Determinants of non-performing loan facilities in microfinance institutions in Uganda. A case study of Pride Microfinance Limited, City Centre Branch
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The purpose of the study was to assess the determinants of non-performance loan facilities in Pride Microfinance Ltd (MDI) City Centre branch in Uganda. The study was driven by the fact that, credit creation through loan facilities is the primary source of income to microfinance institutions and they promote economic growth and development of countries is widely accepted and documented by both scholars and policy maker. Non-performance of loans is a vice hampering the survival of microfinance institution. The study was guided by the two specific research objectives which were; to identify the determinants of non-performance of loan facilities in Pride Microfinance Ltd (MDI) and to design strategies for reducing the non-performance of loan facilities in Pride Microfinance Ltd (MDI). The study used a qualitative survey research design which was non-experimental and cross-section in nature and unit of analysis were staff and customers of Pride microfinance institution. Primary data was collected using interview guide and was analyzed using ATLAS guided by the themes in relation to objectives. Findings for determinants of non-performance of loans revealed that number of day’s loan in arrears, currency fluctuation, inadequate accounting and book keeping skills, non-supervision and inadequate marketing skills, higher interest rates, bad lending decisions, poor credit appraisal to ascertain borrowers without capacity, diverting funds for other purpose, over funding, failure to visit clients, business collapse and multiple borrowing. However, suggested strategies were staff training on credit management, quality appraisal, sensitization of customers before accessing the loan, avoid giving loans to multiple borrower, supervision, insuring loans, use aggressive debt collector to recover the debt, regular loan monitoring and client relationship engagements, reduction in interest rate to induce loan pay back compliance, ensuring economic stability and security. The study recommends that Pride Microfinance institution and other players in banking industry should sensitize and train people/entrepreneurs/ borrowers on how to access and use finance loans toward the credit intended purpose to enhance loan performance.