The Effects Of Credit Risk Management Practices On The Perfomance Of Microfinance Institutions

The Effects Of Credit Risk Management Practices On The Perfomance Of Microfinance Institutions – A Case Study Of Microfinance Institutions In Nyeri County

By Christopher Gikandi Kanyi 

This study was undertaken to analyze the effects of credit risk management practices on the performance of deposit taking MFIs. The study was based on specific objectives that were to establish the relation between risk identifications, risk assessment and risk control and risk monitoring affects the performance of deposit taking MFIs. The study reviewed several literatures in line with the area of study. This review enabled the researchers to demonstrate and familiarize with the area of study. The review also helped identify gaps in previous studies. This study hence aimed at filling these gaps in order to come up with a comprehensive insight of the effects of credit management practices on the performance of deposit taking MFIs. The study employed a survey research design in order to come up with relevant data for analysis. This method was the best suited to systematically give an exhaustive analysis of the situation. The study targeted 150 respondents who were staff members of MFIs in Nyeri county. The study employed stratified random sampling to come up with a sample of 45 respondents who represented 30% of the entire population. The data collected was analyzed using quantitative techniques. Tables were used to present frequencies and percentages. Tables were prepared using each variable or indicator. Since qualitative data was also generated, it was analyzed by use of themes and categories. From the study results more respondents (69%) indicated that risk identification, risk assessment, risk control and risk monitoring highly affects the performance of deposit taking MFIs. The study recommended that; client and customers need to be educated and trained in business management and entrepreneurship. The microfinance should establish a credit assessment team to give expert advice on loan approval and assessment; the right employees need to be appointed in the monitoring division; and that a combination of control instrument should be used namely covenant, guarantor and harsh penalties for defaulters.