| dc.description.abstract | Over the years, there has been an increase in the number and significance of micro-finance in
both matured and emerging economies. In year 2008, the Kenyan Government operationalized
the Micro-finance Act 2006 with an aim to mainstream micro-finance to the financial system
proper and also to regulate the many Micro-finance Institutions (MFIs) operating under different
legislations. The main objective of this study was to survey the credit risk management practices
among MFIs in Kenya.
This was a descriptive survey study. The population of interest of this study was the MFIs in
Kenya. The researcher used structured questionnaires as the main data collection instrument.
The questionnaires had both open and close-ended questions. The close-ended questions
provided more structured responses to facilitate tangible recommendations. The researcher
perused completed questionnaires and document analysis recording sheets. Quantitative data
collected was analyzed by the use of descriptive statistics using SPSS and presented through
percentages, means, standard deviations and frequencies. Correlation inferential analysis was
employed for analysis. Content analysis was used to test data that was qualitative in nature or
aspect of the data collected from the open ended questions. The information was displayed by
use of bar charts, graphs and pie charts and in prose-form.
The study concludes that most of the MFIs used operating efficiency and loan portfolio quality
indicators as a credit risk management practice. Most MFIs employs loan portfolio quality and
operating efficiency indicators such as repayment rate, portfolio at risk, number of active
borrowers per credit officer, number of active borrowers per staff, gross portfolio outstanding per
credit officer, number of active borrowers per branch, cost per loan made and cost per unit of
currency lent to measure credit risk.
The study recommends that MFIs need to strengthen the credit risk management practices by
using credit referencing and profitability indicators. In addition, the study recommends that MFIS to employ a combination of portfolio quality, operating efficiency and profitability
indicators to measure performance. These indicators provide an indication of whether an MFI is
earning an adequate return on the funds invested in the MFI by shareholder and investors. | en |
