The relationship between credit management and loan recovery on microfinance institutions in Uganda; A case study: Hofokam Kasese branch

Abstract

Following the several services and products offered by MFIs to its clients, a study was conducted to investigate the relationship between credit management and loan recovery on microfinance institutions in Uganda. The study was guided by the following research objectives: to assess the relationship between credit policy and loan recovery in MFIs. To establish the relationship between interest rates on loan recovery in MFIs. To design strategies on how credit documentation and loan recovery in MFIs can be improved. The researcher used both primary and secondary data. The primary data was got from HOFOKAM loans officers and its clients. The information was obtained by use of self administered questionnaires. Secondary data was obtained from published material which included journals and online internal reports. In this study a sample size of 42 respondents was used from whom data was obtained. A cross sectional survey research design was used to investigate the relationship between the variable. It was found out that HOFOKAM has got well established loan recovery procedures thus the effective credit policies result into effective loan pay backs. More so the bad debts registered in HOFOKAM and as indicated in the problem statement, are as a result of loans officers not following the procedures of loan recovery. The results of the study show that there is a strong positive relationship between credit management and loan recovery in microfinance institutions in Uganda. It is recommended basing on the above problem that the loans officers more so put in other strategies to ensure effective loan recovery. Taking all that is required to ensure that bad debts pay the outstanding amount should be taken before the loans are written off as bad debts.