywords: Microfinance, Default loan, Overdue, Operational efficiency, Economic conditions, Dushtha Shasthya Kendra (DSK) DOI: https://www.doi.org/10.61607/JFB.V21N1-2.A6 Article Info: Submission Date: June 10, 2024; Acceptance Date: October 13, 2024.
