Effect of Microfinance Credit Policies on Loan Repayment: a Case Study of Ugafode Microfinance Limited.

Abstract

This study focuses on the main dimensions and key conceptual features of Microfinance institutions credit lending terms, networks and the performance of small medium enterprises. The theoretical survey of different views and conceptions characterizes the formation and development of Micro finance lending terms which greatly influences the performance of enterprises.

The study design was cross sectional. Both qualitative and quantitative data were collected; sample random sampling was used to select a sample size of 75 respondents. Analysis was carried out basing on the study objectives.

Findings indicated that the loan repayment period is conducive to the performance of SME’s enterprises, total costs of the loan are high and enterprises mainly rely on social collateral to access loans. The findings in relation to the loan size indicated that the respondents were uncertain and there is a positive trend in the growth of working capital, profitability levels and business sustainability.

However, the respondents indicated low savings growth and there are low networking levels among clients accessing loans from Ugafode Uganda ltd.

There is a significant positive relationship between the credit lending terms, Networks and performance of SME’s enterprises. There is need to introduce adult education among clients accessing credit to improve literacy and numeric to help them manage the loans better and also improve on the networking system by the women entrepreneurs where they can share business ideas, promote their products and Ugafode Uganda ltd should offer multiple loan products such as consumption loans to avoid loan diversion .

In conclusion, the evidence for the effect of micro finance credit terms on loan repayment. Some enterprises have prospered registering increase in business assets and profitability while others have failed to take off. The networks among the enterprises have not been fully developed to enable them expand on their markets and thus limit performance.

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