| dc.description.abstract | Micro Finance Institutions are defined as institutions whose major business is the provision of microfinance services. Proactive risk management is essential to the longterm sustainability of microfinance institutions (MFIs), but many microfinance stakeholders are unaware of the various components of a comprehensive risk management regimen. Credit risks, especially weakness in credit risk management have been identified one of the main reasons behind the failure of majority MFIs. If the microfinance institution does not manage its risks well, it will likely fail to meet its social and financial objectives.
This study sought to establish the relationship between credit risk management practices and performance of Micro Finance Institutions in Kenya. This research study employed a survey research method as well as causal research design to show the relationship between financial performance and risk management practices. The study population consisted of all 43 MFIs registered and are members of Association of Microfinance Institutions of Kenya (AMFI).
This study comprised of data collected through both, primary as well as secondary sources. Primary data was collected through the use of a questionnaire. As for inferential statistic, regression analysis will be sued to establish the relationship between credit risk management practices and the financial performance of MFIs.
From the findings the study concluded that credit risk management practices enhance profitability of the MFI, improve profitability, that diversification across MFIs lead to improving shareholders values and improved saving, loan policy procedure adopted by MFIs improve investment and that human-based expert systems payment capacity help in reduction of defaults improving the performance on MFIs. The study further concludes that there was a positive relationship between credit risk management practices and the financial performance of MFIs depicting the relationship between credit risk management practices and financial performance in organizations | en_US |
