Credit Management in Selected Microfinance Institutions in Central Uganda

International Journal of Research and Innovation in Social Science (IJRISS) | Volume III, Issue VI, June 2019 | ISSN 2454–6186

Credit Management in Selected Microfinance Institutions in Central Uganda

 Ssendagi Muhamad¹ (PhD) and Mabonga Eric² (PhD)

¹Department of Finance and Accounting Faculty of Business and Management, Muteesa 1 Royal University Kampala, Uganda
²Department of Finance and Accounting, College of Economics and Management, Kampala International University, Kampala Uganda

Abstract – This study investigated the degree of credit management and level of financial sustainability in selected Micro Finance Institutions (MFIs) in central Uganda. The ex-post facto, descriptive comparative and descriptive correlation designs were employed. A minimum sample of 277 was used in data collection and analysis. The data were analyzed using means and Fisher’s one way analysis of variance. The findings revealed that; (i) satisfactory degree of credit management overall mean of 3.07. (ii) There is significant difference in the degree of credit management according to district sig of 0.017. It was concluded that strong coordination of the credit department increases financial sustainability in MFIs. Basing on the findings, the researchers recommended that MFIs should establish optimum credit policy in terms of ideal credit standards, credit terms, and debt monitoring and collection strategies to promote financial sustainability of MFIs.

Key Words: Credit Management, Microfinance Institutions

I. INTRODUCTION

In order to bring financial services closer to the people where big financial institutions can not reach, to enhance poverty reduction of the masses and foster economic growth, the government of Uganda is using microfinance institutions (MFIs) as agents of its program “prosperity for all”. In order for these MFIs to properly fulfill their obligations and also flourish in a robust business environment, they have to improve their performance.
[29] While emphasizing insufficient credit policies in MFIs observed that only 3.5% of the MFIs in the World were financially sustainable, 7% of the MFIs were tending towards financial sustainability with operating costs averaging 15-25% of their total costs. The other 89.5% of the MFIs will either fold or require subsidies to be made available to finance their operations unless they are transformed from welfare approach (depending on grants and subsidies in a regulated environment) to peruse the institutional approach to financial sustainability while maintaining a sustainable credit policy.

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