DECLARATION · Web viewMAKERERE UNIVERSITY FACULTY OF ECONOMICS AND MANAGEMENT (FEMA) LOAN...

MAKERERE UNIVERSITY

FACULTY OF ECONOMICS AND MANAGEMENT (FEMA)

LOAN PERFORMANCE AND THE PROFITABILITY OF MICRO FINANCE

INSTITUTIONS

A CASE STUDY OF FINANCE TRUST LTD IGANGA BRANCH

MAGANDA KIZITO HUSSEIN

/06/U/9268/EXT

SUPERVISED BY:

MR. EBIRU DAVID

A RESEARCH REPORT SUBMITTED TO MAKERERE UNIVERSITY ON

PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF

BACHELOR OF COMMERCE DEGREE

JUNE 2010

i

DECLARATION

I Maganda Kizito Hussein declare that this research report is my original work and has never

been published and submitted to this university or any other institution for any award.

Signed:………………………………..

MAGANDA KIZITO HUSSEIN

Date:……………………………………

i

APPROVAL

The undersigned I declare that I have supervised this research report and I am satisfied that is

worthy for the award of Bachelor of Commerce Degree of Makerere University.

Signed………………………………….

Mr. EBIRU DAVID

(SUPERVISOR)

Date……………………………………………………..

ii

DEDICATION

This report is dedicated to my dear wife Mrs. Balisimaki Rose, my brother Isabirye Farouk and

my children Nasuuna Sumayah, Kizito Hasan and Kizito Abdu.

iii

ACKNOWLEDGMENT

I wish to extend my sincere gratitude to all people who assisted and encouraged in my struggle

both physically and spiritually.

My sincere appreciation and thanks go to my supervisor Mr. Ebiru David of his guidance

towards the accomplishment of this report.

My appreciation goes to Makerere University lecturers for Bachelor of Commerce for the

knowledge and advice they gave me during my course.

Special thanks go to my parents Mr. and Mrs. Maganda Abdu for the parental advise, support

and encouragement. I can not forgot to thank my Mummy Nangabi Ajibe for the struggle since

my secondary level education.

Also I would like to appreciate and thank my friends for their encouragement and support

especially Mugeere Moses and his companion madam Flavia Nakigudde, Kagaha Stephen,

Birungi Leonard, Ssekate Julius and Mukalakasa Ronald.

My thanks go to Mr. Kyeyago Ahamed for guiding in this research report and lastly I wish to

thank my late madam Barbra and the respondents for Uganda Trust Finance and the clients for

answering my questionnaires.

Thank you all.

iv

TABLE OF CONTENTS

DECLARATION..............................................................................................................................i

APPROVAL....................................................................................................................................ii

DEDICATION...............................................................................................................................iii

ACKNOWLEDGMENT................................................................................................................iv

TABLE OF CONTENTS................................................................................................................v

LIST OF TABLES.......................................................................................................................viii

LIST OF ACRONYMS..................................................................................................................ix

ABSTRACT....................................................................................................................................x

BACKGROUND TO THE STUDY................................................................................................1

1.0 Introduction...........................................................................................................................1

1.1 Background of the study.......................................................................................................1

1.2 Statement of the problem......................................................................................................2

1.3 Purpose of the study..............................................................................................................2

1.4 Objectives.............................................................................................................................2

1.5 Research Questions...............................................................................................................3

1.6 Scope of study.......................................................................................................................3

1.7 Significance of the study......................................................................................................3

CHAPTER TWO.............................................................................................................................4

LITERATURE REVIEW................................................................................................................4

2.0 Introduction...........................................................................................................................4

2.1 Challenges facing MFI in improving loan performance.......................................................4

2.2.1 Fiduciary...........................................................................................................................4

2.2.2 Strategies...........................................................................................................................4

2.2.3 Supervisory.......................................................................................................................4

2.2.4 Management Development...............................................................................................5

2.3 Level of profitability in MFI.................................................................................................7

2.4 Relationship between loan performance and the level of profitability.................................8

CHAPTER THREE.......................................................................................................................10

METHODOLOGY........................................................................................................................10

v

3.0 Introduction.........................................................................................................................10

3.1 Research design..................................................................................................................10

3.2 Study population.................................................................................................................10

3.3 Sampling design..................................................................................................................10

3.4.1 Sample size.....................................................................................................................11

3.4.2 Sampling procedure........................................................................................................11

3.5 Sources of data....................................................................................................................11

3.6 Methods of data collection and tools..................................................................................12

3.6.1 Questionnaires.................................................................................................................12

3.6.2 Documentary evidence....................................................................................................12

3.6.3 Tools of data collection...................................................................................................12

3.7 Data analysis and presentation of major findings...............................................................12

3.7.1 Data analysis...................................................................................................................12

3.7.2 Data presentation.............................................................................................................12

CHAPTER FOUR.........................................................................................................................13

PRESENTATION DISCUSSION AND ANALYSIS OF FINDINGS.........................................13

4.0 Introduction.........................................................................................................................13

4.1 Demographic characteristic................................................................................................13

4.1.2 Age of respondents..........................................................................................................14

4.1.3 Marital status of the respondents....................................................................................16

4.1.4 Level of education of the respondents............................................................................16

4.1.5 Length of services...........................................................................................................17

4.1.6 Findings on what kind of businesses were done by the clients of FTU..........................18

4.2 Challenges facing the MF in improving loan performance................................................19

4.2.1 Findings on the board members have responsibility of safe guarding the interests of FTU 19

4.2.2 Findings on whether the board supervises management in the execution of the approved strategic plan and evaluate the performance of management........................................................19

4.2.3 Findings on whether FTU face a challenge of high costs of service delivery with poor infrastructure, regulatory policy issues and the need to develop institutional leadership.............20

4.2.4 Collateral security...........................................................................................................21

4.3 Levels of profitability in finance trust micro finance.........................................................22

vi

4.3.1 Costs of financial resources..................................................................................................23

4.3.2 Premium and profit.........................................................................................................24

4.4 Relationship between loan performance and the level of profitability...............................25

4.4.1 Intervention of the central bank......................................................................................25

4.4.2 Interest rate and performance and profitability...............................................................26

4.4.4 Supervision and loan performance and profitability.......................................................26

4.4.5 Recovering loans from the clients...................................................................................27

4.5 The relationship between loan performance and profitability of FTU MFI.......................27

CHAPTER FIVE...........................................................................................................................31

SUMMARY, CONCLUSION AND RECOMMENDATIONS....................................................31

5.0 Introduction.........................................................................................................................31

5.1 Summary of findings..........................................................................................................31

5.2 Main findings......................................................................................................................31

5.3 Conclusion...............................................................................................................................32

5.4 Recommendation.....................................................................................................................33

5.5 Area for further research.................................................................................................33

REFERENCES..............................................................................................................................34

APPENDICES...............................................................................................................................36

vii

LIST OF TABLES

Table 4. 1: Sex of respondents.......................................................................................................13

Table 4. 2: Age of respondents......................................................................................................15

Table 4. 3: Marital status of the respondents.................................................................................16

Table 4. 4: Level of education of the respondents.........................................................................16

Table 4. 5: Length of services........................................................................................................17

Table 4. 6: Sectors where most customers come from..................................................................18

Table 4. 7: Response on whether FTU customers on the board is safe guarding the FTU interests

.......................................................................................................................................................19

Table 4. 8: Board supervision........................................................................................................20

Table 4. 9: High costs, service delivery and infrastructure...........................................................20

Table 4. 10: Collateral security......................................................................................................21

Table 4. 11: Loan processing.........................................................................................................22

Table 4. 12: Interest charge...........................................................................................................22

Table 4. 13: Effects of staff training..............................................................................................23

Table 4. 14: Financial resources....................................................................................................24

Table 4. 15: Premium and profits..................................................................................................24

Table 4. 16: Intervention of bank of Uganda.................................................................................25

Table 4. 17: Interest rate and performance and profitability.........................................................26

Table 4. 18: Supervision and loan performance and profitability.................................................26

Table 4. 19:General performance and profitability level of MFIs.................................................27

Table 4. 20: Showing the relationship between loan performances and profitability of FTU MFI

.......................................................................................................................................................28

viii

LIST OF ACRONYMS

MFI - Micro Finance Institutions

PRESTO - Private Enterprise Support, Training and Organization Development

MF - Micro Finance

COWAN - Country Women Association of Nigeria

FI - Financial Institutions

PEAP - Poverty Eradication Action Plan

SPSS - Special Package for Social Scientists

UWFT - Uganda Women Finance Trust

FT - Finance Trust

NGOs - Non Governmental Organizations

ix

ABSTRACT

The study was carried out under the topic loan performance and profitability with a case study of

Finance Trust Uganda Micro Finance Institution. The study to establish challenges facing the

MFI in improving loan performance, to establish the level of profitability in MFI, to establish the

relationship between loan performance and the level of profitability. Various related literature

was looked at the majority was in agreement that proper loan performance management results

into high level of profitability.

A cross-sectional design and correlation was used during the study. The population was technical

staff of FTU and the sample size was 40 respondents. A self administered questionnaires was

used during data collection.

The study results revealed a weak negative relationship (r= _0.136) between loan performance

and profitability in FTU microfinance institution. Pearson (r2) findings indicated that 1.85% of

the variance in the profitability was explained by loan performance and 98.15% was due to other

variables not under this study. This implies that if loan performance would most probably in the

same direction.

The study recommended that FTU should appreciate the findings in the relationship between

loan performance and profitability to ensure its continued survival in competitive finance

industry in Uganda.

x

CHAPTER ONE

BACKGROUND TO THE STUDY

1.0 Introduction

This chapter of the research proposal will cover the background of the study, the

statement of the problem, the objectives of the study, research questions and scope

of the study.

1.1 Background of the study

Micro finance institutions (MFI) are organizations that provide savings and / or credit facilities to

micro and small scale businesses people. MFIs provide finance services to active poor people

who have experienced difficulties in obtaining this service from most formal financial

institutions because of their businesses, saving levels and credit needs are all small. MFI in

Uganda include banks several companies limited by shares and a large number of NGOs,

companies limited by guarantee, cooperative and credit unions PRESTO Directory of MFI.

According to Africa magazine, MFI is a term commonly used to define financial institutions

dedicated in assisting small enterprises, the active poor and house holds that have no access to

the move institutionalized financial system, in mobilizing savings and obtaining access to

financial services.

MFI is the provision of finance service to low income, poor and very poor self employed people.

Otero (1999).

In Africa MFIs’ have reported notable gains. The sector has transformed from an insignificant

player in the national psyche to a recognized sector with potential to equitably offer finance

services to the active poor women in viable micro enterprises empower enterprising women

through financial access and skills and drastically reduce poverty. Access to saving and credit

facilities strengthen communities in economic decisions, Africa executive.

Today one of the most compelling challenges facing Uganda is the problem of poverty. Poverty

is not only on a steady increase but also wide spread in rural country’s development challenge

1

and poverty alleviation, micro finance is becoming one of the most popular options as credit has

been identified as a barrier facing the poor. Lufumpa (1999). The rural communities operate

mainly in informal economy where the whole context for their lives and economics activities

does not have enough surpluses to lift the standard of living as a consequence, they lack the

ability to generate income to save to start economic activities and access credit from the formal

sector is heavily restricted due to lack of collateral. The poor are tradition disregarded as “un

bankable” and “un credit worth”. So therefore the problem of micro finance is to enable the poor

community to pull out of their poverty situation is critical. Yunus S (1999).

1.2 Statement of the problem

Despite the effort put in place by FTU to improve on the loan performance and profitability

through tight follow up of loan and short grace period, its still facing the problem of loan default

due to the belief that micro finance loan is government’s money. Thus it has led to declining

profitability as indicated in table one below;

Table 2: Showing the variation in the level of profitability and Finance Trust Iganga

branch for the period of three years

YEAR PORTFOLIO PROFITABILITY PER YEAR

2006/7 1,172,840,439/= 380,268,576/=

2007/8 1,353,755,396/= 360,254,254/=

2008/9 1,344,537,751/= 330,638,450/=

The researcher therefore wishes to investigate the relationship between loan performance and

profitability of micro finance institutions.

1.3 Purpose of the study

The study established the loan performance and profitability of MFI

1.4 Objectives

The study were guided by the following research objectives

To establish challenges facing the MFI in improving loan performance

2

To establish the level of performance in MFI

To establish the relationship between loan performance and the level of profitability

1.5 Research Questions

The following research questions guided the study

What is the level of profitability in MFIs?

What are the challenges facing MFIs on loan performance?

What is the relationship between loan performance and profitability in MFIs

1.6 Scope of study

The geographical scope: the study covered finance Trust Bank in Iganga branch in Iganga Town.

The period of scope: the research was carried out between March and June 2010.

Subject scope: it covered loan performance and profitability of MFI

1.7 Significance of the study

The results of the study will provide the following values

The study will help improve the loan performance of MFIs

The research findings will help the management in designing appropriate strategies to

address the challenges facing the MFIs’ performance.

The study will serve as source of information to other researchers.

The study will enable the researcher to acquire his Bachelor’s degree in Commerce.

3

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This will include theory on the variables with emphasis of existing literature on the

variables.

2.1 Challenges facing MFI in improving loan performance

According to Maria et al (1997) found out that MFI faces a challenge in improving loan

performance with the organizations board responsibilities were by the basis

responsibilities of the board which comprises; fiduciary, strategic, supervision and

management development are not full in most organizations.

2.2.1 Fiduciary

The board has the responsibility to safe guard the interests of all the institutions’

stakeholders. As such the board serves as a check and balance to provide confidence to

company’s investors, staff, customer and other key stakeholders that the managers will

operate in the best interest of the institution.

2.2.2 Strategies

The board participates in the organization’s long term strategy by critically considering

the principle risks to which the organization is exposed and approving plans presented by

management. The board does not generate corporate strategy but instead reviews

management plans in light of the institutions’ mission and approves them accordingly.

2.2.3 Supervisory

The board delegates the authority for operations to the management through the chief

executive officer. The board supervises management in the execution of the approved

4

strategic plan and evaluates the performance of management in the context of the goals

and time frame out lined in the plan.

2.2.4 Management Development

The board supervises the selection, evaluation and compensation of the senior

management team. This includes succession planning for the CEO in the transition from a

small growing and entrepreneurial organization to become an established institution,

governance ensures that the company survives.

Robert Peck (2004) asserts that traditionally banks have not provided services, such as

loans to clients, with little or no cash income. Banks incur substantial costs to manage a

client account, regardless of how small the sum of money involved. But the fixed cost of

processing loans of any size is considerable as assessment of potential borrowers, their

repayment prospects and security, administration of out standing loans, collecting from

the delinquent borrowers etc has to be done in all cases. There is a break even point in

providing loans or deposits below which banks loose money on each transaction they

make. Poor people usually fall below that breakeven point.

Yunus (2008) found out that most people MFI give loan are poor and have few assets that

can be secured by the bank as collateral. Even if they happen to own land in the

developing world they may not have effective title to it. This means that the bank will

have little recourse against defaulting borrowers.

In Stuart Rutherfords (2000) recent book the poor and their money he cites several types

of needs which the poor requires in their day to day leaving;

- Life cycle needs such as wedding females, child birth, education, home building etc

- Personal emergences such as sickness, injury, unemployment, theft, harassment or death.

- Disasters such as fire, cyclones, floods and man made events like wars.

- Investment opportunities which needs expanding business, buying land or equipment,

improving housing, securing a job (which often requires paying huge bribe) etc poor

people always face big challenge of how to create and often collaborate ways to meet

these needs, primarily though creating and exchanging different forms of non cash value.

5

Yunus (2008) further asserted that MFI charge high interest to borrowers which interest is far

high to the poor. The real average portfolio yield cited by the sample of 704 MFI that

voluntarily submitted reports to micro banking bulleting in 2006 was 22.3% annually.

However, annual rates charged to clients are higher, as they also include local inflation and

bad debt expenses of the MFI.

Asma (2010) at the same time says that the high rate of micro credit have been under the

microscope of industry analysts for quite some time focusing on operating expenses because

they are the main component of interest rates. The challenge of MFI is to reduce on the cost

of service delivery which will ultimately lower the cost of credit for the poor.

Kiva asserts that comprehensive impact studies have demonstrated that MFI helps very poor

household, meet basic needs and protect against risk, use of financial services by low income

household is associated with improvements in household economic welfare and enterprise

stability of growth by supporting women’s economic participation, micro finance helps to

empower women, thus promote gender equality and improving household wellbeing.

In addition the government of Uganda has supported credit activities within the framework of

other multipurpose projects including the micro projects program, Danida Credit Scheme in

Rakai District NURP, and PAPSCA. However, implementation of many government

programs lacked the effective methodologies and the adequate management and coordination

capacity necessary for their success. As a result the performance of the schemes was

adversely affected by the very poor loan recovery, inefficiency and high management cost

which consequently lead to under performance and or collapse.

Akinyi (2009) asserted that among challenges facing MF industry in Africa are high costs of

service delivery with poor infrastructure, regulatory policy issues and the need to develop

institutional leadership. Because infrastructure and communication technology remains

underdeveloped in Africa, it is significantly more expensive for MFI in Africa to operate

compared to their persons in developing countries.

In addition to policy making and government regulations which vary from country to

country. In many countries like Uganda the supervisory capacity of central banks, this holds

the ultimate responsibility of financial sector needs and adjustment. The countries which are

6

able to close the MF demand gap most successfully will be those that improve their policy

framework and adopt their legal and regulatory systems in line with rapidly changing

industries.

2.3 Level of profitability in MFI

According to Elodie Parent (2009) the interest rates charged by MFIs are calculated on

the basis of their financial situations and profitability targets. To make these rates more

affordable for their low income clients, MFIs can conduct an analysis of their financial

situation using four key criteria – the aim is then to optimize them. MFIs profitability

targets are set by their share holders and could be better assessed and more transparent.

This can ultimately lead to readjustment that will bring down rates while maintaining an

adequate of profitability.

Gonzalez et al (2009) asserts that to preserve an instrument to combat poverty, all MFI

prayers both donors and the private sector have to declare that they are convinced that it

is important for MFIs to continue to be a tool to combat poverty. Faced with such

consequences, stakeholders must conduct an in-depth reflection process that will allow

them to establish a fair rate to charge clients based on moderate profitability. This process

is more important because we are aware of the risks of over indebtness that are intrinsic

to the sector and of the poorest being decapitalized. In light of the above donors and

private sector must continue to develop partnership so that a common approach

investment in MFI can be built, while respecting their risk management constraints and

profitability targets.

Richardson (2002), further said that the cost of financial resources (equity, debt, deposit)

must be optimized by trying to give priority to deposits, which are often the cheapest

resources. If this is not possible, MFI should optimize the debt/equity leverage effect in

order to avoid financing growth exclusively at a exorbitant cost of accrued income.

Indeed this case it can only achieve sufficient level of net income by charging high rates

which in turn will rise the level of equity so as to boost growth or at least not to curb it.

According to CGAP – Kiva microfinance there are three types of costs the MFI has to a

7

cover when it makes micro loans; the cost of the money it lends, cost of loan default and

transaction costs.

For instance if the cost paid by the MFI for the money it lends is shs 10 and experiences

defaults of shs. 1 of the amount lent then these two costs will total to shs. 11 for a loan of

shs. 100 and shs. 55 for a loan of shs. 500 plus the transaction loans which is not

proportional to the amount lent hence the profitability level will reduce given the above

scenario.

Yunus (2008) asserted that NGOs tend to be more committed to serving the poor than

other types of MFIs but these results imply that they are profit oriented. His method is

that high premium indicates as high profit, but on the analysis of MFIs, it was found that

profits are minor driver of interest yield and interest premium. Premium, which is the

difference between the MFIs interest rates and its cost of fund, is largely governed by

loan sizes and operating costs. Fully 80% of interest rate premium is explained by

operating costs which profits accounting for only 9% of the measure.

2.4 Relationship between loan performance and the level of profitability

According to the Letenah (2009), experience has shown that funding agencies MF

interventions produce better results when designed reporting and monitoring focus

explicitly on key measures of performance. Unfortunately many projects fail include such

measurement. This note, written for staff who design on monitor projects that fund MFIs,

offer basic tools to measure performance of MFIs in areas like out reach, client poverty

level, collection performance financial sustainability and efficiency hence affecting the

level of profitability.

According to Petra (2007) the Latin America region exhibits the greatest profitability and

sustainability in MFI than any other region in the world. It is also one of the diverse

institutionally and conceptually providing complex financial products.

According to MF bulletin in 2007 some MFIs have traditionally provided loans to micro

entrepreneurs and moving into the consumer mortgage and low end commercial

segments.

8

At the same time, large consumer focused lenders are trying to compete on the MF

market.

Dan Matovu (2006), asserted that there is a remarkable changes in the situation of

community accruing to MF intervention. The community especially the women have had

their voices strengthened, they have managed to set up their businesses and run them,

their loan performance has improved and their leadership skills in business have been

enhanced. They have gained more confidence that can enable them to stand on their own

because level of profitability in their businesses has improved.

According to PEAP, when you help the poor with MF, then the problem of poverty is

gone for ever. However, one has to be very careful with this type of argument because it

ignores the fact that capital as a resource is just one factor production which must be

combined with other factors like entrepreneurial skills, well functioning markets good

feeder roads to transport merchandize and good communication which can facilitate good

loan performance hence improvement of profitability.

According to World Bank report (2005) investing in education, health and gender

equality are critical in attaining the millennium development goals. These investments

help to empower the people to participate in decision about development projects that

affect their lives and the lives of their families. The MFI are the world leaders in

investing in people empowerment in doing so loan performance indicators must be seen

in order to empower the community hence achieving a certain level of profitability in

what ever investments carried out.

9

CHAPTER THREE

METHODOLOGY

3.0 Introduction

This chapter was to provide a description of research design, nature of study, source of

data collection, source of information, sample size, methods of data collection, data

analysis and presentation.

3.1 Research design

The type of research approach was a survey. The researcher uses a descriptive and

analytical design because he was interested in getting data that was to help him to draw

conclusion on the topic in question.

3.2 Study population

Given the nature of the cause problems associated with un answered questionnaires and

non response issues and time factor, the population of the study involved top managers,

respondents from marketing and credit department, accounts department and others who

were in position to answer the researchers’ questionnaires.

3.3 Sampling design

The researcher used both random and non random sampling techniques to select

respondents this is because it was economical and relevant to interview all people in the

organization. Stratified random sampling and simple random sampling was used. Here

the researcher used departments as strata. And after which simple random sampling was

used to determine the final respondents like credit officers, marketers, accounts officers

and auditors.

10

Using non random sampling purposive sampling was used whereby the staff was to be

consisted crucial for the provision of information that was used to be chosen to respond

for example accountant, manager and credit officers.

3.4.1 Sample size

Due to limited time and other limiting factors the study was carried out on only 40

respondents in the following manner; 1 manager, 1 accountant, 5 credit officers, 4

accounts assistants and others. The sample for the study was as below;

Table 2: Showing the sample size

Respondents No of Respondents

Top manager 01

Accountant 01

Credit officers 05

Accounts Assistant 04

Others 29

Total 40

3.4.2 Sampling procedure

To avoid being biased the researcher selected the sample from the department that were

directly affected by the level of profitability of MFIs.

The researcher employed simple random technique and stratified sampling in that in

various department and others were used as strata whereby it was easy and possible to

use that stratum so that the sampling is done well hence getting clear and collect data. By

use of simple random sampling method the researcher assigned numbers of various

respondents that were selected randomly by their numbers, which acted as samples out of

the population and as well as organization charts were selected to show the data got. This

kind of technique was good in that little time could be taken hence simplifying work.

11

3.5 Sources of data

These constituted both primary and secondary sources. The primary data were obtained

from management and employees using questionnaires and interviews. On the other hand

secondary data were obtained by reviewing organizations’ records and journals.

3.6 Methods of data collection and tools

The methods of data collection included application of questionnaires and documentary

review.

3.6.1 Questionnaires

This is an instrument of data collection method consisting of a set of questions to which

the subject respondents replied in writing. This kind of instrument was to be good

because there were minimal personal attendance.

3.6.2 Documentary evidence

This involved reading journals and other published materials. This was mainly employed

when sourcing secondary data.

3.6.3 Tools of data collection

The tools of data collection which were used include clip boards pencils, pens, writing

papers and other instructional materials which were deemed important for the research to

be successful.

3.7 Data analysis and presentation of major findings

3.7.1 Data analysis A data were analyzed quantitatively and qualitatively by using figures, averages,

percentages and statistical techniques by use of SPSS.

12

3.7.2 Data presentation

At the end of data collection the researcher used tabulation to present the data gathered.

This was reached on the use of relevant tables frequencies and percentages to present the

data gathered.

13

CHAPTER FOUR

PRESENTATION DISCUSSION AND ANALYSIS OF FINDINGS

4.0 Introduction

This chapter presents empirical findings and interpretation of the data collected in

relation to the loan performance and the profitability of micro finance institutions.

It is divided into sections. That is demographic characteristics of respondents, discussion

on loan performance, profitability levels, and the relationship between loan performance

and the profitability of micro finance institutions.

4.1 Demographic characteristic

This included age, sex and qualifications of respondents. Table 4.1 summaries the sex of

the respondents in FTU

Table 4. 1: Sex of respondents

Gender Frequency Percentage

Males 28 70

Females 12 30

Total 40 100

Source: Primary data

According to the table above 70% of the respondents were male and 30% of the respondents

were female. This was because males were involved in various activities that generate income

and were afraid of getting income whereas female were involved in activities that yield low

income hence were risk averse. There was none response.

14

Pie chart

28

12

MaleFemale

4.1.2 Age of respondents

The following table shows the age of the respondents established during the study.

15

Table 4. 2: Age of respondents

Age group Frequency Percentage

Under 20 years 15 37.5

21 -30 13 32.5

31 – 50 8 20

50 and above 4 10

Total 40 100


From the table above 32.5% of the respondents were of age group between 31-40 years, 37.5%

of the respondents were of the age group between 18 – 30 years while 20% of the respondents

were of the age group between 41-50 years and 10% of the respondents were above the age of 50

years majority of the respondents were between 18-30 years. This implies that they are still

energetic and in the youth category expected to perform well in their assigned duties.

Under 20 years

21 -30 31 -50 50 and above0

2

4

6

8

10

12

14

16

Series1

Age of respondents

Freq

uenc

y

16

4.1.3 Marital status of the respondents

The following table present marital status of the respondents as illustrated below in table

4.3

Table 4. 3: Marital status of the respondents

Marital status Frequency Percentage Single 15 37.5Married 25 62.5Divorce 0 0Widow 0 0Total 40 100Source: Primary data

From the table above, 37.5% of the respondents were single 62.5% of respondents were married

while no responses was registered on divorce and separated. Majority of the respondents were

married and thus through to be responsible to not only their females but also in their respondents

department/office in DFCU Bank.

4.1.4 Level of education of the respondents

The following table presents level of education of the respondent to established during

the study.

Table 4. 4: Level of education of the respondents

Level of education Frequency Percentage Primary 4 10Secondary 6 15Certificates 10 25Diploma 4 10Degree 16 40Others 0 0Total 40 100Source: Primary data

From the above table it was found out that the respondents could read and write hence evaluation

of the loan applicant was not the problem. For example 45% of the respondents were of primary

17

level, 15% were of secondary 25% had certificates 10% of the respondents had diplomas and

40% had degrees. This implies that majority of respondents in FTU are graduates and expected

to deliver to the expectation of a graduate – personnel irrespective of the office department they

belong to in FTU Micro Finance.

4.1.5 Length of services

The following table shows the length of services of the respondents in FTU Bank.

Table 4. 5: Length of services

Period (year) Frequency Percentage

Less than 2 years 4 10

2-4 6 15

5-10 12 30

More than 10 18 45

Total 40 100


The study findings confirmed that 10% of the respondents had served in FTU bank for a period

of less than two years. 15% for a period of 2-4 years, 305 for a period of years and 45% for a

period of 5-10 years. Majority the respondents 45% had served FTU for a period of more than 10

years. This signifies that they are well versed with FTU strengths, weakness and achievements.

18

4.1.6 Findings on what kind of businesses were done by the clients of FTU

Table 4. 6: Sectors where most customers come from

Sector Frequency Percentage

Retail trade 10 25

Manufacturing e.g. bakery 20 50

Rearing e.g. poultry 6 15

Service e.g. saloons 4 10

Total 40 100


From the table above, 25% of the respondents who applied for loan invested in retail business

because which was assumed to have quick returns 50% of the respondents showed that

customers were in manufacturing like bakery, maize flour making, rice processing, while 15% of

the respondents were in farming like poultry and 10% comprised of service provision like

saloon, hotels, schools, clinics. The majority were in manufacturing because it takes a lot of loan

(money) and their machines act as security to get loans.

19

4.2 Challenges facing the MF in improving loan performance

4.2.1 Findings on the board members have responsibility of safe guarding the interests of FTU

The following table presents the responsibility of the board in safe guarding the FTU

interests.

Table 4. 7: Response on whether FTU customers on the board is safe guarding the FTU interests

Response Frequency Percentage

Strongly agree 10 25

Agreed 19 47.5

Not sure 2 5

Disagreed 4 10

Strongly disagreed 5 12.5

Total 40 100


From the table above 25% of the respondents strongly agreed that board members have the

responsibility to safe guard the interests, 47.5% of the respondents agreed, 5% were not sure.

10% disagreed while 12.5% strongly disagreed. This implies that majority of the respondents

were in agreement with the statement.

4.2.2 Findings on whether the board supervises management in the execution of the

approved strategic plan and evaluate the performance of management

The table below presents response on whether the board supervises management in the execution

of the approved strategic plan and evaluates the performance of management

20

Table 4. 8: Board supervision


Strongly agree 3 7.5

Agreed 9 22.5

Uncertain 15 37.5

Disagreed 9 22.5

Strongly disagreed 4 10

Total 40 100


From the table above indicates that 7.5% of the respondents strongly agree 22.5% agreed, 37.5%

were uncertain 22.5% were in disagreement while 10% strongly disagreed. The majority of the

respondents were uncertain and this implies that the management supervision is inadequate and

not satisfactory to the FTU microfinance.

4.2.3 Findings on whether FTU face a challenge of high costs of service delivery with poor

infrastructure, regulatory policy issues and the need to develop institutional leadership

Table 4. 9: High costs, service delivery and infrastructure



Agreed 10 25

Not sure 15 37.5

Disagreed 6 15

Strongly disagreed 2 5

Total 40 100


Results above indicate that 17.5% of the respondents strongly agreed that there are high FTU

25% agreed, 37.5% of the respondents are not sure, 15% of the respondents disagreed while 5%

21

strongly disagreed, this shows that the high costs are part of poor service delivery and poor

infrastructure.

4.2.4 Collateral security

On the question about collateral security whether the collateral security is required before

they advance the loans to the clients.

Table 4. 10: Collateral security

Options Frequency Percentage


Agreed 20 50

Not sure 6 15

Disagreed - -

Strongly disagreed - -

Total 40 100


From the table above 35% of the respondents were in strong agreement that FTU requires

collateral security, 50% agreed, 15% were not sure implying that acquiring a loan needs a

collateral security in FIU which is in agreement with Kakuru, (2006), who asserts that banks

usually looks for a second source of repayment which is often security. Loan security comprises

of personal and business assets that can be sold to pay back the loan. If a potential borrower has

no collateral to secure a loan, he/she will need a guarantor; otherwise it may be difficult to obtain

a loan.

The final value of security is based on its market value but a much reduced value to account

expected loss in value if the asset has to be liquidated quickly.

Costs of processing a loan

The table below present findings on fixed costs of processing loans of any size is considerable as

assessment of potential borrowers regardless of how small the sum of money involved.

22

Table 4. 11: Loan processing


Strongly agree 2 5

Agreed 9 22.5

Not sure 15 37.5

Disagreed 0 0

Strongly disagreed 5 12.5

Total 40 100


Results above indicates that 5% of the respondents were in strong agree, 22.5% was in

agreement 37% were not sure 22.5% disagreed while 12.5% strongly disagreed. Majority the

respondents were in disagreement that FTU meaning that the cost of processing a loan vary on

the amount of money to be taken, the honesty of the customer, as explained by Pandey (1995)

five Cs of effective credit policy, which include, Collateral Security on Loans, Capital,

Conditions, Character and Capacity.

4.3 Levels of profitability in finance trust micro finance

Interest charge

The table below represents the respondent’s views the interest rate charged by finance

Trust limited are calculated on the basis of their financial situations and profitability

targets.

Table 4. 12: Interest charge

Response Frequency Percentage Strongly agree 8 20Agreed 14 35Not sure 8 20Disagreed 6 15Strongly disagreed 4 10Total 40 100Source: Primary data

23

The result clearly indicates that 20% of the respondents strongly agreed 35% agreed 20% were

not sure 15% disagreed and 10% strongly disagreed. Majority agreed with credit policy in FTU

which is so significant because the micro finance can not be affected by any unconducive

economic environment.

Operational costs

The table showing response on Operational costs in finance Trust limited affects the level of

profitability

Table 4. 13: Effects of staff training



Agreed 9 22.5

Not sure 3 7.5

Disagreed 7 17.5


Total 40 100


From the above table 52% of the respondents agreed that high operational costs affects the sales

and revenues hence the profit, 22.5% agreed, 7.5% were not sure, 17.5%

4.3.1 Costs of financial resources

The following where the respondent’s review on whether in order for Finance Trust to

make profits, the cost of financial resources (equity, debt, deposit) must be optimized

24

Table 4. 14: Financial resources


Strongly agree 6 15

Agreed 20 50

Uncertain 8 20

Disagreed 6 15


Total 40 100


Results above indicate that 15% of the respondents strongly agree, 50% agreed, 20% were not

sure, 15% disagreed and there were no respondents who strongly disagreed. Majority of the

respondents agreed financial resources are efficient and effective in generating high returns/

profits hence high levels of profitability in FTU. This is in line with that Eugenen (2000) say that

financial resources should be opted for in order to accelerated the vast economic opportunities by

investors in order to generate good returns on equity.

4.3.2 Premium and profit

On question about whether High premium indicates a high profit and profits is a minor driver of

interest yield and interest premium.

Table 4. 15: Premium and profits

Response Frequency Percentage Strongly agree 12 30Agreed 20 50Not sure 8 20Disagreed - -- - -Total 40 100Source: Primary data

Findings revealed that 30% of the respondents strongly agreed, 50% agreed 20% were not sure,

and nil response were registered on disagreed and strongly disagreement. Majority of the

25

respondents agreed that long High premium indicates a high profit and profits are a minor driver

of interest yield and interest premium. This implies strength in the loan performance of FTU

microfinance institutions.

4.4 Relationship between loan performance and the level of profitability

4.4.1 Intervention of the central bankThe table showing response on whether microfinance intervention by bank of Uganda produces

better results when design, reporting and monitoring explicitly on key measures of performance.

Table 4. 16: Intervention of bank of Uganda

Response Frequency Percentage Strongly agree 10 25Agreed 19 47.5Not sure 19 27.5Disagreed - -- - -Total 40 100Source: Primary data

From the table above 25% of the respondents strongly agreed, 47% agreed, 27% were not sure,

and response was registered on disagreed and strongly disagreement. The majority of the

respondents agreed that intervention by bank of Uganda produces better results when design,

reporting and monitoring explicitly on key measures of performance, given the certificate and the

licence issued out for operation, this gives out confidence while dealing with its clients.

26

4.4.2 Interest rate and performance and profitability

Table 4. 17: Interest rate and performance and profitability



Agreed 7 17.5

Uncertain 10 25

Disagreed 5 12.5


Total 40 100


Results above indicate that 45% strongly agreed, 17.5% agreed, 25% were not sure, 12.5%

disagreed and nil response was registered on strong disagreement. The majority of the

respondents agreed that the higher the interest rate the lower the loans given out hence the lower

the profit generated. As agreed with Yunus (2008), who asserts that the high interest makes the

microfinance to fail to perform.

4.4.4 Supervision and loan performance and profitability

The table below shows the response on whether close supervision and monitoring effects loan

performance and level profitability.

Table 4. 18: Supervision and loan performance and profitability

Response Frequency Percentage Strongly agree 11 27.5Agreed 3 7.5Not sure 16 40Disagreed 5 12.5Strongly disagreed 5 12.5Total 40 100Source: Primary data

Findings above indicate that 27.5% of the respondents strongly agreed, 7.5% agreed, 40% are not

sure, 12.5% disagreed and 12.5% strongly disagreed. To some extent majority of the respondents

27

disagreed that because there is poor supervision to the clients, whereby clients need to be

reminded because some of them do not know how to calculate the interest, business planning.

4.4.5 Recovering loans from the clients

The responses on whether the failure to recover the credit loan from the clients affects the loan

performance and level of profitability.

Table 4. 19:General performance and profitability level of MFIs

Response Frequency Percentage Strongly agree 22 55Agreed 8 20Not sure 10 25Disagreed - -Strongly disagreed - -Total 40 100Source: Primary data

From the above table 55% of the respondents strongly agreed, 20% of respondents agreed 25%

of the respondents were not sure, and nil response registered on disagree and strongly

disagreement. This shows that general performance of FTU affects its profitability levels. This is

also recommended by Barley and Myres (1998) that general performance is a major technique of

attracting the clients and team building enthusiasm and profitability in general.

4.5 The relationship between loan performance and profitability of FTU MFI

Analyzing the relationship between loan performance and profitability of FTU, MFI using

regression analysis help to identify to what extent credit policies affect debt collection

performance.

28

Table 4. 20: Showing the relationship between loan performances and profitability of FTU

MFI

Key; SA – Strongly Agree, A – Agree, NS – Not Sure, D – Disagree, SD – Strongly Disagree, F-

Frequency and the respondents % percentage of responses

Loan performance Profitability X2 Y2 XYIndependent variable X

Dependent variable Y

Independent variable

Dependent variable

Independent dependent variable multiplied

1 A 29 A 26 841 676 7542 D 11 D 14 121 196 1543 A 11 A 32 121 1024 3524 D 29 D 8 841 64 2325 A 12 A 29 144 841 3486 D 28 D 11 784 121 3087 A 17 A 25 289 625 4258 D 23 D 15 529 225 3459 A 34 A 14 1156 196 47610 D 6 D 26 36 676 15611 A 11 A 30 121 900 33012 D 29 D 10 841 100 29013 A 22 A 36 484 1296 79214 D 18 D 4 324 16 7215 A 30 A 35 900 1225 105016 D 10 D 5 100 25 50

∑X 320 ∑Y 320 ∑X2 7632 ∑Y2 9447 ∑XY = 6136Source: Primary data

Given y = a + bx

While y = the dependent variable (loan performance)

x = the dependent variable (profitability)

a = the dependent variable intercept

b= slope of both variable above

r = n ∑XY = ∑X∑y

√[ ∑x2 – (∑X2) [n∑y2 - ∑y)2]

29

Where n = number of items = 16

r = (16 x 6136) – (320 x320)

√[16 x 7632 – (320)2] [16 x 947 – (320)2]

98,176 – 102, 400

r = √[122112 - 102400] [151152 – 102400

r= -4224

√ 19712 x 48752

r = -4224

√ 960, 999424

r = -4224

30999.99

r = -0.136

Having computed the regression analysis

r = -0.136 which revealed that credit policy and debt collection performance FTU bank are

inversely related. Pearson denoted by r2 was used to determine the strength of the inverse

relationship as coefficient of determination explain the percentage of the variance in the

dependent variable {debt Collection Performance}

r = -0.136

r2 = -[0.136]2

r2 = 0.0185

r2 = 1.85%

The implication of Pearson (r2) findings, 1.85% revealed that 1.85% of variance in debt

collection performance is explaining by loan performance. It can then be concluded that 1.85% is

the contribution of credit policy to probability and 98.15% is due to the factors variables not

considered in the study.

30

The implication of the findings is that if loan techniques are strengthened in FTU MFI credit

department then, profitability will probably be accelerated and bad debt will be minimized.

31

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.0 Introduction

This included summary, conclusion and recommendations of the study.

5.1 Summary of findings

The main objective of the study was to evaluate to establish challenges facing the MFI in

improving loan performance, to establish the level of profitability in MFI, to establish the

relationship between loan performance and the level of profitability in FTU.

The specific objectives of the study were, to establish loan performance mechanisms used in

FTU, to establish the relationship between loan performance and profitability in FTU. The study

also presented the literature review on the evaluation of loan performance and profitability

levels FTU micro finance. It also discussed the methodology used with included research design,

sampling procedure, data collection instruments and sources of data among others.

5.2 Main findings

Result in table 4.2.5 in chapter four indicated that 166 out of 320 respondents were in Agreement

with loan performance (credit standards credit and collection procedures were being used to

manage its debtors while 154 out of 320 respondents were in Disagreement.

The findings show that majority of the respondents were in agreement that truly FTU

microfinance institution has a loan performance policy in place and it has cost and benefit

implications. Therefore, 154 out of 320 respondents were disagreement with studies conducted

by Van Horne, (1995) which revealed that when credit is offered, accounts receivables or debtors

are created and expected to be collected in the near future and that the debt involves a significant

risk much as they are of economic value which necessitates loan performance in place to

minimize this risk and create more returns on loan and profitability.

32

The result in table 4.24 in chapter four shows that loan performance the dependent variable

revealed that 227 out of 320 respondents were in agreement that FTU has procedures it follows

when evaluating the procedures while 93 out of 320 respondents were in disagreement.

The majority of the respondents agreed that FTU has procedures in place when assessing the

clients and supervision. The implication of the finding strengthened the need to have a basis of

consideration before a debit decision is made. Also results are recommended by Broaklinston

(1997) factors on the challenges financial managers reveals that determining acceptance level of

loan performance to ensure that the organization operates profitably in a difficult task to

managing in finance operations while servicing the debts. Financial institutions dealing in credit

requires debt management procedures that can allow effective loan operations to attain

satisfactory level of profitability.

The study revealed a weak negative relationship [r=-0.136] between loan performance and

profitability in FTU.

Pearson [r2] findings imply that 1.85% of the variance in profitability level is explained by a loan

performance policy and 98.15% is due to other variable not considered under this study. This

implies that, if loan performance policies are strengthen, profitability will probably be improved

or increased in the same direction. The findings are consistent with Pandey (1997) arguments

that a good loan performance policy ensures that debtors are properly managed by focusing at

the major objectives of making a trade of between incremental returns and increment costs,

aiming from credit decision which reduce operating costs and increases profit.

5.3 Conclusion

From the findings, it can be concluded that FTU micro finance employees lenient credit policies

in place to manage its profits. Majority of the respondents agreed that cost ands benefit

implications are being experienced. Profitability was adequate and the study confirmed a week

negative relationship between loan performance and profitability of FTU micro finance

institutions.

33

5.4 Recommendation.

Basing on the study findings and conclusion, the study came up with the following

recommendations.

i. Management of FTU micro finance should address cost and benefit implications by

redesigning its current loan policy so as to minimize cost associated with credit while

maximizing the benefits from it. The loan performance policy that is no be redesigned

should ensure operational consistency and adherence to inform and sound practices; it

should also involve affective initiations analysis, credit monitoring and evaluation.

This is in line with Pandey 5cs measurement parameters. (Capacity condition,

collateral, character and capital) should always be considered when evaluating

debtors.

ii. FTU should strengthen its loan performance procedures/methods debt capacity

technique should continuously be used to ensure that profitability levels are

satisfactory.

iii. Management of FTU micro finance should not be scared of negative relationships

between variables under study, but should rather appreciate the Pearson coefficient of

determination findings 1.85%. Academicians and researchers we also encourage to

investigate more 98.15% which is explained by other variables other than loan

performance.

iv. FTU should appreciate the findings in the relationship between loan performance and

profitability to ensure its continual survival in a competitive finance industry in

Uganda.

5.5 Area for further research

The study was limited to loan performance and profitability levels used in micro fiancé

institutions but more research needs to be done on the following

i. Customer orientation and debt collection performance in macro finance institutions

ii. Total quality management and supervision in micro finance institutions

iii. Customer ability to pay and debt collection performance in micro finance institutions

iv. Credit management and customer satisfaction in commercial banks

34

REFERENCES

1. Akinyi Jane (2009), Role of Micro Finance In Empowering Women In Africa. Africa

executive magazine.

2. Beijuka John (1999), Micro Finance In post Conflict Countries. ILO- General

3. Dan Matovu (2006) Micro Finance And Poverty Alleviation in Uganda School of Global

studies. Goteborge University

4. Hulme David and Paul Mosley (1996), Finance Against Poverty Vol. 1 Routledge

London

5. Ismawan (2000) Real Idea Of Micro Finance

6. Kakuru (2006) Financial Management 3rd Edition

7. Kasente Deborah, Germina Ssemogerere and Mutesasira Leonard (2001) Micro Save

Africa And Uganda Women Finance Trust. Impact of MF on pervert alleviation

8. LIIjefrost Emilia (2005) Fighting Pervert Wirth Micro Finance. The Democratization of

Finance.Uppsala University

9. Mayour Linda (article: 438) Trackling The Downside. Social Capital, Women

empowerment and MF in Cameroon

10. Ngozi G. Ihedure (2002), Women Entrepreneurship And Development. Gendering in

microfinance in Nigeria. Abistate University

11. Lufumpa Leyeka (1999), The Africa Economy

12. PEAP (Poverty Eradication Action Plan (2005-2007/8)

13. Pandey (1995) Finance Management

14. Roth James (1997) The Limits of Micro Credit As A Rural Development Intervention

Manchester University

15. Sida ( Aug. 2005) Supporting Pro-Poor Growth

16. UWFT Uganda Women Finance Trust

17. World Bank annual report (2005) Investing In Poor People And Empowering Them To

participate In Development

18. Yunus Muhammad (1999) Banker To The Poor, the study of Framen Bank, London

19. Micro Finance Institutions (GTZ In Collaboration With Association Of MFI)

20. Micro Finance Banker on regulations, MIFs (Vol. Issue Sept 2001)

35

21. [email protected]

22. Uganda village project, Generate income in Africa:[email protected]

23. PRESTO. [email protected]

24. Wright G. (1999), Beyond Basis Credit and Savings. Developing New Financial Service

Product for the poor. Eschborn. GTZ

36

mailto:[email protected]

mailto:[email protected]

APPENDICES

Appendix I

Questionnaire staff and clients of finance trust Ltd Iganga Branch

Dear respondents,

The researcher is a student of Makerere University undertaking a research for a bachelors’

degree in commerce carrying out research on the loan performance and the profitability of micro

finance institutions.

This questionnaire is designed to collect information on the topic in question

Information provided will be purely for academic purpose and will be treated with at most

confidentiality.

I therefore kindly request you to fill this questionnaire

Thank you for your time and cooperation

PERSONAL DATA

1. Age group

Under 20 years Between 21-30 years

Between 31-40 years above 40 years

2. Marital status

Married Single

Divorced Widow

3. Gender

Male Female

37

4. Level of education attained:

Primary Secondary

Certificate Diploma

Degree Other specify……………..

5. Position held……………………..

6. What kind of business are you in dealing in?

Retail trade Service e.g. saloons

Manufacturers e.g. bakery Rearing e.g. poultry

7. How long have you worked with financial Trust/been in business?

Below 2 years 2-4 years

5 – 10 years more than 10 years

Please indicate how much you strongly Agree (SA) Agree (A), Uncertain (U), Disagree (D) or

Strongly Disagree (SD) with the following statements

Abbreviations:

MFI Micro Finance Institution

MF Micro Finance

NUREP Northern Uganda Rehabilitation Programme

PAPSCA Programme for Poverty Alleviation and Social Costs of Structural

Adjustment

PSDP Private Sector Development Programme

NGO’s Non Governmental Organization

38

CGAP Consultation Group for Assistance to the Poor

SECTION A

Challenges facing the MF in improving loan performance

SA A U D SD1. The board has the responsibility to safeguard the interest

of the institution stakeholders2. The board participates in the organization of long term

strategy by critically considering the principle risks to which the organization is exposed

3. The board supervises management in the execution of the approved strategies plan and evaluates the performance of management

4. The board supervises the selection, evaluation and compensation of the senior management term including succession planning for the CEO

5. Finance Trust MF face a challenge of high costs of service delivery with poor infrastructure, regulatory policy issues and the need to develop institutional leadership

6. There is a minimum capital structure standard and cash management standards required in finance Trust obtain a loan

7. Finance Trust MF considers collateral security before advancing a loan to their clients

8. Fixed costs of processing loans of any size is considerable as assessment of potential borrowers regardless of how small the sum of money involved

39

SECTION B

LEVEL OF PROFITABILITY IN FINANCE TRUST MICRO FINANCE

SA A U D SD1. The interest rate charged by finance Trust limited are

calculated on the basis of their financial situations and profitability targets

2. Finance Trust conduct an in depth reflection process that allow stakeholders a fare rate to charge clients best on moderate profitability

3. Operational costs in finance Trust limited affects the level of profitability

4. In order for Finance Trust to make profits, the cost of financial resources (equity, debt, deposits) must be optimized

5. High premium indicates a high profit and profits are a minor driver of interest yield and interest premium

40

SECTION C

Relationship between loan performance and the level of profitability

SA A U D SD1. Microfinance intervention by bank of Uganda produce

better results when design, reporting and monitoring explicitly on key measures of performance

2. High interest rate affects loan performance and level of profitability

3. Close supervision and monitoring affects loan performance and level profitability

4. Failure to recover the credit loan from finance Trust on effective use of the loan, management of the loan and how to settle the balance affects loan performance and the level of profitability

5. Generally one performance help to determine the level of MFIs

Thank you for being part of this research

41

DECLARATION · Web viewMAKERERE UNIVERSITY FACULTY OF ECONOMICS AND MANAGEMENT (FEMA) LOAN...

Documents

Transcript of DECLARATION · Web viewMAKERERE UNIVERSITY FACULTY OF ECONOMICS AND MANAGEMENT (FEMA) LOAN...