risks, credit managers take into account five ‘Cs’ of credit: that is character, capacity, capital, collateral and condition. (Weston and Brigham, 1979, Kakuru 1999). Credit standards work efficiently only when there is system in place to control receivables (debtors). However during evaluation of the customers, the credit officers should also consider the other factors like future incomes. For example, a farmer might not be able to generate incomes now but his harvests after some time may generate him or her some money to pay the credit advanced to him or he. It means some creditors may not be able to pay as expected but he/she may pay them in a future if the assets are promising. Therefore, credit terms or the period for repayment should be fixed in a way that favours the customers. The amount to be paid within very period may be more or less than expected but the credit officer needs to talk to the customer to see and understand his/her position at the very time and take more or less from him in the next month or repayment date. 2.2.2 Credit terms Credit terms are stipulations under which firms grant credit to customers without incurring unnecessary high levels of bad debts (Maganda, 2002). A firm should try as much as possible to make once an organization make a decision to extend credit, the next thing to do is to decide on the terms of credit, that is, how much credit to be extended, for what period, and at what cost. The allowable credit terms are normally looked as the credit period and terms of discount (Brealey and Mayers, 1988). 2.2.3 Collection efforts Collection policy is required because not all customers (debtors) pay the firm’s bill in time. Collection efforts should aim at accelerating slow paying customers and reducing losses from bad debts. Collection effort policy is to ensure prompt collection for a faster turn over; keeping collections costs low and avoiding or reducing bad debts. In to accelerate payment of debts, some firms use services of factoring firms which act as agents to collect debts on behalf of the company at a commission.
From the results of the study, it is clear that the bottom wire from the success of microfinance institutions growth began with “customer retention.” However, customer service is an attitude and therefore hard and difficult to measure. According the Managing Director Microfinance Managers can however attempt to quantitatively measure it by; Mystery customer services; that are organizing with outside agents who pose as customers and secretly evaluate quality of services provided and their feedback should be used constructively. Customer advisory of previous and current clients need to regularly review services and advice management. Customer advisory board needs to organize regular meetings with sample clients to both listen to their comments and criticisms, but also respond in tangible ways. groups conducted by research firms focusing sessions with representative samples of clients to evaluate customer service. They should be conducted anonymously by external agents and likely to attract crucial comments from clients. Clients could also include prospective clients as well as competitors’ customers. Client surveys with buyer samples and this approach is informative if it is done on former clients as it reveals the ways they stopped borrowing from the institution. CHAPTER FIVE 5.0 Findings, Conclusions, Limitations and Recommendations 5.1 Introduction This Chapter discussed the findings and draws conclusions to the results in Chapter four. The Chapter further contains recommendations, limitations and conclusions according to the objectives of the study. Lastly it gives suggestions for further research. 5.2 Summary of the findings with respect to study objects 5.2.1 Findings about the credit policy Pride Microfinance Ltd uses The study found out that for anyone to qualify to any credit; the managers ask for collateral security, business turnover which indicates an ability to pay back, employers recommendations,
Gitman, L. (1999). “Microfinance and Poverty Eradication”, Great Britain: Oxford and Action Aid Publishers. Hannie, V.G (1989). “Analysis and Managing Financial Risk”. Harlow: Prentice Hall International. C. Van Horne (1994). “Financial Management and Policy”. Prentice Hall Private Ltd, India, Munnahe. Kakuru Julius ,(2001), “ Finance and Business division”. Pandey, 1993, “Financial Management”, New Vikas Publishing House, PTV. Chandra, Prasanna, 1989, “Financial Management Theory and Practice”, New Delhi, Tata McGraw Hill. J. Fred Weston and Eugenes F. Brigham, “Managerial Finance”, New York, Holt, Rinehart and Winston 1966. Solomon, Ezra, 1963, “The Theory of Financial Management”, New York, Columbia University. Mpozza, Stephen, 2005, “Financial Services Industry”, Information Technology-Uganda. Nyamuyonjo, 2006, MFI Credit Terms and Financial Performance of Client Small Enterprises in Kampal”. APPENDICES Appendix I: Questionnaire to the Manager Pride Microfinance Ltd-Arua Branch RESEARCH QUESTIONNAIRE Dear respondent This questionnaire seeks your view on the topic “credit policy in Micro Finance Institutions and customer retention management”. The study is purely academic and answer to each of the questions will be treated with highest level of confidently. Please I humbly request you to spare a few of your valuable time to respond to the issues raised. SECTION A