Loan portfolio management and financial performance of microfinance institutions in Uganda: a case study of Brac Uganda Microfinance Limited Head office, Kampala.

Abstract

ABSTRACT This study set to investigate the relationship between loan management and the financial performance of microfinance institutions, using BRAC as a case study. The study followed a quantitative approach and adopted a Case study design. The key respondents of the study were the relationship officers that deal directly with identification and recommendation of prospective loan borrowers. The study findings revealed the existence of: a significant relationship between loan portfolio planning and financial performance (r=.27, p<.05); the existence of: a significant relationship between client screening and financial performance (r=.34, p<.01); and the lack of a significant relationship between credit risk control and financial performance. The study concluded that loan portfolio planning and client screening are very key to MFIs financial performance. Credit risk control plays an insignificant role in MFIs financial performance as explained by the key objectives and the inherent nature of the type of clients served by MFIs. It is recommended that MFIs strengthen their portfolio planning and client screening policies, and continue to improve on their credit risk control policies in line with their key objectives. Further research is recommended to cover more MFIs, and a study on the role of insurance as hedge to MFIs inherent risk is highly recommended. 1