Assessment of Credit Management Practice and its Effect on Loan Performance in Six Selected Microfinance Institutions in Addis Ababa

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This study was conducted with the aim of assessment of credit management practice and its effect on loan performance in six micro finance institutions found in Addis Ababa from period of 2017 to 2020.This research adopted a descriptive and explanatory research design. The major purpose of descriptive research design is to describe the state of affairs as it is at the presents. This study has used both primary and secondary data, which also entail both quantitative and qualitative types in order to achieve this objective, The Primary data were collected using three methods: survey questionnaire from 211sampled respondents and in-depth interview with key informants. The target population of this study is16 MFI found in Addis Ababa, of which 6 MFNs were selected. This study, the researcher has employed both probability and non-probability sampling techniques to select representative samples for primary data collection and employees of credit management, credit analysts and credit portfolio was the target group. The quantitative data collected through questionnaire were first edited, coded and filtered and entered in to SPSS program version 25and AMOS21, using Structural Equation Modeling and path analysis processed and thus descriptive and inferential statistical analysis were carried out. The results indicated that there is a positive relationship among the four explanatory variables i.e., CP, CS,CT and CC and are statistically significant at 1% level. conclusion, it was observed that there was a positive significant association among the study variables. Moreover, the path analysis confirmed that credit management practice has significant positive effect on the performance of the financial firms. In general, the researcher recommended that financial institutions firms must take proper awareness of effective credit management that could enhance institutional profitability.



credit policy, credit terms and collection policy credit story affect the loan performance