CREDIT RISK MANAGEMENT AND FINANCIAL PERFORMANCE OF MICROFINANCE INSTITUTIONS IN CAMEROON: THE CASE OF BAMENDA POLICE COOPERATIVE CREDIT UNION LIMITED (BAPCCUL) AND OTHER MICROFINANCE INSTITUTIONS
Abstract
Most financial institutions, especially the microfinance, over the years have been experiencing increasing loan delinquency, which has greatly caused their asset portfolios to be highly non-productive and very poor in quality. This situation has been very disturbing as little or no attention is paid to this phenomenon by the stakeholders. The main objective of this paper was to identify credit risk factors and their effects on the financial performance of MFIs in Cameroon. Specifically, the study sought to determine the extent to which credit risk identification, credit risk assessment, risk relationships in microfinance institutions have affected financial performance. The paper adopted a descriptive and a causal research design to provide answers to the research objectives of interest. The descriptive results revealed that credit risk elements or factors like poor monitoring of loans, management influence in lending activities, improper credit and credit risk analysis during underwriting, poor or non-segmentation of loan portfolio into smaller loans to a large portion of the membership, non-respect and no review of credit policies as well as little or no perfection of collateral security do lead to credit risk. The study showed that credit risk relates negatively with financial performance at the 1% level of significance. This implied that credit risk significantly and negatively affects financial performance of MFIs in Cameroon. The paper therefore recommended that accurate and holistic measures be put in place to curb credit risk in order to improve on financial performance and improve on asset quality. Also, management should empower employees through capacity building trainings, employ and put to use recent technological software for credit risk monitoring and reporting.
Keywords: Credit risk management, Financial performance, Microfinance institutions, Cameroon
CITATION: Ngwah, N. C., Ndamsa, D. T., & Mongo, E. A. (2023). Credit risk management and financial performance of microfinance institutions in Cameroon: The case of Bamenda Police Cooperative Credit Union Limited (BAPCCUL) and other microfinance institutions. The Strategic Journal of Business & Change Management, 10 (1), 708 – 728.
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DOI: http://dx.doi.org/10.61426/sjbcm.v10i1.2577
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