Credit Management and Financial Performance of Microfinance Institutions in Nyamagabe District, Rwanda

ABSTRACT This study explored the influence of credit management on financial performance of Microfinance institutions in Nyamagabe District. The objectives were to determine the profile of the respondents; to determine the level of credit management in the selected microfinance institutions under study, to determine the extent of financial performance and to establish if there is a significant relationship between credit management and financial performance of microfinance institutions in Nyamagabe District. This study used descriptive and correlation design. The target population involved a total of 156 people of 13 microfinance institutions operating in Nyamagabe District, which are Vision Finance Company, RIM s.a; Ingenzi Gasaka SACCO, Twizigamire, Umwalimu SACCO, Umutanguha Gasarenda, Kibilizi SACCO, Cyanika SACCO, Urwego C.B, Inkingi MF, Tare SACCO, Winkingi SACCO and CT Nyamagabe where we have selected a sample size of 111. Purposive sampling was used to select respondents able to provide relevant information to the research. To meet these objectives, the researcher has collected data using questionnaires. The data were presented, analyzed and interpreted using Statistical Package for Social Science (SPSS). The findings showed that the majority of the respondents are females, with age between 31 and 40 years, with one to 5 years of experience and were credits officials. All of the studied institutions have and strictly apply credit management policies, guidelines, have methodology and eligibility criteria to evaluate creditworthiness of clients and appropriate loan security requirements and monitoring procedures exist. Thus, these factors influence positively the financial performance of microfinance institutions where the findings revealed that the majority of studied institutions’ profits and fixed assets have been increasing in the past three years with efficiency and productive use of their resources. By conclusion, the Pearson’s correlation coefficient indicates that there is a significant and positive relationship between credit management and financial performance of studied microfinance institutions. The null hypothesis was rejected. As recommendation, MFIs could diversify geographically to reach rural areas where are located a lot of people of low income; donors and governments should focus on improving the legal and regulatory framework; MFIs should multiply techniques for improving credit management such as giving trainings and incentives packages on clients who paid regularly and they are recommended to diversify their working areas, clients and types of funded activities for keeping them competitive and facing well their current working competition.