Credit Policy Of Finance Institution And Performance Of Selected Small And Medium Enterprises (Smes): A Case Study Of Popular Bank, Ny Amirambo Branch, Rwanda

ABSTRACT

The research intended tg establish the credit policy on loan recovery in microfinance institutions,

case of Popular Bank.

The objective of the of the study was to establish the existence of credit policies in Popular Bank

Rwanda, to examine how loans were recovered in Popular Bank, Rwanda and to establish the

relationship between credit policy and loan recovery in Popular Bank, Rwanda.

The research methodology adopted both descriptive and analytical research design based on semistructured

questionnaires to gain an in-depth understanding of credit policy management and loan

recovery. A sample size of 140 respondents was used. Stratified sampling method was adopted for

the study. Data was collected from both primary with the help of questionnaires designed using

likert scales and secondary data got from textbooks, internet, journals and newspaper articles.

The study revealed that credit policies exist in Popular Bank but there was management laxity to

effectively implement them and this has negatively impacted on Popular Bank's loan recovery

between the periods "2008-20 IO" where the default rate was steadily increasing. It is therefore this

steady rise that necessitates the investigation of its probable cause.

Besides this, there exists a strong positive relationship of 0.722 (using correlation SPSS) between

credit policy and loan recovery. This implies that the effectiveness of credit policy leads to higher

loan recovery levels.

The researcher recomm-ends that the management should review the implementation of credit

policies, interest rate should be reduced from 36% per year to at least 24% per year just like other

lending institutions, and payback period must be extended to at least beyond one year.

Popular Bank should train its clients on how to beneficially use the borrowed money. In addition to

this, it should listen to client's grievances in order to efficiently serve their interests and so achieve

its target goals. The above measures if taken into consideration will strengthen the effectiveness of credit policy towards achieving the set objectives and still enhance loan recovery.