credit policy and loan portfolio performance in microfinance institutions: case study of uganda finance trust central branch, kampala

Description

This study was carried out with the purpose of establishing the relationship between credit policies and loan portfolio performance of Micro finance institutions. The study objectives included, examining credit management policies of Uganda Finance Trust, to evaluate the portfolio performance of Uganda Finance Trust and to establish the relationship between Credit policies and loan portfolio performance. The researcher used a combination of descriptive and analytical, cross-sectional survey. The descriptive and analytical designs were appropriate because data was easily analyzed using frequency counts, averages or percentages derived from questionnaires and interviews. The cross- sectional survey was appropriate because it captured the state on the variable at a particular point in time in the different area of an organization. It was also used for associational or descriptive purposes or case studies like this one. The research was carried out in Uganda Finance Trust, Central branch and as such the study population included the management, credit officers and clients of the branch. The findings as well indicated that Uganda Finance Trust Limited used customer particulars for tracking purposes as some of it credit controls when issuing its loans to customers. In addition the findings indicate that the organization has a variety of loan products such as, business loans, individual loans, school fees loans and salary loans. The findings indicated a positive significant relationship (r = 0.951) implying that credit policies affects the loan performance level of Uganda Finance Trust Limited by a magnitude of 95%. The study indicated that credit policies if not clearly designed could negatively impact on the performance of micro finance institutions. The following recommendations were suggested; the organization should improve on credit policies that are in place and train its employees on how to deal with the credit policies set by the organization, the organization should always review the credit controls to make sure that they are effective in increasing the loan performance and the organization should motivate employees to ensure adherence and implementation of credit policies and term.