Microcredit Risk Management Strategies and Loan Portfolio Quality of Microfinance Institutions in Kenya
Keywords:
Non-Performing Loan, loan portfolio quality, microcredit risk strategies, Microfinance institutionsAbstract
The study investigated the effects of Microcredit risk strategies on the loan portfolio quality of microfinance institutions in Kenya. The analysis is based on a panel dataset of 14 microfinance institutions in the period 2017 to 2021. The study was guided by the following theories the institutional theory, the theory of information asymmetry, the theory of delegated monitoring and the modern portfolio. The study will be useful to the MFIs managers and will help them devise good policies to ensure borrowers are well screened to improve portfolio quality while improving the cases of loan defaults. The study adopted a desktop methodology. Desk research refers to secondary data that which can be collected without fieldwork. The quality of loan portfolio has been affected most by nonperforming loans and has affected largely the microfinance institution’s profitability and their financial performances, there have not been adequately featured in any of the studies reviewed. To the academicians and researchers, they will be furnished with relevant information regarding microcredit risk management and loan portfolio quality of the Microfinance institutions in Kenya. This will also contribute to the general body of banking sector and form a basis for further research. The regulators of Bank Sector will use it to formulate stringent policies to tame the rising cases of non-performing loans, evaluating how successive their approach has been identifying the gaps and adjust.
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