Loan defaults and operation of microfinance institutions: a case study of pride microfinance institution Mbarara branch

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Kampala International University, College of Economics and Management.
The major objective of the study was to identify the factors responsible for loan default by clients of microfinance institutions, to examine the credit methodologies used in loan default management and to identify the relationship between loan default and MFI operations. Questionnaires were used collect data for the study. It was a combination of descriptive and analytical research of results from self-administered questions, interviews and record inspection. The researcher analyzed the data and also constructed some tables to show comparisons. Responses were edited for completeness and accuracy; percentages were employed where respondents’ attitude were sought. Tables were also used for data analysis. From the study, the findings indicated that there is a negative relationship between the study variables meaning that an increase in Loan defaults reduces the performance of microfinance institutions. It was established that loan defaults are Marjory caused by poor sales from the clients and disappointments from the creditors. It was further revealed that institutional factors mostly cause loan defaults. The study critically recommended that, the institutions should educate people on how to invest money is it was revealed that loan defaults are caused by poor sales. Hence stakeholders should ensure that borrowers invest in activities that they consider productive and that Institutions should improve on their terms of loan collection and repayment as it was revealed that institutional factors greatly cause loan defaults. The most recommended area for further research were: loan default management in big formal institutions.
A research report submitted to the college of economics and management in partial fulfillment of the award of bachelor’s degree in business administration of Kampala international university.
Loan defaults, Operation, Microfinance institutions, Pride microfinance, Mbarara branch