The Determinants of non-performing assets in Finca International Incorporation: A Case Study of Morogoro branch
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Date
2015
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Mzumbe University
Abstract
Microfinance Institutions (MFIs) in the World currently provide significant financial services including microcredit facilities particularly to the rural and semi-urban areas across the country. Granting of microcredit facility (Loan) is a major activity of the mfis and the loan portfolio constitute a significant proportion of the assets of the MFIs. Undoubtedly, the mfis derive most of their interest incomes from loans, however, not all loans granted to beneficiaries perform well and earn the expected returns and this tend to have adverse effect on the quality of the loan portfolio. The purpose of the study was to find out the Determinants of non-performing assets in Microfinance Institutions. The study focused on trend of Non-Performing Assets at FINCA as a whole and the causes or factors for Non-Performing Assets at FINCA Morogoro Branch. The study reviews both theoretical and empirical aspects of nonperforming Assets. Chi-square analysis is employed, both primary and secondary data were used for the study. The study found FINCA recorded significant amounts as non-performing assets in the five-year period reviewed and has adversely affected the financial performance of the organization by reducing its operating profits, loanable funds and undermining the liquidity position. The findings revealed that external factors are more prevalent in causing non-performing assets in FINCA. Findings suggest that integrity of borrower such that use of funds for purposes different from agreed ones as a major factor that cause n pas. Close monitoring of borrowers is critical to lending business, good relationship with borrowers was found to be the most favorable strategy of reducing non-performing assets. The researcher suggests future studies should be broad to assess the performance of Credit Risk Management in line with the level of NPA in mfis. This thesis is organized into five chapters. Chapter one covers introduction of the study. Chapter two presents review of related literature. In this chapter, the key issues concerning Non-performing Assets are discussed. Chapter three is the research methodology. Chapter four discusses various findings and analysis, while several recommendations and conclusion are found in chapter five.
Description
A dissertation submitted to Mzumbe University as a partial fulfilment of the requirements for the award of Master’s Degree of Science in Accounting and Finance (MSc. A&F) of Mzumbe University
Keywords
Micro Finance Institutions, Credit Risk Management, Non – Performing Assets, FINCA, Lending Business, Chi-square analysis, Microcredit facilities-rural, Microcredit facilities-semi urban
Citation
APA