Abstract:
The purpose of the study was to assess the role of credit risk management in the liquidity
position of microfinance companies in Ghana: case study of selected MFIs in the Kumasi
Metropolis. The researcher used descriptive research approach. Quantitative research
approach was used. The target population of the study was made up of employees of
selected MFIs in the Kumasi Metropolis that comprised of 156 employees. Census
method was used to select all the 156 respondents for the study. Questionnaire was the
main instrument used to gather primary data. The statistical analysis such as frequencies,
percentages and mean were used to analyze the questionnaire. The study findings
concluded that the credit risk reduction tools that were used by the MFI to manage loan
default were staff training, client project evaluation, internal controls, customer
affordability calculation, credit granting policy, debt collection techniques and credit
scoring models. The factors MFI considered before granting loans to clients were ability
to pay, future prospects of the business, profitability of the business, cash flow statement,
profit and loss statement, security, character of customers, borrower repayment history
and experience of credit utilization. The credit risks faced by microfinance institutions
were over reliance on guarantors, carelessness and poor underwriting typically evidenced
by inadequate loan documentation, lack of current financial information and a lack of
protective covenants in the loan agreement, communication ineffectiveness and
ineffective loan monitoring cause loan default. The study recommended that the
management of the MFI must organize periodic workshops and seminars to educate
credit officers on loan approval, credit appraisal techniques, loan supervision strategies
and monitoring strategies to improve loan recovery in the MFI.
Description:
A PROJECT REPORT IN THE DEPARTMENT OF ACCOUNTING STUDIES,
SUBMITTED TO THE SCHOOL OF GRADUATE STUDIES IN PARTIAL
FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE
DEGREE OF MASTER OF BUSINESS ADMINISTRATION (ACCOUNTING) IN
THE UNIVERSITY OF EDUCATION, WINNEBA
JUNE, 2019