Determinants of repayment performance of Microfinance Institutions among borrowers: The moderating effect of IT capability

• Main Author: Othman, Ahmad
• Format: Thesis
• Language: English; English; English
• Published: 2024
• Subjects: HG Finance
• Online Access: https://etd.uum.edu.my/11673/1/permission%20to%20deposit-not%20allow-s901263.pdf; https://etd.uum.edu.my/11673/2/s901263_01.pdf; https://etd.uum.edu.my/11673/3/s901263_02.pdf; https://etd.uum.edu.my/11673/

Microfinance Institution (MFI) plays a crucial role in alleviating poverty and reducing unemployment by offering credit and saving resources to poor people who lack financial services. However, MFIs face challenges related to borrower default, which threatens their sustainability. Therefore, this research aimed to examine the interconnections among various factors, such as innovation, trust, management skill, and training, in relation to borrowers' repayment performance in the MFI. The study also investigated the role of IT capability as a moderating factor in this relationship. Due to persistently high rates of default on repayment among microfinance agencies, these factors were deemed essential variables for investigation. The study used primary data to achieve its objectives, collecting responses from 200 participants for the final data analysis. Descriptive statistics were employed using SmartPLS software to analyse the data and test the hypotheses. Nine hypotheses were tested through both the measurement model and the structural model. The study's findings revealed two significant positive relationships: one between trust and MFIs' loan repayment performance, and another between IT capability and MFIs' repayment performance. Conversely, no significant relationships were found between innovation, training, management skills, and trust with IT capability, as well as between innovation, training, and management skills with IT capability as moderators. This study utilized the Resource-Based View (RBV) model and Principal- Agent Theory (PAT) as its foundational theories. The study is significant from a theoretical standpoint because it sheds light on the factors that contribute to MFI repayment performance, which can ultimately help improve the effectiveness and sustainability of microfinance initiatives. The implications of this study also could assist policymakers and MFI institutions in monitoring loan repayments among borrowers, ultimately helping to improve the effectiveness and sustainability of microfinance initiatives.