The Effect of Loan Appraisal Process Management on Credit Performance in Microfinance Institutions (MFIs): A Case of MFIs in Uganda

The study was carried out with the purpose of understanding the effectiveness of loan appraisal process management on the credit performance of MFIs in Uganda taking MFIs in Fort portal municipality in Western Uganda as a case study. The study objectives included, (i) analyzing the loan appraisal process by Microfinance institutions, (ii) examining the challenges faced by Credit officers at the appraisal stage of the Loan process and (iii) assessing the relationship between the loan appraisal process management and credit performance in Microfinance institutions in Fort Portal, Uganda. The researcher employed both qualitative and quantitative research approaches which involved the use of questionnaires to collect data from 44 loan officers and Credit Managers. The study revealed that MFIs use client appraisal in Credit management to a great extent. Further, it established that client appraisal is a viable strategy for mitigating credit risk. The study also established that there was a strong relationship between credit performance of MFIs and client appraisal. The researcher recommended that there is need for MFIs to enhance their client appraisal techniques so as to improve their credit performance.