A Dissertation Submitted in Partial Fulfillment of the Requirements for the
Award of Degree of Master in Business Administration-Corporate Management
of the Mzumbe University
This study aimed at investigating the effect of credit risk management techniques on
credit loss control in microfinance institutions. Specifically, the study aimed to
examine the credit risk control techniques (i.e. diversification of loan services, super
hedging strategy, group decision-making process, and machine learning methods)
employed for the prevention of credit loss; investigate the main cause of credit loss;
and identify the problems encountered in the recovery of loans granted by credit
officers. The multiple case study design with a quantitative approach was used to
facilitate in-depth inquiry of the problem using large samples. The sample size of 45
respondents was used where information was corrected from respondents in different
selected SACCOS using a questionnaire. The study used descriptive analysis whereby
the data was analyzed and presented in tables and bar charts in terms of frequencies and
percentages. The study findings show that credit loss control is influenced by credit
risk control techniques, the main causes of credit loss, and problems encountered in the
recovery of loans. Findings of the study show that the diversification of loan services,
super hedging strategy, group decision-making process, and machine learning methods
to protect credit loss were the key credit risk control techniques employed by risk
officers to prevent credit loss, lack of in-depth knowledge of customer’s operation,
illiteracy, and improper flow of business income and high loan interest rates were the
major cause of credit loss at their respective SACCOS. Furthermore, findings indicated
that poor accounting system and record-keeping, lack of adherence to Co-operative
principles, lack of credit risk monitoring and control mechanisms, and lack of risk
management culture into SACCOs are the perceived problems encountered by credit
officers. The study recommends that credit officers should attend financial
management training courses as having qualified credit risk management staff is
essential to ensure that loans are well monitored. Also, to reduce credit loss, credit
management should be well improved by emphasizing the applications of credit
principles, sound accounting system and record-keeping, as well as efficient credit risk
monitoring and control mechanisms in order to improve loan recovery.