Credit management and financial performance of Microfinance Institutions in Uganda: a case study of Pride Microfinance, Kabalagala, Kampala, Uganda

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Kampala International University: College of Economics and Management
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. Effective 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 Uganda. The study adopted a descriptive survey design. The population of study consisted of 59 employees and customers of Pride Microfinance in Uganda. A census study was used to carry out the research. Primary data were collected using questionnaires where all the issues on the questionnaire were addressed. Descriptive statistics was used to analyze data. Furthermore, descriptions were made basing on the results of the tables. The study found out that client appraisal; credit risk control and collection policy had effect on financial performance of MFis Uganda. The study established that there is strong relationship between financial performance of MFis and client appraisal, credit risk control and collection policy. The study had established that client appraisal, credit risk control and collection policy significantly influence financial performance of MFis in Uganda. Collection policy was found to have a higher effect on financial performance and that a stringent policy was 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.
A research report submitted to the College of Economics and Management in partial fulfillment of the requirements for the Award of a Bachelor's Degree in Business Administration of Kampala International University
Credit management, Financial performance, Microfinance Institutions, Pride Microfinance