Effect of Group Lending On Management of Loan Default Rates among Microfinance Institutions in Nakuru Town, Kenya

Microfinance Institutions (MFIs) in Kenya currently provide significant financial services including microcredit facilities particularly to the low income persons in both rural and urban areas across the country. The object of this study was to determine how loan defaults in MFIs have been minimized by the use of group lending to members of groups. This research, therefore, tried to examine effectiveness of group guarantee systems by examining Group administration in relation to loan default rate management. The research employed descriptive research design and survey research method. The scope of the study was Nakuru town with target population of 119 drawn from staff members of 18 MFIs operating within the town. Sample of 85 officers were chosen through simple random sampling, response rate was 84.7%. The findings were presented in form of descriptive statistics (mean, percentages and standard deviation) and inferential statistics (Pearson’s correlation). It was generally established that the respondents agreed that group administration influenced management of loan default rates. In general, group administration was conspicuously strongly and positively related to loan default rate management.