Credit Policy and Loan Recovery in Microfinance Institutions in Uganda: A Case Study of Pride Microfinance Kisoro District Branch
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Date
2013-12
Authors
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Publisher
Kampala International University, bachelors degree in business administration
Abstract
The study was set to establish the impact of credit policy on loan recovery in microfinance
institutions in Uganda using a case study of pride microfinance Kisoro district branch. The
research used a sample size 59 from population of 70 respondents. The research objectives of the
study were: To establish the existing credit policies in Pride microfinance Kisoro, to examine
how loans are recovered in Pride microfinance Kisoro and to establish the relationship between
credit policy and loans recovery of Pride microfinance Kisoro while research questions were:
What are the existing credit policies in Pride microfinance Kisoro?, How are loans recovered in
Pride microfinance Kisoro? and What is the relationship between credit policy and loan recovery
in Pride microfinance Kisoro?. The findings of the study revealed that the branch manager cited
that the growing rate of deficit is as a result of inadequate application of the tools of credit policy
management thus locking it into an increasing portfolio of non-performing assets. This clearly
showed that credit systems were only designed on paper and lacked proper implementation,
findings indicated that loan default increased steadily in 2008 to 20 IO (38%-51 %) of
nonperforming assets respectively out of (62%-49%) of performing assets, besides weekly
deposit are made to avoid the default and further revealed that there is a strong positive
relationship between credit policy and loan recovery represented by a correlation of 0.722
implying that the more efforts put on credit policy, the higher the loan recovery made concluding
that the two variables are significantly related. The researcher concluded that credit officers
carried out close monitoring and loan management. However, clients' said that credit officers
lacked customer care skills; they were arrogant and uncooperative during execution of their
duties, clients reported embezzlement of funds by loan officers. And the recommendations
included to make clients appreciate the credit policies and recovery procedures. Pride
microfinance has to educate the clients and also listen to their grievances, the interest rate should
be reduced from 36% per year at least 24% like other lending institutions and the loan amount or
size should at least be increased from 700,000-10,000,000 million depending on the financial
need and capacity to repay
Description
A Research Dissertation Submitted To College Of Economics and Management in Partial Fulfillment of the Requirements for the Award of Bachelor's Degree I Business Administration of Kampala International University
Keywords
Credit Policy and Loan Recovery, Microfinance Institutions, Kisoro District