Credit risk management and the performance of Pride Micro Finance

Abstract

This study aimed at determining the effect of credit risk management on performance of pride microfinance. The study was guided by the following objectives: to assess the effect of credit risk identification on the performance of Pride Micro finance; to examine how credit risk assessment influences the performance of Pride Micro finance and to determine the effect of credit risk monitoring on the performance of Pride Micro finance. A cross-sectional survey design was used. The study employed a triangulation of quantitative and qualitative approaches, though it predominantly employed that quantitative approach. A sample size of 113 was selected. Findings revealed that credit risk identification, credit risk assessment and credit monitoring had a strong significant and positive relationship with performance of Pride microfinance. It was thus concluded that; that having in place credit risk assessment tools, setting credit limits, among other factors, can significantly contribute to financial performance of an institution. In addition, undertaking the required credit risk assessment is very vital in improving financial performance, while having effective credit risk monitoring techniques can help to keep track of loans and hence improve financial performance. It is thus recommended that Pride Microfinance takes the initiative to enhance a credit identification strategy, enhance use of insurance firms, strengthen policies on credit risk assessment and finally, set clear portfolio limits in order to enhance the monitoring function.