Assessing the prejudices of non-performance of loans in microfinance institutions in Uganda: a case study of Pride Micro Finance Limited

Abstract

The purpose of this study was to assess the prejudices responsible for Non-Performing Loans in Pride Microfinance Limited. This was guided by three objectives; to assess then relationship between collection procedures and NPL, to assess then relationship between understandability and NPL and to assess other factors responsible for loan default, then the other factors that cause borrowers to default. The study used a cross-sectional descriptive study research design to explore a population of 134 staff from which a sample of 100 staffs was selected as these were staff from branches with high rates of NPLs. A structured questionnaire was used to collect primary data, an interview guide was administered too and data collected was edited for completeness and consistency. Findings about the study established that there are non-performing loans in Pride Microfinance Limited which was attributed to lack of understandability of credit terms, poor collection procedures among others. In conclusion, non-performance of loans were attributed to small font size of credit terms, customers not given a chance to ask questions, loans officers not visiting borrowers to check on their progress among others so we recommend PML to endeavor explain the credit terms to its borrowers, visit borrowers, write credit terms in big fonts and also give the borrowers a chance to ask questions.