Credit risk management mechanisms and financial performance of microfinance banks: a case study of the Urwego opportunity Bank.

Abstract

As a poverty-laden country, Rwanda has since 2010 deregulated its financial services sector in order to boost economic growth and most of the effort was focused on the micro finance banking sector (Rwanda Business Report of 2013). Hitherto, the sector has operated under the new guidelines and four of the country’s community savings cooperatives gained the status of micro finance banks. Whether the micro credit banks have improved their status as a result of the governments proper credit management or other factors contributed. This proposed study “Credit risk management and performance of micro finance banks in Rwanda”, a case study of the Urwego Opportunity Bank, is to assess the effect of credit management on financial performance of micro finance banks in Rwanda. Specifically, the study will seek to explore the credit risk management used by the Urwego Opportunity Bank to maximize its level of financial performance. The study also ends by establishing how the credit risk management mechanisms affect the financial performance of micro finance banks in Rwanda.The financial performance measure by the return on Assets (ROA) and return on equity (ROE) and the credit risk management mechanisms measured by the level the cost of bad debt.The research will be significant to the researcher, the Urwego Opportunity Bank and other researchers. The population will be selected from the Urwego Opportunity Bank employees,using purposive sampling method methods.Both primary and secondary data will be collected through questionnaire and documentary review.