Loan Recovery And Credit Policy In Microfinance Institutions. A Case Study: Finca, Buganda Road Branch, Kampala, Uganda

ABSTRACT

The research was carried out to assess loan recovery and credit policy of clients of Micro

Finance Institutions, with Foundation for International Community Assistance (FINCA)

as a case study. The researcher decided to carry out this study because of reported decline

in loan recovery ofFINCA's clients as a result of high interest rates charged on the loans.

This study is therefore to investigate the credit policy of MFI' s.

A survey research design was used in an effort to describe events and explain the

relationship between loan recovery and credit policy of clients ofMFI's. The respondents

were selected using random sampling and the major instrument used for data collection

was a questionnaire. The questionnaire was distributed to staff and clients of FIN CA.

The findings showed 35 respondents representing 77.8% of the sample size. The socioDemographic

characteristics of the respondents were investigated. Majority of the

respondents were found to be female as compared to men counter patis. Any one can be

offered a loan regardless of sex. Marital status was investigated it was found out that the

married were more as compared to others.

Majority of the respondents were between age brackets 31-40. Most of them had

acquired loan from FINCA. The education background showed that the majority had

acquired formal education at least to primary level. However there was a problem in

interpreting the questionnaires given to them.

In conclusion, the findings confirmed that there is a positive correlation between credit

policy and loan recovery of FINCA. The study therefore recommended that in order to

attain good performance of loan recovery will depend on the availability of good credit

policy techniques applied.