The Effects Of Credit Risk Management On The Profitability Of Micro-financial Institutions In Ghana

The biggest risk in micro financial institutions is that of non-repayment of loans when due usually referred to as credit risk.As such,the main preoccupation of management here is to implement reliable measures to ensure repayment of loans and achieve better performance.Consequently,the study sought to examine the effects of credit risk management on the profitability with the case study being Ghanaian credit unions.To achieve the goals,the research utilized a survey research design in which a representative sample was issued structured questionnaires.The primary data gathered was analyzed using the tables,charts,and statistical tests.The major results of the study revealed that Credit worthiness,default risk mitigation,and portfolio management all have a significant relationship with return on investment.These results were at a significant level of 5%.Moreover,Credit worthiness had a negative sign,default rate had a positive sign while portfolio management had a positive sign.However,all the signs were not the same as expected meaning that firm may not be effectively implementing the steps necessary to manage their credit risk.Furthermore,recommendations have been made to attend to the major weaknesses as well as suggestions for further studies.