Browsing by Author "Asiet Alex"

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    Customer Credibility on Loans and Performance of Loan Portfolio. A Case Study of Microfinance Institutions in Kampala.
    (Makerere University Business School, 2028-11-28) Asiet Alex
    The study examined the relationship between assessing customer credibility on loans and the performance of the loan portfolio in microfinance institutions in Kampala. Particularly, the study examined the relationship between credit score and performance of the loan portfolio; (ii) the relationship between income verification and performance of the loan portfolio; (iii) assessed the relationship between character assessment and performance of the loan portfolio, and iv) examined the combined effect of credit score, income verification, and character assessment on performance of the loan portfolio. A cross-sectional survey design with a quantitative approach in generating the required information was used. A population of 79 microfinance institutions in Kampala was identified, and a sample size of 63 companies was derived using a sample determination table. Data were collected using survey questionnaires. All the statistical analyses were conducted using the SPSS software package version 25 to test correlation and regression analysis. The results revealed that credit score had a positive linear relationship with the performance of the loan portfolio (r=0.669, p<0.05), as was the case with income verification (r=0.487, P<0.05) and character assessment (r=0.370, P<0.05). This was a clear indicator that credit scores, income verification, and character assessment as separate independent variables have a positive effect on the performance of the loan portfolio dependent variable. The study concluded that with credit scores, MFIs can make more precise risk evaluations, allowing for better resource allocation and stronger portfolio health. It was also concluded that income verification is a crucial measure for gauging borrowers' financial capacity, which helps mitigate the risk of over-indebtedness. The study recommended that MFIs should establish detailed credit scoring frameworks that go beyond traditional credit histories, incorporating additional data like payment patterns and transaction records. It was also recommended that implement adaptable income verification methods that can capture both formal and informal income sources, such as analyzing cash flow trends for small business owners or accounting for seasonal income patterns. It was also recommended that to maintain accessibility while managing risk, MFIs could provide flexible repayment options, such as smaller, more frequent payments that align with borrowers’ income cycles.