Credit Management in Microfinance Institutions: A Case Study of Some Selected Microfinance Institutions in the Ashanti Region of Ghana

Abstract

Credit risk has proven to be one of the main forms of risks financial institutions are exposed to due to their very nature of business operations. The study investigated the credit risk management of microfinance institutions in Ghana. The target population for the study constituted all the microfinance institutions in Ghana and specifically the study sample came from five microfinance institutions who operate in the Ashanti region. The study used questionnaires as its main data collection instrument. Findings from the study revealed that the key credit risk sources the surveyed microfinance institutions were exposed to in their operations were corporate, individual and SMEs commercial loans. Also, it was established that most of these microfinance institutions relied mostly on accounting based method and subjective analyses to quantify their organization risk exposures, hence it was recommended that management of these microfinance institutions should make it a point to build the capacities of their credit administration department on a regular basis since any mishap in their duties may lead to series of loan defaults.

Keywords: Credit risk management, Microfinance institutions, Bank of Ghana Credit Policy, Ghana