The Microfinance Institutions (MFIs) lend small amounts of unsecured loans to poor clients which signify their objectives of improving the social status of the poor while also trying to maximize their returns. Yet, lending by MFIs is a risky venture especially in developing countries because of the susceptibility of their poor clients. This study therefore determined the extent at which strategic credit risk management affect growth of MFIs in the Eldoret Municipality, Kenya. This study used probability clustered random sampling of 12 MFIs in Eldoret municipality to collect primary data and various reports and published work on MFIs between 2010 to 2015 formed the basis of secondary data. The effect of loan default, risk coverage and credit policy on growth of MFIs was measured by profit and outreach respectively. The relationship between of loan default, risk coverage and credit policy and growth was measured using multiple linear regression models. Hausmann test of endogeneity was employed to validate the results. We demonstrate that profit was significantly (p < 0.05) positively correlated with credit policy but negatively correlated with default and risk coverage. Meanwhile outreach showed a significant (p < 0.05) negative correlation with loan default and risk coverage but no relationship with credit policy. Thus credit risk was an obstacle to the sustainable growth of MFIs in both profit and breadth of outreach. As a result proactive strategies like enhanced management information system, effective internal control and redesigning of suitable customers’ oriented products should be considered.
Inhaltsverzeichnis (Table of Contents)
- Abstract
- Introduction
- Methodology
- Description of Study Area
- Method and Sources of Data Collection
- Data Analysis
- Result and Discussion
- Conclusion and Recommendation
- REFERENCES
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This study aims to determine the influence of strategic credit risk management on the growth of Microfinance Institutions (MFIs) in the Eldoret Municipality, Kenya. The research investigates the relationship between credit risk factors, such as loan default, risk coverage, and credit policy, and the growth of MFIs, measured in terms of profit and outreach.
- Credit risk management in microfinance institutions
- Impact of credit risk on the growth of MFIs
- Strategic credit risk management practices in developing countries
- The role of financial institutions in serving the needs of low-income borrowers
- Sustainable growth of MFIs
Zusammenfassung der Kapitel (Chapter Summaries)
- Abstract: This section provides an overview of the study, highlighting the key objectives, methodology, and findings. It emphasizes the importance of credit risk management for the sustainable growth of MFIs in the Eldoret Municipality.
- Introduction: This chapter discusses the challenges faced by low-income borrowers in accessing financial services and the role of microfinance institutions in bridging this gap. It also introduces the concept of credit risk and its significance in the context of MFIs.
- Methodology: This chapter details the research design, including the study area, data collection methods, and data analysis techniques employed in the study.
- Result and Discussion: This chapter presents the findings of the study, examining the relationship between credit risk factors and the growth of MFIs. It analyzes the impact of loan default, risk coverage, and credit policy on profit and outreach.
Schlüsselwörter (Keywords)
The study focuses on the key concepts of microfinance, financial inaccessibility, credit risk, credit policy, joint liability, outreach, and the growth of Microfinance Institutions (MFIs) in the context of developing countries, particularly in Eldoret Municipality, Kenya.
- Quote paper
- Irene Cheptumo (Author), 2018, Influence of Credit Risk on the Growth of Microfinance Organizations in Eldoret Municipality (Kenya), Munich, GRIN Verlag, https://www.grin.com/document/427210
