Various types of Microcredits lead to different success rates: a study in sub-Saharan Africa

Abstract

This thesis investigates microcredit programs in Sub-Saharan Africa to discover their determinants of success. Investigating the historical trajectory of microfinance and existing microcredit models, this study identifies key success factors through multinomial logistic regression analysis and cluster analysis. Significant results have been found for differences in success rates between different microloans. The results of this research show that the type of microcredit with a higher success rate has a focus on individual loans, has a higher profit margin, and lower interest rates, which is in line with literature (Banerjee, 2013). In contrast, microcredits with lower success rates have a significantly lower focus on SME loans and a higher focus on individual loans, characterized by higher interest rates, which aligns with Banerjee (2013) that less successful microloans have higher interest rates. Interpreting these findings using existing literature, this research proposes implications for microfinance practice and future research. By gaining insights into possible factors determining the success rates of microcredits, this study contributes to targeted poverty alleviation and sustainable development strategies in Sub-Saharan Africa.