Influence of Credit Risk Management Practices on Loan Performance: A Case of Selected Microfinance Institutions in Tanzania

Abstract

This research investigates the influence of credit risk management practices on loan performance of microfinance institutions. The variables of interest in this study are credit appraisal, credit supervision, credit monitoring (as predictor variables) and loan performance (as dependent variable). However, the study includes average credit processing time as a control variable. The study focuses on five microfinance institutions operating in Tanzania. The research utilizes probability and non-probability sampling to select 140 respondents from the study population. The study collected both primary and secondary data. Data analysis was carried out by applying multiple regression analysis following the assumptions of ordinary least squares (OLS). The findings reveal that credit supervision, credit monitoring, and average credit process time are significant in influencing loan performance in microfinance institutions. Contrary, there is no evidence, whatsoever to suggest that credit supervision influences loan performance in microfinance institutions.