Loan portfolio management and performance of micro finance institutions in Uganda: The case of Wakiso District

Abstract

The purpose of the study was to establish the relationship between loan portfolio management and performance of Microfinance Institutions (MFIs) in Wakiso district. This was prompted by the fact that most of the MFIs in Uganda were failing to achieve their portfolio performance; yet it was not clear whether this was due to how their loan portfolios were managed. The study was conducted as a cross sectional survey involving an analytical design. Its objectives were to establish and examine the relationship between: Loan portfolio planning, Client screening, Portfolio control and the performance of MFIs. Data was collected from 10 MFIs represented by their purposively selected managers, loan officers and clients. The data were collected using questionnaires and analyzed using quantitative techniques with the aid of the SPSS computer programme.

The findings show that there were significant relationships between loan portfolio planning, client screening, portfolio control and the performance of the MFIs. The variables also significantly predicted 65.2% of this performance with portfolio control as the best predictor. However, the conduct of each of these portfolio management variables had flaws that impacted adversely on the portfolio performance of the MFIs. The study was therefore concluded by stressing the need to improve the control, client screening, and planning of loan portfolio if the MFIs are to achieve the desired portfolio performance. Accordingly, it was recommended that MFIs should portfolio control, client screening and portfolio planning but putting more emphasis on ameliorating loan monitoring, taking credit decisions and linking portfolio planning to client screening.