Assessment of credit analysis models in micro finance delivery in Ghana: the case of selected Micro Finance Institutions (MFIs)

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MFIs in the recent past had been successful in providing sustainable lending to SMEs. The research work sought to analyse the credit analysis models/methods used by the MFIs in assessing the credit risks of their clients. The study further sought to identify the strengths and limitations of the models of credit analysis. Five (5) MFIs were selected as case study for the research and face-to-face semi-structured interviews were used to gather information from the Management and Credit Staff of the selected MFIs. The data was then organized and assembled into a diagrammatic network that helped the researcher to recognize relationships and patterns in the data and drew the relevant conclusions. It was found out that the use of a program design based on group model with key features of joint-liability and social sanctions, dynamic incentives, collateral substitutes, regular payment schedules were common to all the credit methodologies of the MFIs. The group lending models helped the MFIs to shift the screening and monitoring of loans to the borrowers, thereby reducing processing costs and credit risks. The researcher recommended that the introduction of incentive schemes towards good record keeping, setting up of research departments, offering of specific and relevant training to clients and the use of a hybrid of empirical models and the innovative models by the MFIs could help improve their credit decisions, ensure sustainability of their models and also improve credit portfolio quality.
A thesis submitted to the Institute of Distance Learning, Kwame Nkrumah University of Science and Technology in partial fulfillment of the requirement for the award of Commonwealth Executive Masters in Business Administration (CEMBA), degree,