International Journal of Science and Research (IJSR) ISSN (Online): 2319-7064 Impact Factor (2012): 3.358 Volume 3 Issue 9, September 2014 www.ijsr.net Licensed Under Creative Commons Attribution CC BY Loan Recovery Performance of Credit Officers in Microfinance Institutions: A Case of Assam Gopal Kumar Sarma 1 , Saundarjya Borbora 2 1 Department of Economics, B.B.K. College, Nagaon, Barpeta, Assam, PIN-781311, India 2 Department of Humanities and Social Sciences, Indian Institute of Technology Guwahati, Guwahati, Assam, PIN-781039, India Abstract: In microfinance institutions, credit officers play a pivotal role not only in granting loan, but also recovery of such loans, which have a future operational implication. This paper seeks to promote better understanding of loan recovery performance of credit officers both qualitatively and quantitatively. The qualitative methodology demonstrates their problem regarding recovery and contextual solution with limited regulatory environment. On the other hand, the quantitative part focuses on the determinants of their recovery performance where it is found that collection time has a positive relation with recovery performance. Keywords: microfinance institutions, credit officer, loan recovery, north east India, tobit regression 1. Introduction Financial exclusion is considered one of the greatest constraints in elimination of poverty. In recent times, most of the nations, especially, developing and underdeveloped have been trying to achieve the goal of poverty eradication through a number of contextual policies, where inclusive finance is a common goal for all. Microfinance is considered as one of the significant tools in achieving the objective of inclusive finance due to a couple of reasons. First, it can tackle the problem of information asymmetry that faced by lending institutions by mixing both relationship lending i and credit scoring ii [1, 2, 3, 4]. Secondly, the strength of microfinance lies in its mechanism of credit provision, where social collateral, intra-monitoring among the group members, screening by the peer members is its in-built features [5, 6, 7]. Microfinance is a credit plus approach, which provide not only credit but more financial services such as insurance, transfers, savings, etc. In Indian setting; the most popular operating model of microfinance is Microfinance Institution (MFI) model and Self-Help Group Bank Linkage (SBLP) model. While SBLP model demonstrates larger outreach, MFI model is presently gaining impetus. It is reported that as of December 2010, 3652 MFIs reached about 200 million clients, of which, 66.99 percent were among the poorest when they took their first loan [8]. However, microfinance outreach is still limited, because a vast majority of the regions in the world cannot access financial services [9] although poverty is acute and widespread [10]. Therefore, it implies that microfinance has to make larger outreach to achieve the goal of access to finance. However, microfinance has now-a-days faced the challenge of achieving triple goal of outreach, impact and sustainability, and as a result the critical microfinance triangle has become a concern for microfinance practitioners [11]. Since, both institutional and financial sustainability has lately become priority, the microfinance institutions therefore, emphasis on repayment of loans. Repayment performance is a key variable, which is demonstrated as a prime performance indicator by the MFIs to attract donors and international funding and, which help in achieving financial sustainability [12]. Credit officers iii are key factors in achieving higher loan repayment performance of an MFI. Nevertheless, research itself particularly ignores the role of credit officers at the interface with the poor and for attaining institutional sustainability [13, 14, 15, 16]. In the absence of concrete microfinance regulation, iv it is intricate for a credit officer to maintain higher recovery of loans since a number of issues and problems concerned with the work credit officers [17]. With this backdrop, the paper focuses on the problem and solution related to recovery from qualitative perspective and examines quantitatively the factor behind the recovery performance of credit officers. The paper is organized in five sections. Apart from the introduction in section 1, section 2 describes the database and methodology. Section 3 focuses on the problems and solutions related to recovery from the qualitative perspective which is followed by the assessment of factors behind recovery performance of credit officers in section 4. Finally, section 5 concludes the paper. 2. Data and Methodology The study is based on primary sources of data. Both qualitative and quantitative data were collected through administration of a semi-structured questionnaire. In this endeavour 56 credit officers across 28 branch offices of two selected MFIs of Assam, namely, RGVN(NE) and ASOMI were interviewed. The sample represents three categories of credit officers- better performer (more than 90% of recovery record), average performer with 75-89% of recovery record and under performer (less than 75% of recovery record). Since the problems faced by credit officer and their solutions are qualitative in nature, therefore, open-ended questions were administered to capture the situation. Besides, a Tobit regression model is also constructed to examine the factors behind the recovery performance, which is detailed in the section 4 along with results. Paper ID: SEP14237 675