Credit Policy and Performance of Loan Portfolio at Pride Micro Finance Uganda Ltd

The bad effects of performance of loan portfolio are undesirable and the researcher investigated on how the credit policy if properly managed could offer a means of changing this situation. . Poor loan performance exposes high level of credit risks and affects loan interest repayment, principal payment and profitability, which if not checked can result into depletion of the capital base and closure of institutions hence loss of share holders equity. This study will therefore seek to examine the effect of credit policy on performance of loan portfolio at PMF Uganda Ltd in order to generate recommendations that will help micro fiancé institutions attain improved performance of loan portfolio. The researcher used a combination of descriptive, quantitative, cross sectional and survey design. The target population was 100 from where the sample of 80 was sampled using Morgan tables and the study employed both simple random sampling and purposive to collect primary data with use of the questionnaire. Findings indicated that credit terms contribute to better performance of loan portfolio at PMF Uganda as shown by r=0.825 and adjusted R square of 66.9%. Also it revealed that credit standards have a significant influence on performance of loan portfolio at PMF Uganda and finally findings revealed that credit collection procedures affect performance of loan portfolio at PMF Uganda as shown by r=0.776 and Adjusted R square of 58.9%, r=0.65 and Adjusted R square of 40.3% respectively. All this indicate that these findings answer the general objective of assessing the effect of credit policies on performance of loan portfolio of PMF Uganda. The study recommends that PMF should extend the loan repayment period to at least 12 months instead of mandatory 10 months, there should be friendly credit standards and lastly Credit officers should personally make physical visits to customers’ premises.