Influence of Credit Principles on Debt Recovery among Microfinance Institutions in Eldoret Town, Kenya
Abstract
Credit policy management is a requirement for micro-finance stability and it improves profitability; however deteriorating credit policy management is always the cause of poor profitability and financial performance. Serious loss of profitability and financial problems to microfinance industry has been caused by delays on debt recovery from debtors as they fall due, because it increases bad debts and affects customer relations. The main purpose of the study was to determine the influence of credit principles for credit supply on debt recovery among microfinance institutions in Eldoret Town, Kenya. The study was guided by; Resource Based Theory. This study employed descriptive survey research design. The study targeted 12 microfinance institutions with a total of 132 respondents (credit officers and accountant. The sample size of the study was 99 respondents. This study use stratified random sampling technique to collect data from the respondents; 45 credit officers and 54 accountants. Data collection instrument for the study was questionnaires. The questionnaire was administered using a drop and pick later method. The data collected was analyzed using descriptive and inferential statistics. Analyzed data was presented using chats, figures and tables. The results showed that credit principles had a positive and statistical significant influence on debt recovery among microfinance institutions (β=0.161, p<0.05). Credit principles determines efficiency of debt recovery since flexible polices attract more people who can abide by. In conclusion MFIs in Eldoret have well-articulated policies to facilitate effective debt recovery process in microfinance institutions. The study recommends to the microfinance institutions that have not put into serious consideration comprehensive credit check measures to adopt it fully because it’s a good credit score to determine risks involved when lending money. It can help microfinance institutions effectively recover and control debts.
Keywords: Credit Principles, Debt Recovery and Microfinance Institutions
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