Analysis Of Effects Of Credit Management Professionalism On The Management Of Loan Repayment In Microfinance Institutions In Nairobi, Cbd Kenya
By Joseph Mbugua Muiruri
Most MFIs lack the most basic aspects of credit management professionalism hence are not capable of analyzing trends within organization, leading to default. Management might not be in a position to track the performance of its loan recovery officers in the field if no proper information system is in place. A number of credit management information solutions, however, are emerging. This thus calls for credit management professionalism. The purpose of this study was to analyze the effects of credit management professionalisms on management of loan repayment in microfinance institutions in Nairobi, CBD Kenya. Specifically, the study sought to find out the effects of credit reference bureaus on loan repayment management; determine the extent to which management structure is effective on loan repayment management; establish the effect of legal procedures on loan repayment management as well as determining the extent to which monitoring of management information systems (MIS) affect management of loan repayment in microfinance institutions. The research design used was survey co-relational where the population entailed all 30 MFIs in Nairobi CBD. Simple random sampling was used to select 6 MFIs. The study used both secondary data from other sources and primary data collected using questionnaires both structured and unstructured. Personal telephone interviews, Questionnaires and reports were used in the study. Formal authority to collect data was sought by Email and a personal visit to the persons responsible where necessary. Discretion were assured on the part of the recipient and full disclosure on how the data used and access to the publication that used the data was allowed to the respective organizations managements. To ensure high response rates data was collected at working hours and not recess hours of the persons furnishing the data. Quantitative techniques of data analysis were used. Emphasis was put on statistical analysis. Descriptive statistics was used to summarize qualitative data through tables, charts and measure variation; this included frequency distribution, percentages, mean, median etc. Analysis of variance (ANOVA) was used to analyze the degree of relationship between the variables in the study (for example the relationship between credit management professionalism and loan repayment). This indicated the strength and direction of association between the variables. From the study we can conclude that, most MFIs have an effective system for controlling loan default and thus seldom do they require the services of CRB and therefore only a few MFIs use CRB to recover defaulted loans. Thus with a strong system of loan control, MFIs do not need CRB reports. It is also notable that, every credit officer in MFIs are allowed to deliberate on issues and cascade them to senior credit management and all members of staff are aware of the reporting lines when it comes to loan appraisal and approval. For this to be practical, MFI managers should be able to handle the number of staff under him while awarding credit which are cascaded from the senior credit management to bottom and therefore sound management structure would help guideline governing the process of giving credit to MFI customers. Therefore a good management structure is highly effective in loan management. Proper management of MFIs should be instilled particularly competent in making sound decisions on credit risk management which should steer MFIs to high levels of profitability. The management should employ proper controls that would play the role of CRB reports to avoid loans defaults.