Credit Risk Management Practices and the Profitability of Selected Microfinance Institutions in Bamenda
DOI:
https://doi.org/10.47941/ijf.2609Keywords:
CRM practices, profitability, MFIs, BamendaAbstract
Purpose: This article examines the effect of credit risk management practices on profitability of microfinance institutions in Bamenda which host majority of credit unions in Cameroon.
Methodology: After exploring the related concepts and theories, the study adopts a mixed research design where data were collected mainly with the use of questionnaires from a sample of 41 credit unions in the area, analysed using multivariate regression technique.
Findings: The results of the findings show that the data are normally distributed, not prone to any problem of multicollinearity, and that the model is globally significant at one percent following Fisher test, with the four dimensions of CRM practices explaining over 92 percent of variation in the MFIs’ profitability. The influence of all the variables were positive as hypothesized. The coefficients of the variable for credit scoring was 0.783 and significant at 1 percent, for collateral requirement was 0.232 and equally significant at 1 percent, for loan monitoring was 0.172 and significant at 5 percent, meanwhile for limiting credit exposure was 0.081 and insignificant in contributing to the profitability of the MFIs.
Unique Contribution to Theory, Policy and Practice: Finding of this paper suggest that, MFIs can better manage its credits risks by enhancing the practice of credit scoring, limiting credit exposure, loan monitoring, and collateral requirement in that decreasing order of importance.
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