An Assessment of the Perceived Effectiveness of Credit Risk Management Strategies Adopted by Microfinance Institutions in the Sekondi -Takoradi Metropolis, Ghana

Abstract

The purpose of the study was to assess the perceived effectiveness of credit risk management strategies (CRMS) adopted by microfinance institutions (MFIs) in the Sekondi-Takoradi Metropolis (STM), Ghana. Descriptive survey design was adopted for the study. The population was 261. The sample size for the study was 158 key staff of the various MFIs selected purposively. These key staff were credit officers, finance staff, and managers of the various MFIs. Questionnaire with a reliability coefficient of 0.87 was the instrument used to collect the data. Descriptive statistical tools such as means and standard deviations were used to analyse the data. The findings show that there are meaningful and appropriate credit policies and procedures used by MFIs in STM. However, the effectiveness of CRMS adopted by MFIs in STM is not quite good. Also, credit control processes adopted by the MFIs are not quite adequate as expected. It was recommended that administrators of MFIs in the metropolis should enhance their respective institution’s credit policies and procedures, especially the appraisal of client process. This will create room for the institutions to have credit policies and procedures that allow the institution to identify and analyse all loss exposures, and measure such loss exposures appropriately.

Keywords: Credit control process, Credit policies, Credit procedures, Credit risk management

DOI: 10.7176/RJFA/11-6-15

Publication date:March 31^st 2020