The effect of financial management on the performance of microfinance institutions

Abstract

This study was to examine the effect of financial management on the performance of Microfinance institutions: A case study of Gulu district. The study objective were as follow; to evaluate the influence of liquidity risk management on the financial performance of Microfinance institutions, to ascertain the influence of credit risk management on the financial performance of microfinance and to ascertain the influence of financial analysis and reporting on the Financial performance of microfinance institutions in Gulu Municipality. The study used a descriptive research design where both qualitative and quantitative approaches were used. The study considered a sample size of 36 respondents out of a population of 40 respondents. Key respondents included Tellers, Bank Managers and Members Registered in SACCOs and Customers. The employed questionnaires, interview guide and documentary reviews to collect information from respondents. According to the findings on the major influence of liquidity risk management and financial performance, it was found out that liquidity risk management enhances transactions and possessions, enables operations, financing and investments in business and provides information that is useful to investors and creditors in making credit, investment and other business decisions. As far as ascertain the influence of credit risk management on financial performance, it was discovered that there is opportunity for controversy, changes in price levels hinder preparation, there are complexities and technicalities in financial transactions and accounting practices. It was further found out that components of financial statement predict good investment decisions making, investment decision makers rely on information from financial statement and influence of financial analysis and reporting enables the investors to understand dividends to the share holders. It is therefore recommended that Due diligence in the preparation of the financial statements must be emphasized since most of the investment decisions are focused on the financial statement. All items must be well quantified before preparation of the statements and this will enable to eliminate controversy as regards in measurements of events.