Money is one of the most important things now in the world. People cannot live without food. Just like money, they cannot survive without it. It is a fact that people of the society are so aggressive in terms of money; they can even do things now that they don't usually do before because of it. Earning money is not just a stone that you can pick anywhere whenever you need it.
That is why people need to work hard to gain money and know-how to take control in spending it. However, some cases are unavoidable, like hospitalization, which leads to an immediate need for an amount you don't have. In such situations, money is really needed. That is why people avail loans. People are taking loans for their purchases or for their personal needs. Loans help households meet any shortfall, and in business, loans can be a big help in building or investing your own business.
It can also be used for any personal financial need. It can be used for different family expenses, a child's education, purchasing the latest electronic gadgets or home appliances, buying unexpected medical expenses, or any family emergencies. A loan is a big help to families with a low stage of living or those who want to start a business. With the increasing population of consumers, the financial shortfall is one of the biggest problems of society. Loans are straightforward contracts with distinctive properties.
One individual loans something to another with the encouragement that it will be paid in the future. Many programs have been developed to improve the local community. Some institutions were established to provide financial services to low-income clients, including consumers and self-employed who lack access to banking and related services. The banks and the lenders are considered in business to make money. They have a purpose in the economy because they are interested in maximizing profits, and lending also comes with costs and cautions.
According to Siyad (2013) stated that a positive relationship between Return on Asset (ROA) and accessibility of credit in Microfinance Institutions (MIF), a negative one between ROA and the security of MFI lending, and a positive one among ROA and group lending, and individual lending. The regression results show that, when accessibility of credit in MFI, collateral of MFI lending, individual loans, and group lending have zero values, the dependent value would be 7.724. Overall the findings indicate that only a small percentage of the Small and Medium Enterprises (SMEs) in Somalia are beneficiaries of MFI lending services.
There is in need for the government and other partners to facilitate the accessibility of credit in SMEs to the MFIs and minimize the collateral conditions. Likewise, Radhika (2012) stated that the study covers the bank's financial performance concerning loans and advances at Sree Charan Souhrada Cooperative bank from the year 2012 to 2014 and its impact on the conduct of the business.
The comparisons of total lending and advance show the increase in the amount of lending. The thing to be observed is that the percentage has not risen to the desired higher level, and the basis for this is that the bank provides loans to quality borrowers.
The impact of loans on deposits is positive. It is increasing year on year. Due to the bank's trust in their customers by simple analysis, there is a regular increase in deposits each year from 2012 to 2014. The advance on bills discounting compared with the base year 2012 is constant. In 2014 also it remained the same. It has neither increased nor decreased for the years 2012, 2013, 2014. The exposure under bill discounting advance is minimal, it is observed.
This will determine the effects of availing loans on lending institutions. It will give the people additional knowledge about the different loans they benefit themselves and the lending institutions. This study will help the researchers determine if these people who are actively involved are aware of those possible gains and effects brought by it. It is a big help to the community once the researchers find out the different purposes and reasons people have to avail of loans on the other lending institutions.
It will be helpful in implementing alternative programs to help resolve why people benefit from loans. Lastly, this study will become a foundation for future researchers to go further into the effects of availing loans on lending institutions. Most of the people now are availing loans on the different lending institutions. The lending institution is any corporation, company, or organization that accepts deposits from the public. It includes a bank, saving institution, credit union, insurance company, or mortgage lender.
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