Credit Risk Management and Loan Performance on Micro Finance Institutions

ABSTRACT The concept ofMicrojinance in Uganda is one ofthe most developed in the Sub-Saharan Africa. However, given the importance of credit risk in microfinance functioning, the efficiency of Micro/inance Risk Management which includes techniques, methods, processes, procedures, activities and incentives is expected to significantly influence its loan performance. This study therefore sought to determine the relationship between credit risk management and loan performance in microfinance institutions (MFIs) in Uganda; a case of Pride Microfinance, Kabalagala Branch. A descriptive research design was adopted. The target population comprised t~t’elve MFIs and a sample size of 30 respondents obtained by purposively sampling the respondents from staff members ofpride microjinance, Kabalagala branch. Data collection was done using questionnaires and analyzed using SPSS where descriptive and inferential statistics were conducted. The studyfound a positive and statistically significant relationship between credit risk environment, credit appraisal process, credit administration, measurement and monitoring, internal control over credit risk and loan peiformance in the microfinance bank’s the senior management in the MFIs should develop policies andprocedures, establish overall credit limits, have a sycteni for monitoring the condition of individual credits and an independent internal control system for conducting ongoing assessment ofthe microfinance ‘s credit risk management process.