| dc.description.abstract | Despite aggregate growth in the microfinance sector, microfinance institutions (MFls)
continue to face challenges in credit performance. The Central Bank of Kenya has not only
been concerned over the low level of risk management in financial institutions, but also in the
fact that most of these institutions concentrate only on credit risk, with weak measures in
other credit management policies. Even though financial institutions are investing a lot of
funds in credit risk modelling. it is not clear whether this investment is viable. Challenges
with developing optimal appraisal, risk control, and debt collection policies persist, as well as
their effect on credit performance. There is minimal research on the effect of institutional
factors on credit performance. As such, research on the factors influencing credit
performance is a matter of concern in practice and policy. The purpose of the study is to
investigate the effect of institutional factors on credit performance. The specific objectives
are to investigate the effect of client appraisal, credit risk control, debt collection policies on
credit performance in Faulu Kenya. The study was guided by an adapted conceptual
framework linking the independent variables and dependent variable. A descriptive crosssectional
design was used to investigate the research questions. Random sampling was used
to generate a sample size of 90 respondents. The questionnaire for data collection was pilottested
and found to be satisfactory with a Cronbach's Alpha Reliability Coefficient of 0.844,
which is above the recommended 0.7 threshold. Data was analyzed using descriptive statistics
and inferential statistics. Descriptive results indicate a high level of importance placed on
credit appraisal, credit risk control, and debt collection strategic . Multiple regression
coefficients indicate that the relationship between credit appraisal policy (p=0.143) and credit
performance; an inverse relationship between credit risk control policy (p=0.246) and credit
performance, and a positive and statistically significant relationship between debt collection
policies and credit performance (p=O.OOO)at 95% significance level. The study concludes
that MFls should emphasize on debt collection policies in order to improve credit
performance. | en_US |
