Loan appraisal techniques: A case study of Pride Microfinance Limited, Uganda

Abstract

The study was carried out with the purpose of understanding the loan appraisal techniques used in Pride Microfinance Bank Uganda. The study objectives included; (i) analyzing the loan appraisal process by Microfinance institutions, (ii) examining the loan appraisal techniques (iii) recommending strategies to improve loan appraisal process in pride, Uganda. The researcher employed a descriptive approach which involved the use of questionnaires to collect data from 19 loan officers and Credit Managers. The study revealed that the microfinance used referencing with CRB, repayment history and use of the 5 Cs. Further, it established that client appraisal is a viable strategy for mitigating credit risk. The researcher recommended that there is need for Pride to enhance its client appraisal techniques so as to improve their credit performance and that loan officers are transferred frequently to reduce granting loans to friends and hence loan default.