An assessment of the effectiveness of credit risk management in microfinance institutions in kumasi metropolis”.
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Date
2023
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KNUST
Abstract
The research's goal was to evaluate the influence of credit risk management on the liquidity position of Ghanaian microfinance companies: a case study of selected MFIs in the Kumasi Metropolis. The descriptive research design was employed by the researcher. The quantitative research method was applied. The study's target population consisted of 156 workers from selected MFIs in the Kumasi Metropolitan Area. The census approach was utilised to pick all 156 research participants. The major data collection tool was a questionnaire. The questionnaire was analysed using statistical methods such as frequencies, percentages, and mean. Staff training, client project review, internal controls, customer affordability calculation, credit granting policy, debt collection strategies, and credit scoring models were identified as credit risk reduction measures employed by the MFI to manage loan default. MFI assessed the following aspects before issuing loans to clients: capacity to pay, future prospects of the business, profitability of the firm, cash flow statement, profit and loss statement, security, customer character, borrower payback history, and credit utilisation experience. Overreliance on guarantors, carelessness and poor underwriting, as evidenced by inadequate loan documentation, a lack of current financial information, and a lack of protective covenants in the loan agreement, communication ineffectiveness, and ineffective loan monitoring, all contribute to loan default. To increase loan recovery at the MFI, the research advised that management organise frequent workshops and seminars to train credit officers on loan approval, credit assessment procedures, loan supervision tactics, and monitoring strategies.
Description
Thesis submitted to the department of accounting and finance, college of humanities and social science in partial fulfilment of the requirement of award of master in science in accounting and finance