debt collection management and financial …

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DEBT COLLECTION MANAGEMENT AND FINANCIAL PERFORMANCE: A CASE STUDY OF PRIDE MICROFINANCE INSTITUTION, KABALAGALABRANCH BY AUMA EVERLINE BBA/46716/152/DU A RESEARCH REPORT SUBMITTED TO THE COLLEGE OF ECONOMICS AND MANAGEMENT IN PARTIAL FULFILMENT OF THE REQUIREMEN'IS'FOR THE AWARD OF BACHELOR OF BUSINESS ADMINISTRATION OF KAMPALA INTERNATIONAL UNIVERSITY APRIL, 2018

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Page 1: DEBT COLLECTION MANAGEMENT AND FINANCIAL …

DEBT COLLECTION MANAGEMENT AND FINANCIAL PERFORMANCE: A

CASE STUDY OF PRIDE MICROFINANCE INSTITUTION,

KABALAGALABRANCH

BY

AUMA EVERLINE

BBA/46716/152/DU

A RESEARCH REPORT SUBMITTED TO THE COLLEGE OF ECONOMICS AND

MANAGEMENT IN PARTIAL FULFILMENT OF THE REQUIREMEN'IS'FOR THE

AWARD OF BACHELOR OF BUSINESS ADMINISTRATION OF

KAMPALA INTERNATIONAL UNIVERSITY

APRIL, 2018

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DECLARATION

I AUMA EVERLINE do hereby declare that this is my original work and it has never before

been presented elsewhere for any academic award. The pieces of work from other sources have

been dully recognized.

Sign: @.:~ . .. ...... . .. ... . . ..... . .. . . . .

Date: .~ 1. ~. /t'f. r.! . J ·r .~.q_ /.A .. . .

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APPROVAL

This work has been supervised and is now ready to be submitted to the college of Economics

and Management of Kampala International University with the approval of the supervisor.

Date ... .. . ... . .. .. . ........ . ..... .. .. ..... .. .. .. . .

DR.KIRABO B.K. JOSEPH

ii

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DEDICATION

This research is dedicated to my beloved parents, brothers, sisters and friends.

iii

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ACKNOWLEDGEMENT I will like to extend my gratitude to those who have contributed to this research I really

appreciate their effort and time towards achieving my studies.

And to my hard working supervisor Mr. Kirabo B.K Joseph thanks for your time and patience

towards the research my deepest appreciation for guiding me throughout my research.

Also much appreciation to Kampala International University and to some of the lecturers who

have contributed directly or indirectly to my studies special regards to all academic and non­

academic staffs of the university.

Lastly to my family who if not for them by the help of God I won't be here. I will like to

thank them for their efforts prayers and support. May God bless you all

iv

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TABLE OF CONTENTS

DECLARATION .......................................................................................................................... I

APPROVAL ................................................................................................................................ II

DEDICATION ............................................................................................................................ III

ACKNOWLEDGEMENT ......................................................................................................... IV

TABLE OF CONTENTS ............................................................................................................ V

ABSTRACT ............................................................................................................................ VIII

LIST OF FIGURES ................................................................................................................... IX

LIST OF ACRONYMS ............................................................................................................. XI

CHAPTER ONE ooonooouuuuouuuoooouooonouuooooouoooouuoooooooooooeeuoooouoouuouoonuonouooouoooooooooouooouool

INTRODUCTION ...................................................................................................................... !

1.0 Introduction ............................................................................................................................ !

1.1 Background to the Study ........................................................................................................ ]

1.1.1 Historical Perspectives ........................................................................................................ !

1.1.2 Theoretical Perspectives ..................................................................................................... 2

1.1.3 Conceptual Perspectives ..................................................................................................... 3

1.1.4 Contextual Perspectives ...................................................................................................... 3

1.2 Statement ofProblem ............................................................................................................. 4

1.3 Purpose ofStudy .................................................................................................................... 4

1.4 Objective of the study ............................................................................................................. 4

1.5 Research Questions ................................................................................................................ 4

1.7 Scope of the Study ................................................................................................................. 5

1.7.1 Time Scope ......................................................................................................................... 5

1.7.2 Content scope ...................................................................................................................... S

1.8 Significance of the Study ....................................................................................................... S

1.9 Definition ofkeyterms ........................................................................................................... S

CHAPTER TWO uuuouuooouuoooooooooouooouoouuuoooouuuuouooooooooooooououououoooouuouuonooouoououooooooooo6

LITERATURE REVIEW uooouooouoouooounuuuuuuuuooouuoooououooouuouoouo"ouuoouuououoooooououoooooo6

2.0 Introduction ............................................................................................................................ 6

2.1 Theoretical review ................................................................................................................. 6

v

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2.2 The conceptual review ........................................................................................................... 7

2.3 Debt Management .................................................................................................................. 7

2.4 Financial Perfonnance ........................................................................................................... 8

2.5 Relationships between debt collection management and financial performance .................. 8

2.6 Policies of debt management ................................................................................................. 9

2. 7 Indicators of financial Performance ..................................................................................... 11

2.8 Problems faced by microfinance institutions in delivering financial services to clients ..... 12

2.9 Gaps in the literatnre ............................................................................................................ l3

CHAPTER THREE .................................................................. -. .............................................. 15

METHODOLOGY .................................................................... u ............................................ 15

3.0 Introduction .......................................................................................................................... IS

3.1 Research Design ................................................................................................................... 15

3.2 Survey Population ................................................................................................................ 15

3.3 Sampling Size ...................................................................................................................... 15

3.4 Sample Design ..................................................................................................................... 15

3.5 Sample procedure ................................................................................................................. 16

3.6 Source ofData ...................................................................................................................... 16

3.6.1 Primary source .................................................................................................................. 16

3.6.2 Secondary Source .............................................................................................................. 16

3.7 Data collection methods ....................................................................................................... l6

3.8 Data processing and analysis ............................................................................................... 16

3.9 Limitations of the study ........................................................................................................ 17

CHAPTER FOUR .................................................................................................................... IS

DATA ANALYSIS AND PRESENTATION .....................•.••.•••..................................••..•••... l8

4.0 Introduction .......................................................................................................................... 18

4.1 Demographic characteristics of respondents ....................................................................... 18

4.2 The existing credit policies in Pride Micro-finance ............................................................. 22

4.3 How Loan are recovered in Pride micro-finance ................................................................. 23

4.4 The relationship between credit management and loans performance ................................ 24

vi

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CHAPTER FIVE oooooooooouoooooooouoooooooooonoooooooouuoeuooouoooooooooooouuonoooonoouoouoooooouooouooonououuuoo26

SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS ............... 26

5.0 Introduction .......................................................................................................................... 26

5.1 Summary of findings ............................................................................................................ 26

5.2 Conclusions .......................................................................................................................... 26

5.3 Policy Recommendations ..................................................................................................... 27

5.4 Areas for Further Research .................................................................................................. 27

REFERENCES .......................................................................................................................... 28

APPENDIX. A ........................................................................................................................... 32

QUESTIONAIRE FOR EN COT EMPLOYEES ....................................................................... 32

APPENDIX. B. BUDGET ......................................................................................................... 35

APPENDIX. C. TIME FRAME ................................................................................................. 36

vii

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ABSTRACT

The study was carried out to find out the relationship between credit management and loan

performance in micro finance institution, taking a case study of Pride, Kabalagala Uganda.

The study aimed at investigating the relationship between credit management and loans

performance in Pride micro finance institution.

The study applied both qualitative and quantitative research designs where interviews and

questionnaires were used. Data was collected from both primary and secondary sources. Data

was processed and analyzed using formal, tables, pie charts, narrative text and correction to

find out the relationship between credit management and loans performance at Pride

microfinance institution Kabalagala branch. A total of 35 respondents were considered out of

the entire population.

TI1e findings indicated that there is credit policies, loans recovery mechanism at Pride

microfinance and different recommendations were suggested such as; financial accounting

and reporting procedures to ensure better performance, there is need for more resource to be

mobilized and help finance the institution, there is need for periodic auditing and inspection

on performance of entire institution and come up with risk mitigating strategies to address the

challenge of bad debts, default by clients.

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LIST OF FIGURES

FIGURE 2.1: CONCEPTUAL FRAME WORK ..................................................................... 7

FIGURE 4. 1: GENDER OF RESPONDENTS .................................................................... 19

FIGURE 4.2: LEVEL OF EDUCATION ............................................................................... 20

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LIST OF TABLES

TABLE 4.1: GENDER OF RESPONDENTS ......................••..........................••.•..................... 18

TABLE 4.2: AGE OF RESPONDENTS •••••.••...................••••.•.•.................••...•••.••................••.•. 19

TABLE 4.3: LEVEL OF EDUCATION .................................................................................... 20

TABLE 4.4: WORK EXPERIENCE uoooueouoooouooouuuouuoou~ooooo<>oououououoooooououooneuoooooooooooooooe21

TABLE4. 5; REPRESENTS THE EXISTING CREDIT POLICIES IN PRIDE MICRO-

FINANCE KABALAGALA ....................................................................................................... 22

TABLE 4.6: REPRESENTS LOAN RECOVERY IN PRIDE MICROFINANCE

KABALAGALAooononuoooooooooooooooouoououoouonouoeeooo~uuoouuouoouoooouooooouoouououoououoooooooouooooououuoo23

TABLE 4.7; REPRESENTS THE RELATIONSHIP BETWEEN CREDIT

MANAGEMENT AND LOANS PERFORMANCE ................................................................ 24

X

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LIST OF ACRONYMS

AIT : Asymmetric Information Theory

GDP : Gross Domestic Products

MFI : Micro Financial Institutions

SACCO : Saving and Credit Cooperatives

UNDP

USA

ROI

ROA

: United Nation Development Progranune

: United State of America

: Retum on Investment

: Retum on Assets

LGIAM : Ministry of Local Govemment of Uganda Audit Manual

x!

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1.0 Introduction

CHAPTER ONE

INTRODUCTION

This chapter presented the background to the study consisted of the historical, theoretical,

conceptual, and contextual; then the statement of the problem, objectives of the study,

research hypotheses, scope to the study, significance, definition of key terms and conceptual

framework.

1.1 Background to the Study

The background was broken into four sections namely the historical, theoretical, conceptual,

and contextual perspectives.

1.1.1 Historical Perspectives

The concept of credit management can be traced back in history and it was not appreciated

until and after the Second World War when it was largely appreciated in Europe and later to

Africa (Kiiru, 2004). Banks in USA gave credit to customers with high interest rates which

sometimes discouraged boiTowers hence the concept of credit didn't become popular until the

economic boom in USA in 1885 when the banks had excess liquidity and wanted to lend the

excess cash (Ditcher, 2003). In Africa the concept of debt collection management was largely

appreciated in the 50's when most banks started opening the credit sections and departments

to give loans to white settlers. In 1990s loans given to customers did not perform which

called for an intervention. Most suggestions were for the evaluation of customer's ability to

repay the loan, but this didn't work as loan defaults continued (Modurch, 1999). The concept

of debt collection management became widely appreciated by Microfinance Institutions

(MFI' s) in the late 90s, but again this did not stop loan defaults and enhance financial

perfonnance ofMFI's to this date (Modurch, 1999).

In order to minimize exposure to bad debt, over-reserving and bankruptcies, companies must

have greater insight into customer financial strength, credit score history and changing

payment patterns. The ability to penetrate new markets and customers hinges on the ability to

quickly and easily make well-informed credit decisions and set appropriate lines of credit.

Credit management starts with the sale and does not stop until the full and final payment has

been received. It is as important as part of the deal as closing the sale. In fact, a sale is

1

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technically not a sale until the money has been collected. This is intended to improve on loan

performance since effective credit management is the ability to intelligently and efficiently

manage customer credit lines.

Microfinance Institutions and other finance institutions must develop a credit policy to

govern their credit management operations (Pandey, 2008) and since microfinance

institutions generate their revenue from credit extended to low income individuals in the form

of interest charged on the funds granted (Central Bank Annual Report, 2010) the loan

performance may be uncertain. The success of lending out credit depends on the

methodology applied to evaluate and to award the credit (Ditcher, 2003) and therefore the

credit decision should be based on a thorough evaluation of the risk conditions of the lending

and the characteristics of the borrower.

1.1.2 Theoretical Perspectives

This study has to adopt the asymmetric information theory (AIT) developed in the 1970s and

1980s by George Akerlof, Michael Spence and Joseph Stiglitz proposes that an imbalance

of information between clients and creditors can lead to inefficient outcomes in certain

markets (Charles Wilson 2008). Information asymmetry refers to a situation where manager

know more about the prospects for, and risks facing their business, than do lenders (PWHC,

2002) cited in Eppy, 2005). It describes a condition in which all parties are involved in an

undertaking do not know relevant information. In a debt market, infonnation asymmetry

arises when a borrower who takes a loan usually has better information about the potential

risks and returns associated with investment projects for which the funds are earmarked.

Information asy:tmnetry models assume that at least one party to a transaction has relevant

information, whereas the other(s) do not. In this current study, it is argued that, if a MFI

employs effective debt management processes or procedures, it is in better position to gain

::ritical information about the borrower to make more profitable decision whether to give the

loan or deny based on the quality of information obtained during loan assessment process.

1\.ccording to Stiglitz the pioneer of the theory of screening in which it was argued that, the

mder informed party can induce the other party to reveal their information (Ledyard, 2008).

They can provide a menu of choices in such a way that the choice depends on the private

nformation of the other party. Binks et a! (1992) point out that perceived information

!symmetry poses two problems for L'le financial institutions, moral hazard (monitoring

mtrepreneurial behavior) and adverse selection (making errors in lending decisions). In this

2:

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way, in absence of an effective credit management processes, MFis may find it difficult to

overcome these problems because it is not economical to devote resources to appraisal and

monitoring where lending is for relatively small amounts. This is because data needs to

screen credit applications and to monitor borrowers are not freely available to MFis hence

affecting financial performance.

1.1.3 Conceptual Perspectives

Franklin (201 0) defined debt management as the rules and guidelines established by top

management that governs the company's credit department audits performance in the

extension of credit privileges. It is simply a set of guidelines designed to minimize costs

associated with credit while maximizing benefits from it. Debt management policies entail

the credit procedures, credit standards and credit terms.

Financial perfonnance is a measure of company's policies and operations in monetary tenus.

It is a general measure of a firm's overall financial health over a given period of time, and

can be used to compare similar firms across the same industry or to compare industries or

sectors in aggregation. There are many different ways to Measure Company's financial

performance. This may be reflected in the finn's return on investment (ROI), retum on

assets(ROA), value added, among others and is a subjective measure of how a firm can use

assets from its primary mode ofbusiness and generate revenues(Mishkin, 2007) .

Positive financial performance in a firm can be achieved by eradicating waste in benefits

services processes and systems. The "critical success factor" for a firm is the degree to which

it fulfills its set objectives and mission in tetms of being efficient, effective and economical.

It can therefore be argued that, in order to improve financial perfonnance among MFis, it is

important that financial institutions adopt more appropriate and effective debt collection

management methods to guarantee high return.

1.1.4 Contextual Perspectives

Pride micro finance institution is micro-credit and enterprise development NGO founded in

2000 with its head quarters in Bukoto Kampala (Uganda). The Organization is developed as a

response to the challenges of poverty and suffeting faced by the people in country, most

~specially the farmers. According to the recent review ptide has a total of 27 branches in

~ountry including Kabalegala branch offeting credit services to its clients.

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1.2 Statement of Problem

Pride microfinance has credit policies as a way of administering loans and collecting debts

from their clients. The policies have objectives of maximizing profits to the benefit of the

shareholders as well. Since 2014, the institntion faced hardships in financial performance,

portfolio at credit as from 0.3% to 0.51% in June 2017 despite all the efforts of attaching

collectoral security and other assets to secure loans, building up equality loan portfolios and

keeping the rate of the deficit under control. The branch manager cited that problem is as a

result of the inadequate application of the tools of debt collection management (Kabalega1a

branch managers' annual report June 2017 by Ngonzi Hope) locking it into a large and

increasing proportion of nonperforming debts. According to Mugisa (1995), bad quality

assets (loans) not only erode the institntion's ability to recycle its financial resources but also

threaten their survival and deprive the economy of a continuous flow of capital.

1.3 Purpose of Study

The purpose of the stndy was to investigate the relationship between debt collection

management and financial performance in Pride micro finance institntion.

1.4 Objective ofthe Study

i. To establish the relationship between debt collection management and financial

performance of Pride micro Finance Kabalegala

n. To establish the existing debt policies in Pride Micro Finance Kabalegala

iii. To examine how debts are recovered in Pride Micro Finance Kabalegala

1.5 Research Questions

1. What is the relationship between debt collection management and financial

performance?

n. What are the existing debt policies in Pride microfinance Kabalegala?

m. How are debts recovered in Pride microfinance Kabalegala?

1.6 Research Hypothesis

HO: There is no significant relationship between debt collection management and financial

performance.

Hl: There are existing debt policies in pride micro finance

H2: There are debts recovered in Pride microfinance

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1.7 Scope ofthe Study

The research was carried out at Pride microfinance Kabalegala. Where the emphasis was on

the loans department for data relating to debt collection and financial performance

1.7.1 Time Scope

The study considered debt collection and financial performance between 2013 to June 2017.

1.7.2 Content scope

This covered the performance (financial performance) as per debts collected carried in Pride

microfinance to confirm whether debts policies improves financial performance rate.

1.8 Significance ofthe Study

1) The research highlighted the areas of debt management that may need to be modified.

2) The study helped the researcher to better understand debt management setting in

relation to financial performance.

3) The research paved way for another researcher interested in this field to learn from it

and expand upon their research.

1.9 Defmition of key terms

Income: This refers to the monetaty payments received for goods or services, or from other

sources, such as rents or investments. In this study, income levels were measured basing on

the total monetary payments of parents' goods or services, rents or other investments.

Control is defined as a performance with a definite influence on the management of an

enterprise, as rights based on laws and contracts that involve proprietary rights to the whole

property or its part, or any other rights that enable to exert a significant influence on the

management and performance of an enterprise, or state supervision.

Financial performance is the measurement of the results of a firm's policies and operations

in monetary terms. These results are reflected in the fim1' s returns and value-added. This is a

subjective measure of how well a firm can use assets from its primary mode of business and

generate revenues.

Profitability is the ability of a business to earn a profit. A profit is what is left of the revenue

a business generates after it pays all expenses directly related to the generation of the

revenue, such as producing a product, and other expenses related to the conduct of the

business activities.

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2.0 Introduction

CHAPTER TWO

LITERATURE REVIEW

This chapter was concerned with the theoretical review, conceptual review of the related

literature on debt management and financial performance. It was done mainly from the

survey already conducted in the field of debt collection management and financial

performance in micro finance institutions in Uganda.

2.1 Theoretical review

According to Graham et a!, (1990) microfinance refers to the provision of financial services

to the low- income earners who do not earn or obtain their services from the formal financial

institutions because of their business saving levels and credit needs are very small (Bonnevie,

2003). According to Microfinance of Uganda definition, microfinance institutions are non­

governmental institutions savings and credit cooperatives that provide savings and

microloans not exceeding the US $ 5000 for the project to poor individual's average not

exceeding the US $1000 per project to poor individual enterprises or groups for the purpose

of engaging in income generating activities (Hutchison and Me Dill, 1999).

Wood (1998) defined microfinance institutions as institutions that provide financial services

to low-income earners. These financial services may include savings, loans, insurance

transfer and payment services to enhance the growth of small scale enterprises. According to

Dumba, (1997), microfinance is an economic development approach intended to benefit the

low-income groups by providing financial services that are not obtained from other formal

financial institutions, financial services generally include savings and credit facilitates.

However, some microfinance institutions provide payment services and insurance in addition

to financial services.

The features that differentiate microfinance from formal financing are; Informal appraisal to

borrowers and investment use of collateral substitute's access to loans based on payment

performance, streamline with disbursement, monitoring and secure savings product

(Microfinance of Uganda, 1995).

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2.2 The conceptual review

The figure below shows the conceptual framework which illustrates the relationship between

the variables of the study.

Independent variable

Debt management

0 Collateral security

• Credit administration

• Payment policies

• Cost of debt •

Figure 2.1: Conceptual Frame Work

Source: Adapted fi·om Greuning, (1999)

2.3 Debt Management

Dependent variable

Financial performance

• More profits

• Reduction in defaults

rates

• Liquidity preference

Admimlstration policies

Regulation from Bank of

Uganda

Customs and beliefs of

clients

I

A credit management is an institutional method for analyzing credit requests and its decision

criteria for accepting or rejecting applications (Girma, 1996). Credit management is

important in the management of accounts receivables. A firm has time flexibility of shaping

credit management within the confines of its practices. It is, therefore, a means of reducing

iligh default credit implying that the firm should be discretionary in granting loans (Pandey,

1995).Policies save time by ensuring that the same issue is not discussed over and over again

each time a decision is to be made. This ensures that decisions are consistent and fair and that

Jeople in the same circumstance get treated in the same manner (Khandkar and Khan, 1998).

1\.ccording to Me Naughton, (1996), credit management provides a framework for the entire

nanagement practices. Written credit policies are the cornerstone of sound credit

nanagement, they set objectives, standards, and parameters to guide microfinance officers

.vho grant loans and manage loan portfolio. The main reach for management is to ensure

lperation's consistency and adherence to uniform sound practices. Policies should be the

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same for all and are the general rule designed to guide each decision, simplifying and

listening to each decision-making process (Bonnevie, 2003). A good credit involves effective

initiation analysis, credit monitoring, and evaluation.

2.4 Financial Performance

Financial Performance and Value for Money are used to assess whether or not a firm has

obtained the maximum benefit from the goods and services it acquires and/or provides,

within the resources available to it ,as reflected in the audit manual of Ministry of local

govemment of Uganda (LGlAM, 2007).

Value for Money is not paying more for a good or service than its quality or availability,

justifies.

A well planned public spending implies a concem with economy (cost minimization),

efficiency (output maximization) and effectiveness (full attainment of the intended results).

The most effective way to improve financial performance is by reducing the level of

irregularity and fraud through improvements in the firm's systems of intemal financial

control. Shareholders need to be assured that their resources are being used efficiently and

effectively in providing the right service at the least cost.

Financial Performance analysis needs to pay attention to total risks and is related to concepts

Jf efficiency and effectiveness (Deakin, 1998).

tS Relationships between debt collection management and fmancial performance

Credit standards and fmancial performance

Jood credit management provides the institution with a reasonable and adequate retum on

.oans and capital employed primarily through improvement in operations efficiency this

~enerates adequate intemal resources to finance the institution's growth (Pandey, 2000).

The institution may have tight credit standards that it may extend the loan to the most reliance

md financially strong customers such standards will result in no bad debt losses and less cost

lf credit administration (Pandey, 2000).

'andey (1995) stressed that credit standards are criteria for selecting customers for credit; the

'und may have higher credit standards that are extending loans to selected customers with

~ood reputation or record. On the other hand, customers have to be evaluated to see if they

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meet the standards set by the management before loans are extended to them. However, (Van

Home, 1995) states that when an institution extends a loan to only strongest customers, it will

never have bad losses and will incur fewer administration expenses.

Credit terms and loan performance

When borrowers are given a small amount of money it will not be sufficient for business

operations yet given too much money it is spent on nonproductive activities causing high non

- loan repayment. The credit manager should check on the amount the customer is demanding

for, whether it is too much or little. The chartered of microfinance and lending text (2002)

advises lending institutions on the amount to give a borrower.

Collection efforts and fmancial performance

Collection efforts determine the actual collection period of the loan (Pandey, 2000) it is the

supervision of the credit loans. The management refers to procedure an institution or firm

follows to obtain payment of past due. It may involve sending a letter to such clients when

they are, for instance, ten days past due data or phone calls, if payment is not received with

thirty days' court action may be taken. Collection procedures are needed because some

clients do not pay their dues in time if firms carry out this management, it will quicken

performance portfolio and hence reduce bad debts.

However, it may not guarantee full perfonnance because some clients are slower in

repayment while others never pay (Pandey, 1992). Credit management decisions are based

solely on borrower's will and ability to recover loans, the amount of loan is therefore based

on the client's needs and assessed loan performance ability of the enterprises.

2.6 Policies of debt management

Pandey, (2000) observers that debt management refers to a combination of three decision

variables. These decision variables determine who qualifies for the loan. They include credit

>tandards, credit terms and collection efforts on which the financial manager has influence.

2apacity. This is the subjective judgment of a customer's ability to pay. It may be assessed

Jsing a customer's ability to pay. It may be assessed using the customer's past records, which

nay be supplemented by physical or observation.

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The condition. This is the impact of the present economic trends on the business conditions

which affects the firm's ability to recover its money. It includes the assessment of prevailing

economic and other factors which may affect the client ability to pay (Kakuru, 2000).

Collateral security. This is what customers offer as saving so that failure to honor his

obligation the creditor can sell it to recover the loan. It is also a form of security which the

client offers as a form of guarantee to acquire loans and surrender in case of failure to pay; if

borrowers do not fulfill their obligations the creditor may seize their asset (Girma,

1996).According to Chan and Thakor (1987), security should be safe and easily marketable

securities apart from land building keep on losing value as to globalization where new

technology keeps on developing, therefore, lender should put more emphasis on it.

Credit Terms

Ringtho (1998) observes that credit terms are nonnally looked at as the credit period terms of

discount and the amount of credit and choice of instmment used to evidence credit. Credit

terms may include;

The length of time to approve loans, this is the time taken from applicants to the loan

disbursement or receipt. It is evaluated by the position of the client as indicated by the ratio

analysis, trends in cash flow and looking at the capital position. The maturity of a loan, this is

the time period it takes a loan to mature with the interest thereon. The cost of the loan. This is

interest charged on loans, different microfinance institutions charge differently basing on

what their competitors are charging (Gordy, 2000). The chartered institute of micro financiers

and lending text (1993) advises lending institutions to consider amount given to borrowers.

Robinson (1994) pointed out that the maximum loan amount per cycle is determined to base

Jn the purpose of the loan and the ability of the client to repay (including guarantee).

Collection Efforts

\.1c Naughton (1996) defines a collection effort as the procedure an institution follows to

:ollect past due account. Collection management refers to the procedures microfinance

nstitutions use to collect due accounts. The collection process can be rather expensive in

erms ofboth product expenditure and lost good will (Brighan, 1997).

[he effort may include attaching mandatory savings forcing guarantors to pay, attaching

:ollateral assets, courts litigation (Myers, 1998). Microfinance institutions may send a letter

o such individuals (borrowers) when say ten days' elapse or phone calls and if payment is 10

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not received within thirty days, it may turn over the account to a collection agency (Myers,

1998).

Collection procedure is required because some clients do not pay the loan in time some are

slower while others never pay. Thus, collection efforts aimed at accelerating coliections from

slower players to avoid bad debts. Prompt payments are aimed at increasing turnover while

keeping low and bad debts within limits (Pandey, 1995). However, caution should be taken

against stringent steps especially on permanent clients because harsh measures may cause

them to shift to competitors (Van Hom 1995).

Credit Standards

This is a criterion used to decide the type of client to whom loans should be extended. Kakuru

(1998) noted that it's important that credit standards be based on the individual credit

application by considering character assessment, capacity condition collateral, and security

capital. The character it refers to the willingness of a customer to settle his obligations

(Kakuru, 2000). It mainly involves assessment of the moral factors. Social collateral group

members can guarantee the loan members known the character of each client; if they doubt

the character then the client is likely to default (Kakuru, 2000).

Saving habit involves analyzing how consistent the client is in realizing own funds, saving

promotes loan sustainability of the enterprise once the loan is paid (Caprio and Klingebiel,

1997).

Other sources of income. Another source should be identified so as to enable him to serve the

loan in time. This helps microfinance institutions not to only limit loans to short-term projects

such qualities have an impact on the repayment commitment of the borrowers it should be

noted that there should be a firm evidence of this information that points to the borrower's

character (Katende, 1998).

2.7 Indicators offmancial Performance.

The following are the measures used to detennine financial performance. Management rate

measures the amount of payment received with respect to the amount due. Portfolio quality

ratios; involves the arrears rate portfolio credit and the ratio delinquent borrowers. The

mears ratio rate shows how much of the loans have become due and has not been received.

Portfolio rate refers to the outstanding balance of all loans that have an amount due (Bhatt. &

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Tang, 2002). Delinquent borrowers determine the number of borrowers who are delinquent

relative to the volume of delinquent loans (Greuning, 1998).

Credit ratio measures on micro finance institutions net income in relation to the structure of its

balance sheet. This helps investors and managers determine whether they are earning an

adequate return on funds invested in the micro finance institutions. Productivity and efficiency

ratios provide the information about the rate at which microfinance institutions generate

revenue to cover their expenses (Boyd, Gomis and Kvak, 2001). Productivity ratio focuses on

the productivity officers because they are primary generators of revenue. The ratio includes;

A number of active borrowers per credit officer (performing assets), Total amount disbursed

in the period per credit officer and portfolio outstanding per credit officer (Non-performing

assets).

Efficiency ratios measure the cost of providing loans for generating revenue; these are

referred to as operating costs and should include neither financing costs nor loan loss

provisions.

Scale and depth of outreach, Microfinance institutions collect data on their clients base both

the scale of their activities (number of clients served with types of instruments) and the depth

of outreach (the type of client reached and their level of poverty)

Outreach indicators include; number of active borrowers, total balance of outstanding loans

average outstanding, real annual average growth rate of loans outstanding during the past

years' loan size, average minimum and maximum, average disbursed loan size, average

~utstanding rates, average loan term, nominal interest rates, effective annual interest rates,

value of loans per staff member and number of loans per staff member.

~.8 Problems faced by microfinance institutions in delivering fmancial services to clients

Whereas microfinance institutions and other credit programs are designed to benefit the rural

Joor and disadvantaged in Uganda, their operations have faced a number of constraints, these

.nvolve;

'oor client's assessment procedures, clients are given loans without assessing the character,

:apacity, and coilateral of the borrower, low loan supervision, clients need to be supervised

m how to utilize the loan advanced to them and also low incentive to save. Uganda has a

rery low domestic saving to gross domestic product (GDP) of 6-8% (Bureau of labor

;tatistics 20 16). 12

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High-interest rate. The higher the interest rate, the more income to microfinance institutions

but also means that the higher the cost of borrowing to the clients, (Stem, 1991). If the

customers fail to pay on time, the rates carmot yield income. The demand for credit is a

function of interest, in accordance with the law of demand (Brook, 1993) customers will stop

borrowing if the interest rate is high. In order to succeed in the promotion of the economic

interest of member lending institutions, most recognize the responsibility to members; it is

important for the aim at sustainability. Sustainability is the ability of micro finance institutions

to generate income from operation that covers administration costs and losses covering costs

from earned income (Ministry of finance, plarming and economic development 2004)

Microfinance institutions need increasing income size and repetitive borrowing of increasing

loan size and fail to pay, the micro finance institutions lose revenue and if it continues may

lead to its collapse (microfinance formn, 2003). To ensure long-term sustainability there must

be growth in customers and size of portfolio lent out. Micro finance institutions need to grow

in order to generate the income needed to pay for operations of their services (Atuhaire,

2001).

Microfinance institutions quote only nominal interest rate to customers but there are other

additional costs the clients incur like penalties on default, travel time for meetings, mandatory

saving, and loan size. According to UNDP report, Feb. 2005 clients that receive small loans

do not utilize the loan on economic activities and those that receive bigger loan spend them

on nonproductive activities.

Regulatory framework; Lack of proper regulatory framework has made microfinance

institutions face a high non-loan repayment. The poor regulatory system determines a

ninimum standard of operation through the self-regulatory body of microfimmce saving

nobi!ization of fixed interest rates operation overlapping can be looked into by regulatory

)Ody (Shafiques, 2000). Microfinance institutions must set a low in order to deal with

iefaulters to recover loans. Poor physical infrastructure, particularly roads and

:ommunication facilities that make contact between lenders and borrowers very difficult

Musinguzi, 1999). There are also cases of multiple borrowing where most clients borrow

rom several microfinance institutions beyond the capacity to pay.

~.9 Gaps in the literature

}lobally, Goldberg and Palladini (2010) did a study on microfinance meets the market;

N'alsh (2010) conducted a study on Assessments on the credit management process of credit

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union. In Uganda, Mwangi (2010) did a study on the factors affecting microfinance credit

management practices in Uganda and Nyakeri (2012) did a study on the effect of credit

management practices on the financial performance in SACCO. However, none of these

studies focused on influences of credit management on the loan performance of deposit

taking microfinance institutions in Uganda. Failure to observe and implement debt

management practices is one of the causes of loan default and non-performing loans in most

microfinance institutions. Studies have been done in relation to debt management practices

and financial performance: Chege (20 1 0) and Simiyu (2008), however none of these studies

have investigated on credit management practices on loan performance of deposit taking

micro finance institutions in Uganda. This study therefore seeks to determine the effects of

debt collection management practices on financial performance of deposit taking

microfinance institutions in Uganda.

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3.0 Introduction

CHAPTER THREE

METHODOLOGY

This presented the methods that were employed in data collection and analysis. It described

the research design, study population, sample size, sample design, sample procedure. Data

collection tools, data processing, and analysis.

3.1 Research Design

The study adopted a descriptive research design where both qualitative and quantitative data

was employed to gain an in-depth understanding of debt management and financial

performance in microfinance a case of Pride microfinance Kabalagala. Qualitative data

helped to draw conclusions and recommendations; it further enabled the understanding of

effectiveness and efficiency of the debt management and financial performance while the

quantitative design was used to evaluate facts from the field.

3.2 Survey Population

The survey population comprised of 50 respondents of whom both are staff and clients to

Pride microfinance institution in Kabalagala. Clients and staff members were used as a

control group to study the behavior and the rate of debt management, financial performance

and criteria ofloan disbursement.

3.3 Sampling Size

The sample size deduce from study population with the help of stratified random Sampling

~onsisting of 35 respondents both employees and clients of Pride micro finance Kabalagala to

Jbtain relevant information.

J.4 Sample Design

The researcher used a stratified random sampling technique during the study. Stratified

·andom sampling was a process of sample selection which involves dividing the population

nto none overlapping groups called strata or selecting the sample from each stratum using a

;imple random technique. The choice was made in order to enable the researcher to get

tdequate representation of the whole population. With a stratified random sampling, the

15

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sample was kept small without losing its accuracy. Besides this, the characteristics of each

stratum can be estimated and hence a comparison between the two variables is easily made.

This was because it was not possible to survey the entire population due to financial and time

constraint.

3.5 Sample procedure

By stratified method, the researcher formed strata and the respondents from each stratum

were selected using a simple random sampling for instance how much one borrows

3.6 Source of Data

Data sources are two both primary and secondary. Primary data were collected by the use of

questionnaires and secondary data was got from reports, journals, magazines, books and the

internet.

3.6.1 Primary source

Data was collected by the use of questionnaires. These were designed using the Likert scale

and they were distributed to staff and clients in order to get their views about the Pride

microfinance framework.

3.6.2 Secondary Source

The source comprised of a review of textbooks, journals, Newspaper articles, the internet and

earlier researchers on the problem.

3. 7 Data collection methods

The major techniques that were used to collect data from the respondents involve the use of

semi- structured questionnaires which are largely closed-ended questionnaires. This was done

with the help of researcher's or a chosen person's guide to cater for persons who would be in

ilurry or those who might not understand what exactly the question meant and those that the

:esearcher thought Should provide more information than questionnaires ask for.

t8 Data processing and analysis

:taw data was processed into meaningful infonnation. The process involved editing,

abulation, and analysis with a view of checking the completeness and accuracy of the

nformation.

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3.9 Limitations ofthe Study

The researcher faced these limitations in conducting the research;

The researcher had to complete the research in a stipulated short period which caused some

financial constraint in undertaking the study.

The researcher had to go through bureaucratic processes to receive permit to issue

questionnaires at Pride micro financial services which took some time.

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CHAPTER FOUR

DATA ANALYSIS AND PRESENTATION

4.0 Introduction.

This chapter covered the analysis, presentation and discussion of the findings. The data was

presented in form of Tables and graphs. Where data could not be quantified, it is explained.

Presentation of findings has been organized in accordance with the study objectives.

4.1 Demographic characteristics of respondents

The respondents were asked to state their gender and their responses are in table below.

Table 4.1: Gender of respondents

Gender Frequency Percentage

Male 20 57 I

Female 15 43

Total 35 100

Source: Primary data 2018

Out of the 35 respondents 20 (57%) were males and 15(43%) were females. This shows that

!he male respondents formed the majority. In contacting a few of the employees the

:esearcher discovered that the males were the majority whiles females fonned minority

~oup.

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Figure 4. 1: Gender of respondents

100 ,-----------------------------------------------------

90 +--------------------------------------------------80 +-----------------------------------------------------70 +------------------------------------------------------60 +-----------------------------------------------------

40 +------30

20 +------10 +------0 +------

Male

Source; Primary data, 2018

Female

From figure 4.lout of the 35 re~pondents represented in the figure, 20(57%) were males and

15(43%) were females. This shows that the male respondents formed the majority of

respondents and females formed minority.

fable 4.2: Age of respondents

A.ge Frequency Percentage

18-24 02 06

~5 -35 05 14

36-44 18 51

\hove 45 years 10 29

rota! 35 100

. ;ource: Pnmary data 2018

1rom the table 4.2, 18(51 %) were between the age group of 36-44, and then 1 0(29%) were

.bove 45 years old, followed by those between 25-35 years of age with 05(14%) and finally

b.ose between 18-24 years with 2(6%). This implied that the majority of the respondents

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were between 36-44 and the minorities were between 18- 24 years. Therefore respondents

had relevant information about the study objectives.

Table 4.3: Level of education

Level of education Frequency Percentage

Certificate 5 14

Diploma 17 49

Bachelors degree 10 29

Others 03 08

Total 35 100

Source: Primary data 2018

From the table 4.3, it can be observed that 5 (14%) of the respondents had a certificate, 17

representing 49% had diploma, 10 representing 29% had bachelors degree, while 3

representing 8% belonged to other qualification. It can therefore be concluded that to be

employed or participate in the microfinance institution need have at least a qualification.

Figure 1.2: Level of education

100 ,---------------------------------------------------------

90 1---------------------------------------------------------

80 i--------------------------------------------------------·---70 +--------------------------------------------------------60 t------------------------------------------------------50 +----------------

40 +-----------------30 +----------------20 +-------------

10 +--

0 +------' Certificate Diploma Bachelors Others

1rom the figure 4.2, it can be observed that 5 (09%) of the respondents had a certificate,

7(49%) had diploma, 10(29%) had bachelors degree, while 03(08%) belonged to other

20

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qualification. It implies that respondents have qualification and knowledge worth their

employment in Pride micro finance Kabalagala

Table 4.4: Work experience

Working experience Frequency Percentage

6 months-2years 10 29

3-Syears 20 57

6-8years 03 09

Above 8 years 02 06

Total 35 100

Source: Primary data 2018

From the table 4.4, the respondents who had working experience of 6 months-2 years were

10(29%), those with working experience of3-5years were 20(57%), then those with 6-8years

working experience were 03(09%) and those with above 8 years working experience were

02(6%). This implies that the majority of the respondents had a working experience of 3-

Syears and the minority had a working experience of above 8years.

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4.2 The existing credit policies in Pride Micro-fmance.

The respondents were asked to state whether credit policies exist in Pride micro-finance

Kabalagala and their responses were noted as shown below in table.

Table 4. 5; Represents the existing credit policies in Pride micro-fmance Kabalagala

Credit policies Strongly Agree Disagree Strongly Total

Agree(%) (%) (%) Disagree (%)

(%)

Identification and prioritization of 55 25 13 07 100

markets.

Credit origination 50 26 14 10 100

Credit evaluation 45 25 20 10 100

Credit documentation and 40 35 15 10 100

disbursement

Credit monitoring 47 23 16 14 100

I Source: Primary Data, 2018

From the table 4.5 .55% of the respondents strongly agreed, 25% agreed, 13% disagreed and

7% of respondents strongly disagreed that Identification and prioritization of markets. This

implies that get credit in Pride involves some steps, identification of clients and prioritization

:>f market of operation.

=::redit origination.50% of the respondents strongly agreed, 26% agreed to this. 14%

iisagreed and 10% strongly disagreed.

~5% of the respondents strongly agreed, 25% agreed, 20% disagree and 10% of respondents

;trongly disagreed with credit evaluation.

<rom the table, 40% of the respondents strongly disagree, 35% agree that Credit

!ocumentation and disbursement, 15% disagreed and 1 0% strongly agree was applied before

letting credit in Pride micro-finance Kabalagala.

:redit monitoring, 47% of the respondents strongly agreed, 23% disagreed, 16% disagreed

1nd 14% strongly disagreed. This implies that credit monitoring is police used by Pride

nicrofinance to supervisor their clients and follows up their payments.

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4.3 How Loan are recovered in Pride micro-fmance

The respondents were asked how loans are recovered in Pride micro-finance and their

responses are in table below;

Table 4.6: Represents loan recovery in Pride microfmance Kabalagala

Loans recovery Frequency Percentage(%)

Paying in installments for a 12 34

particular period agreed

Return on equity 02 06

Selling of collateral security of 10 29

clients in case of failing to pay

loans

Employing of loans officers to 08 23

help in monitoring and supervision

of clients

Provision of bad debts and writing 01 03

off

Total 35 100

Sources: Primary data, 2018

Prom table 4.6, 12 of respondents supported Paying in installments for a particular period

anti! all loan amounts is paid back that is indicated by 34%.

Retum on equity had 2 of respondents indicated by 06% who agreed with it Micro lending.

~emando, (2006) argues that the small size of micro enterprises increases the transaction cost

'or MFis because they cannot process micro loans in bulk.

;elling of collateral security of clients in case of failing to pay loans I 0 of respondents agreed

>Vith it presented by 29%. According to Churchill, C. (1997) notes that because micro

mtrepteneurs usually have no collateral to offer microfinance providers, no alternate source

>f income, and little if any formal education or training in the area of their business, micro

•ntrepreneurs are considered high risk ventures and micro finance institutes (MFis) are forced

o compensate for this by charging interest rates. This issue harms the microfinance sector

>ecause MFis will be reluctant to enter the market.

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Employing of loans officers to help in monitoring and supervision of clients had 8

respondents supporting it presented by 23%.Dichter, T. (1997) argues that microfinance is

delivering the economic returns its proponents promised, but there are only a handful of tools

available that measure the social return of micro finance employing loans officer to support in

its services.

Provision of bad debts and writing off one of the respondents strongly agreed presented by

03%.According to Hatch, J. (2002) notes that microfinance providers may be complacent

with their client base in certain cities and feel no economic need (ignoring the social need to

eradicate poverty) to spread out their distribution system to cater to the poorest of

households.

4.4 The relationship between credit management and loans performance.

The third objective of the study was to establish the relationship between credit management

and loans performance in Pride micro finance Kabalagala

Table 4.7; Represents the relationship between credit management and loans

performance.

Relationship Strongly Agree Disagree Strongly

Agree(%) (%) (%) Disagree

(%)

Helps to achieve long term goal 60 20 10 10

md development.

[ncreases the profit level. 50 20 15 15

\ifodifies micro-enterprise. 40 25 20 15

'Ielps to reduce poverty among 40 30 12 18

wuseholds.

~asy Resource access and 40 32 16 12

nobilization. I J >ource: Primary Data, 2018.

Total

(%)

100

100

100

100

100

I

felps to achieve long term goal and development had 60% strongly agree that its one of link

1etween micro-finance and economic growth, 20% agreed, 10% disagreed and 10% strongly

lisagreed.

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50% strongly agreed with Increases the profit level, 20% agreed, 15% disagreed, 15%

strongly disagreed with it as one of relationship between credit management and loans

performance in Pride Kabalagala branch.

Modifies micro-enterprise had 40% of respondents who strongly agreed, 25% agreed, 20%

disagreed and 15% strongly disagreed.

40% of respondents strongly agreed, 30% agreed that Helps to reduce poverty among

households, 12% disagreed and 18% strongly disagreed with it.

40% strongly agreed, 32% agreed that easy resource access and mobilization thenl6%

disagreed, 12% strongly disagreed as one of relationship between credit management and

loans performance in Pride Kabalagala Branch.

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CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

5.0 Introduction

This chapter dealt with the summary of findings, conclusion and presents recommendations

of the study. Conclusions are made on the credit management and loans performance of Pride

Micro-financial institutions in Uganda Kabalagala. It also suggested areas for further

research.

5.1 Summary offmdings

The researcher found out that there exist credit policies in Pride micro-finance and these

involved; identification and prioritization of markets, credit migination, credit evaluation,

credit documentation and disbursement and regulatory frame work following mles, regulation

governing operation of micro-finance.

From the study researcher found out that different tactics were used to help in loan recovery

in Pride micro-finance; paying in installments, giving in collateral security before getting

loan, employing of loans officers to help in monitoring and supervision of clients to pay their

loans back.

The researcher found out there is relationship between credit management and loans

performance in Pride micro-finance and this leads to increased profit level if better policies

1re used and loan is fully paid by clients, Helps to achieve long term goal and development,

Modifies micro-enterprise and Easy Resource access and mobilization.

;,2 Conclusions

The study assessed the effect of credit management and loans performance of Pride micro­

'inance Kabalagala. It answered three study objectives that included: establish the existing

;redit policies in Pride micro-finance examine how loans are recovered and establish the

·elationship between the credit management and loans performance in Pride micro-finance

(abalagala.

'\.s regards credit policies Pride micro-finance has got different policies while dealing loans

.ection say identification and prioritization of client/market, credit documentation,

:valuation, approval disbursement and monitoring to ensure successful use of money to be

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able to pay back. It was established that resources were in place but there was need for more

follow-up by management to ensure loans are recovered.

5.3 Policy Recommendations

The financial, accounting and reporting procedures need to be enhanced this can be made

possible by allowing further training for the staff in the accounts sections and close

supervision of the audit department on the activities of accounts and finance through regular

audits and checkup.

There is need for more resources to be mobilized and improvement in the performance of

MFis and emphasis should be made on procedures already in place this requires the active

involvement ofboth the internal Auditors and the loan section.

There is need to emphasize the budgetary control measures to enable proper financial

reporting in Pride Kabalagala branch.

There is need for periodic auditing and inspection on how duties are performed by staff at

MFis.

There is need to Come up with risk mitigating strategy to overcome that risk of default by

clients.

5.4 Areas for Further Research

The role of mobile banking on the perfonnance of MFis

The impact of computerized accounting on financial management in an organization

The roles of micro finance institution on the economic development

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APPENDIX. A.

QUESTIONAIRE FOR EN COT EMPLOYEES

TOPIC. DEBT COLLECTION MANAGEMENT AND FINANCIAL PERFOMANCE OF

PRIDE MICRO FINANCE INSTITUTIONS

Dear respondents

I am a student of Kampala international university undertaking a study on the above topic. I

kindly request you to sacrifice some time for me and answer the following questions. The

information will be treated with confidentiality and for academic purposes only. I do

appreciate your assistance.

SECTION A. Bio data of the respondents.

1.1 Name of your branch ......................................................... .

Please tick as appropriate

1.1. Gender

Male

1.2 Age range

l8-24 years 25-36 years 36-44 years 45 years and above

.. 3 Level of education

~ertificate Diploma Degree Masters PHD

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1.4 How long have you worked in the Pride micro finance

6 months-2 years 3-5 years 6-8 years Above 8 years

SECTIONB

Please tick where appropriate

2.0 Integrating credit management processes into the credit policies of the microfinance?

~:· Strongly agree (SA)

~:· Agree (A)

•!• Disagree (D)

•!• Strongly disagree (SD)

•!• Not sure (NS)

2.1 How do you agree that each of the following aspects of debt collect management exist

within Pride at Kabalegala branch

Aspects of debt collect management exist within Pride at SA A D SD NS

Kabalegala branch

t Identification and prioritization of markets

~ Credit origination

I Credit evaluation

~ Negotiation

; Credit approval

' Credit documentation and disbursement

' Credit monitoring

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SECTIONB

3.0 Do the following factors affect your microfinance's PERFOMANCE?

Factors affecting Micro f'rnance performance SA AD D SD NS

I Doubtful loans and net losses

2 Provision for bad loans

3 Bad debts written off

4 Retum on equity

5 Return on assets

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APPENDIX. B. BUDGET

Item Qty Cost per item Cost (shs)

shs

Proposal Development

Printing 100 pages 200 20000

Reproduction 8 copies 8 10000 80000

Binding 8 copies 8 5000 45000

Internet Expenses 30000 30000

Stationery and typing services 40000

Travelling and subsistence 50000

Miscellaneous/contingency expenses 20000

Data collection and report writing 30000

fravelling expenses 6000

:tesearch Assistants expenses 100000

:;RAND TOTAL 421,000

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!Research proposal

lde·vel•oprnerlt and writing

IPr<)po•sal presentation

· testing

Data collection

Data analysis

Report writing

Presentation of Report

8orrections

:ompilation and

)f final Report

APPENDIX. C. TIME FRAME

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KAMPALA INTERNATIONAL UNIVERSITY

Ggaba Road, Kansanga~ PO BOX 20000 Kampala, Uganda Tel: +256 777 295 599, Fax: +256 101 41 · 501 974 E-mail: mugumetmtdlgmail.com, ~Website: http: I /www.kiu.ac.ug

COllEGE OF ECONOMICS AND MANAGEMENT DEPARTMENT OF ACCOUNTING AND FINANCE

Jan, 31st 2018

To whom it may concern

Dear Sir/Madam,

RE: INTRODUCTORY LETTER FOR AUMA EVERLINE REG NO BBA/46716!152/DU.

This is to introduce to you the above named student, who is a bonafide student of Kampala International University pursuing a Bachelor's Degree in Business

. Administration, Third year Second semester.

The purpose of this letter is to request you avail her with all the necessary

assistance regarding her research.

Topic:-

Case Study:-

DEBT COLLECTION MANAGEMENT AND FINANCIAL PERFORMANCE.

PRIDE MICROFINANCE INSTITUTION, KABALAGALA BRANCH.

Any information shared with her from your organization shall be treated with utmost confidentiality.

We shall oe grat,~{ul for your positive response.

Yours truly,N;;

' "

"

" .. Dr. KIRABO KYEYUNE BOUNTY JOSEPH HOD- ACCOUNTING & FINANCE 0772323344.