Credit Unions play a pivotal role in the Microfinance Industry in Ghana.
They are not only deeply rooted in financial intermediation but also provide
favorable terms and conditions in financial products and services to their
members compared to banks and other financial institutions. The sustainability
of Credit Unions has been threatened by the incidence of loan defaults
or non-performing loans. The diagnostics of the causes of loan defaults in
Credit Unions become paramount toward sound credit risk management
practices. The study relied on primary data. Purposive sampling technique
was applied to select 244 Credit Union members. Questionnaires were used
for data collection and logistic regression model was adopted. The study utilized
Statistical Product and Service Solution (SPSS v. 20) and Stata (v.14) as
statistical tools for data analysis. The results reveal that education, loan diversion,
monitoring, marital status and income are significant factors that influence
loan default. Thus, credit education should be intensified and that effective
loan monitoring should be vigorously pursued. Additionally, loan appraisal
systems should be robust with the application and development of
credit scoring systems that will factor in key variables of loan default.
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