The Effect of Microfinance Credit Management On the Performance of Medium and Small Scale Business. A Case Study of Microfinance Institutions

TABLE OF CONTENTS

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

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

DEDICATION .... ... .... ... .... .............................. ..... ......................................... ... ...... iii

ACKNOWLEDGEMENTS ............................ .... .... ................................................... iv

LIST OF ABBREVIATION .......... ................................................. .... ............ ..... ...... v

TABLE OF CONTENTS .......... ............................................ .... ............. ...... .......... ... vi

ABSTRACT ......... ........... ................................................................. ........ ...... ...... ... x

CHAPTER ONE .......................................... ............ ... ........................................... l

1.0 Introduction ......... ...... ... .................................................. ........ ........................... l

1.1 Overview ..... .................. ............ .... ..... ..... ......................... .... ..... .... .... ......... ...... l

1.2 Backgruond of the Study ... ..... ..... .................... ................................. .. ................... l

1.3 Statement of the Problem .... .. .... ........................................................................... 2

1.4 Purpose of the Study .... .......... ... .. .. ......................... .. ............ .............. .............. ... 3

1.5 Specific Objectives of the Study ............................................... ............................. 3

1.6 Research Questions ...................................... .... .. ... ................ ............................. 3

1.7 Scope of the Study .................................. ..... ..... ... ...................................... ........ 3

1.8 Significance/ Rational of the Study ......... .... ....... ............ .... ...................... .......... ..... 4

1.9 Conceptual Framework .......... ... ... ......... ............ .. .... ... ..... ...... ....................... ... ..... 5

vi

CHAPTER TWO .................................. .................. ... ........................................... 7

Literature Review .......................................................... ...... ... ............... ................. 7

2.0 Introduction ................... ... .... ..... ......................... .................... ..... .... ................. 7

2.1 Overview ......................................................................................................... 7

2.2 Micro Finance Credit. ... ................. .. ..................... .......... .... .. ....... ...................... 7

2.2.1 Credit Risk .......... ............................... ............................................................ 8

2.3 Credit Management ... ... ...................... ................................................................ 8

2.4 Credit Policies ..... ......... ............... ............... ....................................................... 9

2.4.1 Credit Terms ..................... .................................................. ........... ...... .......... 9

2.4.2 Credit Standards .............................................................................................. 9

2.4.3 Collection Procedures Efforts ............... ...... ............. .............. ...... ...................... 10

2.5 MFIS Credit Management Policy Elements ................................ ..... ........... ...... ....... 10

2.5 Types of Credit Exetended to Small Scale Business by MFIS ...................................... 12

2.5 .1 Other Services or Products of MFis ..... ..... ...... .. ................................................... 13

2.5.2 Non-Financial services ofMFI'S ............. ....................................................... .... 14

2.6 Performance of Small Scale Business Performance Indicators ......... .... ......................... 14

2.7 Relationship between microfinance credit and performance of small scale businesses ........ 15

2. 7 .1 Contrasting relationship Between Micro finance .............................................. ....... 16

CHAPTER THREE ....................................................... ................................ ....... 18

METHODOLOGY ................................................................................................. 18

vii

3.0 Introduction ............................ ....... .................................................................. 18

3.1 Overview ...................................... ............... ................................. ......... ......... 18

3.2 The Study Area ..... ..... ................................. ..... ............ .... ............................... 18

3 .2 Research design ................................................................................................ 18

3.2.1 Survey Population ....................................................... .................................... 18

3.2.2 Sampling Design/Procedure ................. ..................................................... ........ 19

3.4 Methods and Instruments of Data Collection ..................................... .................. ... 20

3.4.1 Administered questionnaires ...... .. ................................. ................................... 20

3.4.2 Interview Guides .................... ...... ......................................................... ........ 20

3.4.3 Face to face interview ..... .. ................................................................... .......... .. 21

3.4.4 Quality assurance ............. .... ........................................ ....... ... ..... ................... 21

3.5 Data Collection ...... ...... .. ... ................................................................................ 21

3.5.1 Secondary Data ...... .. ... .. ... .. ................................. ........... ............................... 22

3.5.2 Documentation ................................... ..... ... .. .............. ... .................... ............ 22

3.6 Data Processing .......................... ..... .................................................. ....... ....... 22

3.6.1 Data editing ............. .... ............... ..... ............................................................. 22

3.7 Data Analysis ............................................... ............................ .......... ............. 22

3.7.1 Qualitative Analysis .............................. ...................... ............ ....................... 22

3.8limitation of the Study ................................................................. .... .... ......... ...... 22

3.9 Organization of the Research Report ................ .. ................................................... 23

CHAPTER FOUR ....................................................... ............................... : ........ 24

viii

4.0 Introduction ..................................................................... .. ............ ............. .... 24

4.1 Data presentation and Analysis of the Study ...................... .. ................................... 24

4.2 Analysis on tue Types of Credit MFIS Extend to SMES ... ......................................... 24

4.3 Finding on Credit Management Policies ................... ........... ............................. ..... 25

4.4 Findings on The services I products of MFl S .......................................... .. .............. 27

4.5 Findings on Performance of Small SMES .............. ........................................ ........ 28

4.6 Microfinance Credit Analysis .................................................................. ............ 29

4. 7 Findings on the Relationship between mfi Credit and Performance of SMES .................. 29

4.8 MFI'S Analysis ....................................................................... ........................ 29

CHAPTER FIVE .................................................. ... .............. ............................. 30

5.0 Summary of Findings, Conclusion and Recommendation .......................................... 30

5. I Introduction ............................... ..... ...................... .................... ........... .......... . 30

5.2 Summary ofFindings ...................................................... .................................. 30

5.3 Conclusion .......................................................................................... ........... 30

5.4 Reco1runendations ........................................................ : ..... ............................... 31

5.5 Areas of Further Research ................................................................................... 31

REFERENCES ........................................ .................................... ....... ................. 32

APPENDIX 1 ... ................................................................................................... 34

QUESTIONNAIRE ................... .......................... .................... ....................