The Effect of Credit Management on the Financial Performance of Microfinance Institutions in Kenya
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Date
2013-10Author
Gatuhu, Rosemary N
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
Credit management is one of the most important activities in any company and cannot be
overlooked by any economic enterprise engaged in credit irrespective of its business
nature. Sound credit management is a prerequisite for a financial institution‟s stability
and continuing profitability, while deteriorating credit quality is the most frequent cause
of poor financial performance and condition. As with any financial institution, the biggest
risk in microfinance is lending money and not getting it back. The study sought to
determine the effect of credit management on the financial performance of Microfinance
Institutions in Kenya. The study adopted a descriptive survey design. The population of
study consisted of 59 MFIs in Kenya that are members of AMFI. A census study was
used to carry out the research. Primary data was collected using questionnaires where all
the issues on the questionnaire were addressed. Descriptive statistics were used to
analyze data. Furthermore, descriptions were made based on the results of the tables. The
study found that client appraisal, credit risk control and collection policy had effect on
financial performance of MFIs in Kenya. The study established that there was strong
relationship between financial performance of MFIs and client appraisal, credit risk
control and collection policy. The study established that client appraisal, credit risk
control and collection policy significantly influence financial performance of MFIs in
Kenya. Collection policy was found to have a higher effect on financial performance and
that a stringent policy is more effective in debt recovery than a lenient policy. The study
recommends that MFIs should enhance their collection policy by adapting a more
stringent policy to a lenient policy for effective debt recovery.
Citation
Degree of Master of Business Administration, School of Business, University of Nairobi, 2013.Publisher
University of Nairobi, School of Business
Description
MBA Thesis, 2013.