CREDIT POLICIES AND LOAN RECOVERY IN MICROFINANCE INSTITUTIONS: A CASE STUDY OF FINCA UGANDA, BRANCH

TABLE OF CONTENT

DECLARATION ......................................................................................................................................... i

APPROVAL ................................................................................................................................................ ii

D ED ICA TION ........................................................................................................................................... iii

ACKNOWLEDGEMENT ........................................................................................................................ iv

TABLE OF CONTENT ............................................................................................................................. v

CHARPTER ONE ......................................................................................................................... 1

INTRODUCTION .......................................................................................................................... l

I. 0 Introduction .......................................................................................................................................... 1

I .1 The background of the study ............................................................................................................. 1

1.1.1 Historical perceptive ........................................................................................................................ 1

1.1.2Contextual perspectives .................................................................................................................... 3

1.1.3 Conceptual perspectives .................................................................................................................. 4

1 .1.4 Theoretical perceptive .................................................................................................................... 6

1.2 Statement of Problem .......................................................................................................................... 7

1.3 Purpose of Study ................................................................................................................................. 8

1.4 Objective of the Study ........................................................................................................................ 8

1.5 Research Questions ............................................................................................................................. 8

1.6 Scope of the Study .............................................................................................................................. 8

1.6.1 Geographical scope .......................................................................................................................... 8

I. 6.2 Content scope ................................................................................................................................... 8

1. 7 Significance of the Study ................................................................................................................... 9

1.8 The conceptual fi·amework ................................................................................................................. 9

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CHAPTER TWO ......................................................................................................................... 10

LITERATURE REVIEW ........................................................................................................... 10

2.0 Introduction ........................................................................................................................................ 10

2.1 Conceptual Review ........................................................................................................................... 10

2.1.1 Concepts of Micro Finance Institutions ...................................................................................... 10

2.1. 2 Credit Policy .................................................................................................................................. 11

2.1.3 Loan recovery ................................................................................................................................. 11

2.1.4. Indicators of credit policy ............................................................................................................ 12

Credit Standards ....................................................................................................................................... 12

Credit Tenns ............................................................................................................................................. 13

Collection Effmis ..................................................................................................................................... 13

2.1.5 Indicators of Loan Recovery ........................................................................................................ 14

2.2 Theoretical Review ........................................................................................................................... 15

2.2.1 The classic micro finance theory of change ............................................................................... 15

2.2.3 Credit risk theory ........................................................................................................................... 16

2.2.4 Tax theory of credit ....................................................................................................................... 16

-? · 2 .)- L.1 qm. d.1 ty t I1 eory o f" crec 1I· t. ............................................................................................................ 17

2.3 Empirical review ............................................................................................................................... 17

2.3.1 Problems faced by micro finance institutions in delivering financial services to rural poor

people ........................................................................................................................................................ 17

2.3.2 Relationships between credit policy and loan recovery ............................................................ 19

2.3 .3 Credit standards and loan recovery .............................................................................................. 19

2.3.4 Credit terms and loan recovery .................................................................................................... 19

2.3.5 Collection effmis and loan recovery ........................................................................................... 19

2.4 Gaps in literature ............................................................................................................................... 20

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CHAPTER THREE ..................................................................................................................... 21

METHODOLOGY ...................................................................................................................... 21

3.0 Introduction ........................................................................................................................................ 21

3.1 Research Design ................................................................................................................................ 21

3.2 Study Population ............................................................................................................................... 21

3.3 Sampling methods ............................................................................................................................. 21

3.4 Sample composition and size ........................................................................................................... 21

3.5 Validity and Reliability of Research Instruments ........................................................................ 22

3.5.I Validity ............................................................................................................................................ 22

3.5.2 Reliability ........................................................................................................................................ 22

3.6 Sources of Data .................................................................................................................................. 22

3.6.I Primary data .................................................................................................................................... 22

3.6.2 Secondary Data ............................................................................................................................... 22

3.7 Data collection methods ................................................................................................................... 22

3.8 Research instruments ........................................................................................................................ 23

3.8. I Questionnaire .................................................................................................................................. 23

3.8.2 Interview guide ............................................................................................................................... 23

3.9 Data Processing and Analysis .......................................................................................................... 23

3.9. I Data Processing .............................................................................................................................. 23

3.9.2 Data Analysis .................................................................................................................................. 23

3. I 0 Limitations ....................................................................................................................................... 23

3. I I Ethical Considerations .................................................................................................................... 24

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