Assessment on the suitability of repayment period from the perspective of members and credit cooperatives in Malaysia

Abstract

The recovery of economic activity among cooperatives and the reduction of the problem of loan defaulters can be overcome by extending the appropriate financing period. Concurrent with the current situation, the objective of this study is to evaluate the maximum repayment suitability period from the perspective of members and cooperatives. This study employs a combined methodology which is through a set questionnaire (664 respondents) and interviews (10 cooperatives) from the credit cooperatives in Malaysia. This study reveals that most cooperative members suggested that the financing period should be extended to a maximum of 15 years from the original period of 10 years. Longer financing periods may help to ease the burden on the borrowers while reducing monthly payments and the rising cost of living. Besides that, on the perspective of the cooperatives, it is indicated that most cooperatives wouldn’t settle to extend the financing period but rather maintain it. This is because the existing financing period allows the cooperatives to acquire capital adequacy and will be able to offer financing to new borrowers. The contribution of this study can be used as a guide in strategic decision making for policy makers in extending the term of existing loans.