An examination of agricultural loan recovery strategies in rural banking: a case study of Accord Microfinance Bank
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Background of the Study
Agricultural loan recovery is a critical challenge in rural banking, as loan defaults directly affect the financial health of banks and limit further credit access for farmers. Accord Microfinance Bank has developed various loan recovery strategies aimed at minimizing default rates and safeguarding its agricultural lending portfolio. These strategies include proactive monitoring of loan performance, restructuring of loan repayment terms, and the implementation of early warning systems that leverage digital analytics to detect potential repayment issues (Adeniran, 2023). By adopting a multifaceted approach to loan recovery, the bank aims to maintain asset quality and support sustainable rural development.
The bank’s recovery strategies are tailored to address the unique risks associated with agricultural finance, such as seasonal income variability and environmental uncertainties. For example, flexible repayment schedules that align with harvest cycles and group lending models that encourage collective responsibility are commonly used (Okeke, 2024). Additionally, Accord Microfinance Bank offers financial literacy and advisory services to help borrowers manage their debts more effectively, thereby reducing the likelihood of default. These interventions are supported by digital platforms that facilitate real time tracking of loan repayments and automated reminders, ensuring timely interventions when repayment issues arise (Ibrahim, 2025).
Despite these comprehensive measures, agricultural loan recovery remains a persistent challenge due to external factors such as market volatility and adverse weather conditions. Furthermore, the effectiveness of recovery strategies is often hindered by operational inefficiencies and limited borrower cooperation. This study examines the agricultural loan recovery strategies employed by Accord Microfinance Bank, aiming to identify best practices and suggest improvements to enhance recovery rates and overall portfolio performance.
Statement of the Problem
Although Accord Microfinance Bank has implemented various strategies to improve agricultural loan recovery, high default rates continue to affect the bank’s rural lending portfolio. A significant problem is that traditional recovery methods are often insufficient to cope with the unpredictability of agricultural income, which is subject to seasonal fluctuations and external shocks (Chinwe, 2023). Inadequate monitoring and delayed intervention further exacerbate the situation, leading to a buildup of non-performing loans. Moreover, borrowers frequently lack the financial literacy required to manage debt effectively, and rigid repayment structures often do not accommodate the cyclical nature of agricultural earnings (Olayinka, 2024).
Operational challenges, including inefficient loan restructuring processes and limited use of digital recovery tools, also contribute to sub optimal recovery outcomes. These issues hinder the bank’s ability to promptly identify and address repayment issues, resulting in prolonged periods of arrears and increased credit risk. Additionally, external factors such as economic downturns and adverse weather conditions add to the complexity of loan recovery in the agricultural sector. The cumulative effect of these challenges not only impacts the financial performance of Accord Microfinance Bank but also restricts further credit expansion in rural areas. This study aims to analyze these problems by examining current recovery strategies and identifying key barriers to effective loan recovery in agricultural lending.
Objectives of the Study
• To evaluate the effectiveness of current loan recovery strategies at Accord Microfinance Bank.
• To identify operational and external barriers affecting recovery rates.
• To propose recommendations to enhance loan recovery and reduce default rates.
Research Questions
• What are the primary causes of high default rates in agricultural lending?
• How effective are current recovery strategies in mitigating defaults?
• What improvements can be made to enhance recovery outcomes?
Research Hypotheses
• H1: Proactive digital monitoring reduces loan default duration.
• H2: Flexible restructuring options improve repayment performance.
• H3: Enhanced borrower education reduces default incidence.
Scope and Limitations of the Study
This study focuses on Accord Microfinance Bank’s agricultural loan recovery practices from 2023 to 2025. Limitations include external economic volatility and regional agricultural differences.
Definitions of Terms
• Loan Recovery: The process of retrieving overdue loan amounts.
• Non-Performing Loans: Loans in which the borrower is not making scheduled repayments.
• Flexible Repayment: Loan terms that adjust to the borrower’s income cycle.
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