MEKELLE UNIVERSITY

COLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

ASSESSMENT OF CREDIT MANAGEMENT ON DEDEBIT MICRO FINANCE

INSTITUTION

(A case Study of Mekelle, Keble 11, number2 branch of Dedebit micro finance
Institution)

A SENIOR EASSY RESREARCH PAPER SUMMITED TO AWARD OF A

DEGREE OF BACHEOLER ART

By: -Muruts Adisu Id no. 0182/05

ADVISOR: -Ali M (MSC)

June 2007E.C
MEKELLE, ETHIOPIA
 Acknowledgement

I am greatly indebted to ALI Mohammed, my advisor, who sacrificed his precious time and
exercise his tirelessly effort to provide me constructive comments, suggestions and guidance in
organizing and structuring this paper.

My heartfelt gratitude also goes to mekelle, Kebele11, number2 branch of dedebit

micro finance Institution and its employee for their support in hosting my research and providing
information. With the institution support, my research works become true.

I would like to express my sincere and deepest thanks to manager of Mekelle,Kebele11,

number2 branch of Dedebit micro finance institution who sacrificed her time and effort of fill out the
questionnaire and interview and giving pertinent information.

Above all, my debt is to God, who makes it all possible; and of course my deepest gratitude to
my parents for their overall assistance and continues support during my stay at Mekelle University.

ABSTRACT

The concept of credit can be traced back in history and it was not appreciated until and
after the Second World War it was largely appreciated in Europe and later to Aficrica.
Banks in us gave credit to customers with high interest rates which sometimes
discourage borrowers’ key requirement for effective credit management is the ability to
intelligently and efficiently manage customer credit lines. Microfinance institutions and
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other finance institutions must develop credit policy to govern their credit management
and operations and micro finance institutions generate their revenue from credit
extended to low income individual in the form of interest charged on the funds granted
from the loan payments may be full of uncertainty. Credit management is a core
function of banking and micro finance institutions; it is generally divided into two they
are credit sanctions and credit follow-up function. Financial institutions are business
entities that includes financial and none financial enterprise which provide service as
intermediary of financial market. They are responsible for transferring funds from
investors who have excess funds to investors or companies that who have shortage in
need of those funds A study on debit micro finance credit recovery system is a topic of
considerable interest by many researchers. However, due to absence of empirical
studies on credit recovery system motivated to the principal motivation behind this
study mainly focused by solving the following basic questions; what are loan giving
procedures, how follow up the loan, and how manage it . The study was conducted on
dedebit microfinance institution in Mekelle, kebele11 number2 branch with primary
objective of Assessment of Credit Management at branch level. Specifically the
study was focus on credit policy in the institution, loan utilization, training mechanism,
loan administration or follow up, clients visit, and measures to be taken for default to
re pay the loan at repayment schedule, sufficiency, training and collection of credits,
the repayment period mostly used by customers, presence of follow up & supervision,
purpose, agreement of loan and group lending. In this study both primary and
secondary source of data used and the researcher would be use open end and close
questionnaires and structured interview to collect data from the employee, and
management body of the institutions. Additionally the method of data collections are
structural interview, questionnaire and observations and census technique to select
employee because this avoids bias among respondents and enable to get relevant information
from each and every employee and management body of Mekelle,kebele11 number2
branch of dededit microfinance And also the researcher used descriptive method of
data analyzing and the data would be edited, classifying the collected data to more meaning
full, identify errors , omissions, organized, analyzed, and interpreted by using excel tool.

TABLE OF CONTENTS PAGE

Acknowledgement.................................................................................................................I
Abstract.................................................................................................................................II
Table of contents……………………………………………………………………………III
List of tables ........................................................................................................................IV
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CHAPTER ONE
1 Introduction......................................................................................................................1
1.1 Background of the study .................................................................................................1
1.2 Statement of the problem................................................................................................3
1.3 Objectives of the study....................................................................................................4
1.3.1 General objective………………………………………………………………….4
1.3.2 Specific objective………………………………………………………………….4
1.4 Significance of the study...............................................................................................…4
1.5 Scope of the study.........................................................................................................…5
1.6 Limitation of the study………………………………………………………………......5
CHAPTER TWO
2. Literature review............................................................................................................5
2.1 Definitions credit............................................................................................................5
2.2 Credit management.........................................................................................................6
2.3 Credit policy....................................................................................................................7
2.4 Lending methodology ....................................................................................................9
2.5 credit approach (methodology) procedure......................................................................9
2.5.1 Individual lending methodology .................................................................................9
2.5.2 Group lending methodology…….……………………..…………………………….10
2.6 Loan application process................................................................................................12
2.7 loan processing...............................................................................................................12
2.8 Loan approval procedure................................................................................................13
2.9 Loan approval decision..................................................................................................13
2.10 Delinquency management............................................................................................14
2.11 loan follow up and supervision....................................................................................14
2.11.1 Benefits of supervision.............................................................................................15
2.11.2 Who does supervision and when...............................................................................16
2.12 The role of staffs and clients supervision....................................................................17
CHAPTER THREE
3. Research Methodology....................................................................................................16
3.1 Research design.............................................................................................................17
3.2 Source of data………………………………………………………………………….17

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 3.3 Sample technique and sample size.................................................................................17
3.4 Methods of data collection.............................................................................................17
3.5 Method of data processing.............................................................................................17
3.6 Method of data analysis.................................................................................................18
CHAPTER FOUR
DATA ANALYSIS AND INTERPRTATION
Characteristics of respondent (employees)………………………………………………..19
Assessment of credit policy……………………………………………………………….19
Assessment of employee and client’s capacity……………………………………………20
Assessment of loan giving procedure……………………………………………………..22
Assessment of loan management and follow up………………………………………….23
Assessment of measurement taken when default occur…………………………………..24
. Interview for management body………………………………………………………….25
CHAPTER FIVE
CONCLUSION AND RECOMMENDATION
5.1 conclusion…………………………………………………………………………..…26
5.2 recommendation………………………………………………………………………27
Appendix .............................................................................................................................28

List of Tables

Table4.1.1: sex and educational level of the respondents (employees)...………………………………18

Table 4.1.2: Assessment of credit policy, update time………………………………………………......19
Table 4.1.3: Employee and beneficiaries training……………………………………………………….21
Table 4.1.4: Assessment of loan giving procedures……………………………………………………..23
Table 4.1.5: Assessment of loan management and follow up…………………………………………...24
Table 4.1.6: Assessment of measure taken when default occur…………………………………………24
Table 4.1.7: Interview for management body……………………………………………………………………
25

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 CHAPTER ONE
1. INTRODUCTION
1.1 Background of the Study
The concept of credit can be traced back in history and it was not appreciated until and after the
Second World War when it was largely appreciated in Europe and later to Africa (Kiiru, 2004). Banks in
USA gave credit to customers with high interest rates which sometimes discouraged borrowers hence the
concept of credit didn’t become popular until the economic boom in USA in 1885 when the banks had
excess liquidity and wanted to lend the excess cash (Ditcher, 2003).

In Africa the concept of credit was largely appreciated in the 50’s when most banks started opening
the credit sections and departments to give loans to white settlers. The development of micro-finance
institutions in Ethiopia is a recent phenomenon. The proclamation, which provides for the establishment of
micro-finance institutions, was issued in July 1996. Since then, various micro-finance institutions have
legally been registered and started delivering micro-finance services (Wolday, 2000). In particular, the
Licensing and Supervision of Micro-finance Institution Proclamation of the government encouraged the
spread of Micro-finance Institutions (MFIs) in both rural and urban areas as it authorized them among other
things, to legally accept deposits from the general public (hence diversify sources of funds), to draw and
accept drafts, and to manage funds for the micro financing business (Getaneh, 2005).

A key requirement for effective credit management is the ability to intelligently and efficiently
manage customer credit lines. In order to minimize exposure to bad debt, over-reserving and bankruptcies,
companies must have greater insight into customer financial strength, credit score history and changing
payment patterns. The ability to penetrate new markets and customers hinges on the ability to quickly and
easily make well-informed credit decisions and set appropriate lines of credit. Credit management starts with
the sale and does not stop until the full and final payment has been received. (Pandey, 2008)

DedebitMicro-finance Institutions and other finance institutions must develop a credit policy to
govern their credit management operations and since micro-finance institutions generate their revenue from
credit extended to low income individuals in the form of interest charged on the funds granted the loan
repayments may be uncertain. It may be difficult to establish an optimal credit policy as the best
combination of the variables of credit policy is quite difficult to obtain. A firm will change one or two
variables at a time and observe the effect. It should be noted that the firm’s credit policy is greatly
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influenced by economic conditions. As economic conditions change, the credit policy of the firm may also
change (Panday, 2008).

Numerous approaches have been developed in client appraisal process by financial institutions. They range
from relatively simple methods, such as the use of subjective or informal approaches, to fairly complex
ones, such as the use of computerized simulation models (Horne, 2007). Many lending decisions by micro-
finance institutions are frequently based on their subjective feelings about the risk in relation to expected
repayment by the borrower. Micro-finance institutions commonly use this approach because it is both simple
and inexpensive.

While each company would have its own method of determining risk and quality of its clients,
depending on the target group, the following client evaluation concepts are useful for most occasions. These
concepts are referred to as the 5C’s of credit appraisal. These elements are Character, Capacity, Collateral,
Capital and Condition (Edward, 1997).

Credit management is a core function of banking and micro-finance institutions; it is generally

divided in to two. They are the credit sanction and credit follow up function. The two functions may be
organized in one or two units depending on the size of the organization. The credit sanctions deals with
credit analysis, appraisal of business and project negotiation of terms and conditions, credit approvals,
documentations, disbursement of loans and advances. On the other hand, credit follow up sanction deals
with administration, credit monitoring, reviewing, managing credit portfolios and managing nonperformance
loans (NPLs). Credit follow up sanction is the most important function of credit management, but in many
cases lack of attention and emphasis (MulatDemeke, 2000).

Effective credit management requires a capacity to monitor and manage credit comprehensive and
efficiently, adequately, qualified efficient capable and sufficiently motivated. Human recourses are a key
element in effective credit. Credit management is a complicated and requires trading in different skills.
There is a strong need to develop internal capacity building fully utilizing and sustainable capacity.

The common impact on weak credit management in banks and microfinance institutions include:

-Poor organization of credit function

-Lack of check and balance in credit process
-Poor credit analysis and appraises of business and projects

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 -Absence of assets classification and loan loss provisioning
-Low credit monitoring and follow up
-Poor control on loan documentation (Mulat Demeke,2000)

1.2 STATEMENT OF THE PROBLEM

Financial institutions are business entity includes financial and non-financial enterprises: which
provide services as intermediaries of financial market. They are responsible for transferring funds from
investors to companies in need of those funds. Financial institutions facilitate the flow of money through the
economy. Most financial institutions are regulated by government. (Siklos, Pierre, 2001).

Micro-finance is one of the financial institution that provide loans to clients to help them engage in
productive activities and to raise their small business. Most of micro-finance institutions approve loans for
productive purpose because income increment is positively indicator to which all development activities are
addressed. (Daniel, 2010)

Credit management is the core function of micro finance institutions to deserve a special emphasis
because it determines to very success or failure of such institutions. Crisis and bankruptcy of micro-finance
institutions throughout the world show low credit management ranks as the highest contributor. Hence, it
needs special attention to key elements the main one of effective credit management will develop credit
policies and procedures. They provide the entire frame work for credit management processes. It is very
important that policies and procedures be written and well communicated to all that deal with credit
management including the board, the management, the credit officers and other relevant employees. Without
credit management policies and procedures, one could not think of managing credit risk. If there is no
credit policies and procedures credit decisions would become arbitrary subject to individual discriminatory
and judgment and finally lead to corruption (MulatDemeke, 2002)

A Study on micro-finance credit recovery systems is a topic of considerable interest by many researchers.
However, most studies undertaken in the past few years have focused mainly on credit models used by
MFI’s and their impact on profitability (Migiri, 2002). Absence of empirical studies on credit recovery
systems and recognition of the critical role that MFI’s play in the economy are the principal motivation
behind this study which sought to find out the effectiveness of credit management systems on loan
performance among micro-finance institutions.

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Therefore, the researcher motivated to study related to credit management practice in Mekelle, kebele11
number2 branch of Dedebit micro finance institution and by answering the following basic questions:

What are loan giving procedures in the institution?

What procedures the institution uses to follow up the loan?
How the institution manages on delinquency of repayment loan?
1.3 Objectives of the study

1.3.1 General objective

The main objective of this study is to assess credit management in Dedebit micro-finance institution on
Mekelle, kebele11number2 branch.

1.3.2 Specific objective

The specific objectives are;

1. To Assess loan giving procedures in the institution

2. To assess the management on delinquency of loan
3. To Assess the loans follow up procedures
1.4 Significance of the study

The importance of this study will enhance the competitive position for Mekelle, kebele11, number2 branch
of Dedebit micro-finance institution by finding ways that improve the credit management system of the
institution. The researcher also believes that the result of this study will pave the way for the clients of the
institutions, and also for the institutions and additionally serves reference for other researchers.

Also the study will provide additional knowledge to credit managers in designed new credit management
and for planning and controlling procedures in credit activities and it helps the clients of the institutions by
informing necessity of paying credit according to agreements, in preventing unnecessary payments. Finally
the study further researchers as reference who want to conduct study on the area of credit management of
financial institutions particularly Dedebit micro-finance institutions.

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 1.5 Scope of the study

For the sustainability of dedebit micro-finance institutions, it requires continues assessment of credit
management practice. Accordingly the study will focus on assessment of loan giving procedures, managing
on delinquency and loan follow up procedures on dedebit micro finance institution specifically
hawlti,kebele 11 number2 branch.

1.6 Limitations of the study

Some researchers when to do the research cannot achieve the goal without facing any challenges. According
to these, there will be some limitations for doing research;

 Lack of document for obtaining reliable and relevant information about the credit management.
 Time and budget constraint
 Researcher experience to analyze the data
 Unwillingness of concerned body to give information about credit management

CHAPTER TWO

2. Literature Review
2.1 Definition of Credit

Credit is defined a medium of exchange of limited acceptance, it is a medium of exchange that after
being issued. It does not close the transaction at some future time and a future step to be deemed by known
as payment. Credit is defined as the ability and individual of a firm to obtain economic value on faith in
return for an expected payment of equivalent economic value usually at some specified future time (Carl
Heyel, the encyclopedias of management 3rd edition1982).

Credit is borrowed funds with specified terms for repayment. when there is no sufficient accumulated
saving to fiancé a business and when the return on borrowed funds exceeds the interest rate charges on the
loan, it makes sense to borrow rather than not being doing. The business activity until sufficient saving can

5
be accumulated assuming the capacity to service the debate exists. Credit is provided for an activity with in
value needs proper selecting activities, source of funding detailed implementation saving components of
evaluation. It is also explains loans were generally made for productive purpose that are to generate revenue
within a business in order to use credit properly There should be also appropriate credit management control
system and continuous follow up procedure after approval ( Ross 4th edition ).

Credit is a contractual agreement in which a borrower receives something of value now and agrees to repay
the lender at same date in the future, generally with interest. The term also refers to the borrowing capacity
of an individual or company (http://www.wisegeek.com).

2.2 Credit Management

Credit management is a term used to identify accounting function usually conducted under the
umbrella of account re viewable. Essentially, this collection of process involves qualifying the extension of
credit to customer, monitors the logging of payments of outstanding invoices, the initiation of collection
procedures, and the resolution of disputes or queries regarding changes on customer invoices. When
functioning efficiently, credit management serves as an excellent way for the business to remain financially
stable.
The process of credit management begins with accurately assessing the credit-worthiness of the
customer base. This is particularly important if the company chooses to extend same type of credit lines or
revolving credit to certain properly managing credit calls for setting specific criteria that a customer must
meet before receiving this type of credit arrangement. As part of the evaluation process, credit management
also calls for determining the total credit line that will extend to a given customer.
(http://www.wisegeek.com)

Good credit management provide the institution with a reasonable and adequate return on loans and
capital employed primarily through improvement in operations efficiency this generates adequate internal
resources to finance the institution’s growth (Pandey, 2000).

2.3 Credit Policy

Credit policy is a clear, written guidelines that set the terms and conditions for supplying goods of
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credit, costumer qualification criteria, procedures for making collection and steps to be taken in case of
customer delinquency. A credit policy is an institutional method for analyzing credit requests and its decision
criteria for accepting or rejecting applications (Girma 1996). Credit policy is important in the management
of accounts receivables. A firm has time flexibility of shaping credit policy within the confines of its
practices. It is therefore a means of reducing high default risk implying that the firm should be discretionary
in granting loans (Pandey, 1995).

Policies save time by ensuring that the same issue is not discussed over and over again each time a
decision is to be made. This ensures that decisions are consistent and fair and that people in the same
circumstance get treated in the same manner (Khaddar and Khan, 1998)

According to McNaughton (1996), credit policy provides a frame work for the entire management
practices. Written credit policies are the cornerstone of sound credit management, they set objectives,
standards and parameters to guide micro finance officers who grant loans and manage loan portfolio. The
main reach for policy is to ensure operation’s consistency and adherence to uniform sound practices. Policies
should be the same for all and is the general rule designed to guide each decision, simplifying and listening
to each decision making process. A good credit involves effective initiation analysis, credit monitoring and
evaluation.

The success or failure of business depends primarily on the demand for its product/service .Firms’
credit selection activity involves deciding whether to extend credit to a customer and how much credit to
extend. Appropriate source of credit information and methods of credit analyses be developed .First look at
the five C’s of credit which are the focus of credit investigation (Robert H.cole p.3)
A firm credit analysis often uses the C’s of credit to focus their analysis on the key dimension of an
applicant’s credit worthiness. Each of these five dimension character, capacity, capital, collateral and
condition are described in the following manure.
1. Character: The application ability to replay pas obligation financial contractual and moral, past payment
history as well as spending of resolved legal judgments against the applicant would be used to evaluate its
character
2. Capacity: is the applicants’ ability to repay the requested credit financial standard analysis which has
particular emphasis on liquidity and doubt typically used to access the applicant capacity.

7
3. Capital: is the measured by the general financial situation of the firm as indicated by the analysis of
financial statement
4. Collateral: is the represented by the assets that the customer may give as security in order to obtain the
credit.
5. Condition: refer to general a0nd economic trend to the special development in certain geographic region
or sector of the economy that affect customers’ ability to meet its.
Obtained credit information: is approached by a customer describing credit terms. Typically begins the
evaluation process by requiring the applicant on the outreach of various forms. The request included
financial and credit information. Working from the application form if the firm has previously extended
credit to the applicant it have own information an applicant’s payment history.
The major external source of credit information areas are in the following manure:
Financial Statement: by requiring the credit application provides financial statement for the past two
years the firm can analysis the firm quality liquidity dent and profitability position
Credit interchange bureau: The national credit interchange system is a national network of local credit
bureau that exchange containing factual data then analysis, a fee is charged for each equally.
Direct Credit information exchange: it is possibly for the firm’s bank to obtain credit information from
applicant banks. However, the type of information is mostly vague unless the applicant obtained it
typically in and estimation of the firm cash balance provided.

2.4 Lending Methodologies

Lending methodology is a system used to identify and mitigate risk on non- payment loans. Lending
methodologies of micro fiancé institution to the beneficiaries have received extensive attention from both
practitioners and academic. The resulting literature reflects the consensus on the successful provision of
micro financial services that address the two central problems of all financial market: imperfect information
and enforcement (Gemechu, 2002).

2.5 Credit approach (methodology) procedure

Methodology is the set of systems and procedures a program develops in order to deliver its service
to the client. There are two basic categories of methodology used to provide financial service ice in the
micro finance industry, individual lead and peer lending. Peer lending is further subdivided in to two sub

8
categories solidarity group lending and to community based on organization actives.

2.5.1 Individual lending methodology

Business loans or Individual lending methodology is an approach used to give loans to individuals.
With this methodology used, the main purpose is to foster job creation and income generation through
improving the performance and existence of micro and small scale enterprises as well as rural based small
economical activities. The loans are given to cereal traders, spare parts dealers, restaurants, catering and
food vendors, fish mongers, stationery, private schools who are able to meet the ethical standards.

Under these methodology clients, usually individuals working in the formal sector that need working capital
and credit for fixed assets. Loan amounts and terms are determined based on careful analysis of credit
officers. Most micro fiancé institution some form of collateral or co – signatories. Detailed financial analysis
and projecting are often included with the loan application.
Documentation is required including:
 Loan contact
 Details of clients information
 Form assigned by cosigner and his personal information.
 Legal did to assets pleaded and credit history
Loan is usually disbursed at the branch offices. A visit is often made to the clients’ place of business to
verify that clients have made the purchases specified in the loan contract (AEMFI 2002: P .8-9)

2.5.2 Group lending methodology

The group lending methodology basic philosophies in the fact that the shard coming and weaknesses
at the individuals level are overcome by the collective responsibility and security offered by the formation of
a group. Collective coming together and individuals’ members are used for a number of purpose educating
and awareness building collective bargaining power, pressure etc.
There are at least two group lending types; the Germen solidarity group lending and Latin America solidarity
group lending (AEMFI: 2002 P. 9)

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2.5.2. 1 Grameen Solidarity Group Lending

The model was developed by Germen bank of Bangladesh to rural land less women wishing to fiancé
income generating activities. It is mostly prevalent in Asia but has been replicated in other continent as well.
Method: Peer groups of five unrelated member are self-formed and incorporated in to centers of up to 8
peer groups
Conditions:
 Members are required to attended weekly / regularly meetings.
 Weekly / regular saving contribution is compulsory
 Group fund continuation and insurance payment
 Group Members mutually guarantee each other’s loans and are hold legally responsible.
 Four to eight weeks saving prior to accessing loan and should be continued after receiving loans.
 No material collateral are required
 Loan are made to individuals within a groups (( AEMFI 2002 )

2.5.2.2 Latin American Solidarity Group Lending

This model makes loan to individual’s members in groups of four to seven members. Traditional
collateral is replaced by cross guaranteeing each other loan clients are usually female market vendors
(AEMFI, 2002)
Condition:
Clients are mainly informal sector micro business such as traders
Usually the loan is small amount and is a working capital
Group members collectively guarantee loan repayment and access to subsequent loan is dependent
on successful repayment by all group members
Payment are made weekly at program offices
Credit officers make brief occasional visit to individuals clients
Loan amount and terms are gradually increased

2.5.2.3 Village banking lending methodology

Village banks are community credit and saving association established to provide accesses to

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financial service in rural area.
Conditions:
The bank have membership and management committee
Sponsoring agency or micro fiancé institution provides training to village bank members and
management committee
The money is then lent to bank members
Seed capital is providing micro fiancé Institution agency
Loan amount to the village bank depends on aggregate of all individuals village bank member loan
request
All members sign the loan agreement to collectively guarantee the loan taken
Repayment is weekly ( AEMFI.2002 p. 10-11

Benefits of group lending

Perhaps the most important of the microfinance innovations, and certainty the one for which it has
received the most recognition, is lending to solidarity groups. All members received equal financing and
made repayments on the same, fixed schedule. Most importantly, if one member of the group defaulted on
their payments, no other members of the group could apply for another loan until the default was cured.
Group lending provides several benefits to both lenders and borrowers:
 When the members of groups are self-selected from the same village, their knowledge of one
another’s habits and awareness of each member’s propensity for risk will largely obviates
extensive screening by the lender. Safe borrowers will select one another for membership and the
MFI can avoid a highly costly and inaccurate interview process.

 The group members can also monitor one another much more effectively than the lender, and
group lending gives them an economic incentive to do so. This monitoring can take two forms,
the first being ex ante observation to insure that group members are putting their money toward
appropriate uses. Ex post, members will also ensure that returns from a loan funded project are
going towards repayment. They can report to D MFI on members who are withholding payments
deposit an ability to pay.

 Group members can help lenders overcome limitations of formal mechanisms for enforcing
obligations. Members are able to exert pressure on each other, be it social, cultural, or even

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 religious, that traditional institutions are unable to bring to bear.

2.6 Loan Application process

Loan application procedure highly depends on the lending methodology of micro fiancé institution.
However, the most important thing to note here is that whatever the lending methodology as micro fiancé
institution pursues loan application remains central for loan processing. Some micro fiancé institution
requires one loan application to filled for whole group, where as other requires each group members
complete the loan application.
Before filling out the loan application form, consensus must be reached among group members particularly
as the amount of loan each member is signing for after application forms are completed. Loan application
well documented and application internalize must contain:
Name of the application
Full address
The type of loan and purpose
Duration of the Loan
Terms of repayment /amount and time installment
Signature of the applicant and
Date of application

2.7 Loan Processing

Loan Processing mostly involves the paper works. This is mainly done by accountant and yet should be
approved by sub or branch manager. The way loans are processed varies from micro fiancé institution to
micro fiancé institution. Some micro fiancé institution process loans to individuals where as other process
for groups or centers. In fact, the decision comes from that the institution pursues. Those institutions which
follow group lending methodology usually process loan for a center yet there are institution which claim to
have group mechanism, but process to an individual, in group. Most of such institution operated in urban
areas where there is a well-established bank networks (AEMFI 2002 p 13-14) .whatever polices and
procedure that a micro fiancé institution might pursue the fulfillment of the following steps must be assured:
Information on loan application is properly completed.
Loan applications are signed by both the applicant and the relevant person are approving the loans,

12
 usually; loan officer and sub or branch manages.
Loans to the center and each member are not exceeding the loan size ceiling.
Loan are requested only for the purpose that particular micro fiancé institution is willing to fiancé

2.8Loan Approval Procedures

Most of micro fiancé institutions approve loan for productive purpose. The reason is because income
enhancement is a positive and important indicator of poverty alleviation to which all development activities
are addressed. Yet there are practitioners who still argue that the decision as to loan use has to be left to the
borrowers. Their assumption is that borrowers do make rational decision as to the use of the borrowed
money. Although, there is no doubt that borrowers make rational decision we should not forget that this is a
loan and has to be paid back and hence, we should know what we have financed and the viability of the
scheme as well. Otherwise, we may end up in creating some money debt burdened communities. Therefore,
loan should only be approved and provided for activities which involve:
 Proper selection of activities
 Source of funding
 Detailed planning
 Implementation
 Saving component
 Evaluation ( AEMFI : 2002 P 15 – 17 )

2.9 Loan Approval Decision

Institutions differ widely on who makes credit decision. In some institution credit decision highly
centralized where as in other is decentralized. However in most micro fiancé institutions credit decision is
seems to be decentralized. Moreover, credit decisions are made either by loan officers or by groups and
center leaders. Both choices have who favor the approach that credit decision should be made by group
and center leaders argue the philosophical line that no one knows community members better about their
business behavior and characters than other community members .

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2.10 Delinquency Management

Delinquency is a situation that occurs when payment are past due. A delivery loan is a loan on which
payment are past due. Delinquency loan plan a critical role in micro fiancé institution’s expense: cash flow,
revenue and profitability. It is also resulting in slower turnover of loan portfolio and an ability to pay
expense due to reduce cash flow. If the loan principle is not recovered in schedule time, loan to other
borrowers could be made (AEMIF, 2002 p 27).
Delinquency loan also result of in postponed or lost interest revenue to determine the amount of postponed
revenue resulting from delinquent loans, the interest received in a given period is compared with expected
revenue in the period. The difference between the amount actually received in the period and the expected
revenue is the amount of postponed or lost revenue for the period (AEMIF, 2002 Page 28)
The central issue addressed is the measurement of loan delinquency and default in micro finance at top
management level.
Results of high delinquency:
 Lower liquidity: resulting to credit rationing, external credit dependence, reduced ability to
provide services that members want and need.
 Lower profitability: resulting to diminishing ability to provide for operational costs
including staff wages and slow buildup of institutional capital.
 Negative reaction: from members possible loss of good members, losing credibility affecting
the image of the institution. As delinquency increases, the growths of the institutions
decrease. ( Jean Thibotour,(2008)

2.11 Loan Follow up and supervision

Lending decision is made on sound credit risk analysis /appraisal and assessment of creditworthiness of
borrowers. But past records of satisfactory performance and integrity are no guarantee future, though they
serve as useful guide to project trend in performance. A loan granted on the basis of sound analysis might go
bad because of the borrower may not meet obligations per the terms and conditions of the loan contract. It is
for this reason that proper follow up and monitoring is essential. Monitoring or follow-up deals with the
following vital aspects:
Ensuring compliance with terms and conditions

14
 Monitoring end use of approved funds
Monitoring performance to check continued viability of operations
Detecting deviations from terms of decision
Making periodic assessment of the health of the loans and advances by nothing some of the key
indicators of performance that might include: profitability, activity level and management of the unit
and ensure that the assets created are effectively utilized for productive purposes and are well
maintained.
Ensuring recovery of the installments of the principal and interest in case of term loan as per the
scheduled repayment program.
Identify early warning signals, if any, and initiate remedial measures thereby avert in from possible
default.
Loan constitutes the largest asset in the balance sheet of micro fiancé institution. As it is so large relative
to other assets, micro fiancé institution must make an effort on ensure and maintain in quality. If its quality is
reduce, it affect the overall quality of portfolio could indeed be made at two stage before disbursing loans
and other after loan disbursement. Indeed the debate whether micro fiancé institution should follow up and
supervision of the clients business. Some argue that clients should be left alone as they should have in
dependence to manage their own affairs. Although, other does believe that clients should have that right,
they claim that micro fiancé institutions do have motivations to take on the supervision and follow up. The
motives come from the objective of maintaining high quality of portfolio and ensure high repayment rate.
These arguments have to go partly with the business skill management and ethics of hints. Moreover, the
nature and character of clients need also taken in to account before taking on one of the options The
decision on the other hand should also be analyzed along line of benefit derived from supervision).

2.11.1 Benefits of supervision

Supervision and follow up provide several benefits to institution among the following are the major
once:
 Enables institution to identify problems earlier
 Enables micro fiancé institutions to provide early assistance to the clients earlier
 Enables to manage cause of worries and default at early stage (AEMFI 2002 .P 12).

15
General problems for lack of supervision:

In micro-credit process if the loan is nonsupervisory properly may be affected a follows:-

a) The loan is not supervised closely; the member will not utilize it properly. So he will fail to develop
himself and as such he will not attend the meeting.
b) If loan is not supervised regularly, the loan will not be utilized in the right truck and as a result the
members will not be able to pay up installment. c)
If the loan is not supervised properly, problem arises in the repayment.
d) Confidence on each other and the discipline of the group is hampered.
e) Generally people will lose confidence in micro- credit process and will conceive wrong ideas.
(http://microfinanceschool.org/issue7,php#Gen-prob)

2.11.2Who does supervision and when?

Supervision and follow up is one of important tasks that should be performed if we are improving the
quality of loan portfolio. Micro fiancé institutions do not required material collateral to safe guard
themselves from the non-repayment of loans. This has been replaced by joint liability and responsibility,
which could be enforced though peer pressure (AEMFI, 2002.P22).

According to micro finance institution the objectives of supervision are better achieved of a micro fiancé
institution puts in place appropriate mechanism. Although, what is appropriate varies among institution and
the decision is left to each institution to adopt the relevant once. The following mechanisms are widely used:
Decide the number of clients needs to be supervised by each staffs. This usually goes with a micro
fiancé institution staff case load policy
Decide on the regular supervision time tables, i.e. frequency of supervision to particular groups or
centers.
Establish case book on which problems identified and solution given on the field are registered
Have formal format on which load /field officer / agent gives a report to the branch /sub branch managers
(AEMFI, 2002).

16
2.12 The role of staffs and clients supervision

Practice has shown that involving clients and staffs in supervision provides an immense befits to a
micro fiancé institutions. However it should be clear that the role of one party should not be expected to
substitute the role of the other. Rather by making, both parties to participate on supervision of micro fiancé
institution enhance efficiency of effectiveness. Each client in principle need to supervise and follow up what
his other follow is doing with amount of money taken as loan. Whether his follow group endorsed for
enterprises of his follow group members and managed well group members are ready to repay the loan.
If the following benefits occurred:
a) Performance of loan repayment will be enhanced
b) Risk of each group members that could have ban by non-repayment of loan by his/her follow is
dramatically reduced
c) Overall effects of (a) and (b) leads to the sustainability of both micro fiancé and clients

Chapter three

3. Research Methodology

3.1. The research Design

The study would be focuses on the assessment of credit management on Dedebit micro finance institutions
in case of Mekelle, Kebele11, and number2 branch. The study was used qualitative research approaches in
order to achieve the research objective.

3.2. Source of data

In order to get sufficient and relevant information for the study, the researcher was used both primary and
secondary data. The primary data would be collected from, employees of the institution and management on
the current situation of the institutions and performance of employee. The researcher was used secondary
data which collected from written document of the institution, manuals as well as internet.

17
 3.3. Sample techniques and sample size

Since the number of employee in the organization is 30 the researcher was used census sampling technique
method to collect data because this method avoids bias and allow the researcher to get real information for
each and every employee.

3.4. Method of data collection

Primary data would be collected using structural interview from credit mangers because, to get relevant data
and by using questioners from employees. In the questioners, the researcher was use both close- end and
open- end questions in such a way that they should generate important information on credit management
system of Mekelle,Kebele11, number2 branch of Dedebit micro finance institution.

3.5. Method of data processing

The process would be carried out in clear way to reach the objective of the study after the necessary primary
and secondary data have been collected and would be started by editing and classifying the collected data to
more meaning full and relevant data editing means the process of examining the collected data would be
Identify error and omission and to correct them regarding data classification the collected data would be
arranged and grouped in to similar categories.

3.6. Method of data analysis

The collected data would be analyzed by using descriptive analysis method according, tabular, percentage
and frequency count would be analyzed and interpret the data collect form the sample respondent.

CHAPTER FOUR

DATA ANALYSIS AND PRESENTETION

18
 4.1 DATA ANALISIS GAINED FROM EMPLOYEE RESPONSE

The data collected from the respondent through questioners were organized, analyzed and interpreted by
using simple excel tool. In this survey, 30 people participated from Mekelle, Kebele11, and number2 branch
of Dedebit micro finance Institution office. The researcher was used census sampling to collect data from
respondents and their responses were collected, organized, analyzed and interpreted as follows.

Table 4.1.1: Sex and Educational level of the respondent

Descriptions of options Respondents %

Sex

Male 8 26.6

Female 22 73.4

Total 30 100

Educational level

Master 1 3.3

Degree 7 23.3

Diploma 7 23.3

Certificate 15 50

Total 30 100

Sources: survey questionnaire 2015.

This research included the characteristics of respondent in terms of sex and education level during the data
collection process with questionnaire. .

The above table indicated that, 26.6 % of the respondents are male and the rest 73.3 % are female. With
regard to the educational level, there were 3.3%, 50% Master and Certificate respectively educational level
among the respondents. The analysis indicated that, 23.3 % and 23.3% of the respondents had degree and
diploma educational level respectively and the majority of the staff members are certificate holders that
constitute 50% of the total staff members of the institutions.

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Table: 4.1.2 Assessment of Credit Policy, update time
Description of Questionnaire Response options Respondent

Count %

1. Do you have credit policy in Yes 30 100

your institution?
No -

Total 30 100

I. If your answer is yes in Weekly 1 3.3

question 1, When the credit
policy updated? Monthly 9 30

Quarterly 1 3.3

Yearly 19 63.3

Total 30 100

Sources: survey questionnaire 2015.

This survey tried to analysis the existence of credit policy, updating of the policy. The above table indicted
that, 100 % of the respondent replied that the institution has its own credit policy, and none of replied that
the institution has not its own credit policy. This indicated that most of the employee of the institution
interacts with the credit policy and utilized it in their day to day work.

Based on the 30 respondents result, 63.3% of them said the credit policy updated on yearly bases and the
rest 30 % replied that, the credit policy updated monthly, and 3.3 % said that credit policy updated in
quarterly. This implies that yearly update of the credit policy helps the institution to know its strength and
weakness, and taking corrective action for those weaknesses and learned from that weakness to do beyond
that in order to not to repeat again through out the operation of the institutions.

Table 4.1.3 Assessment of Employee and Clients Capacity

Description of Questionnaire Response options Respondent

Count %

20
 2. Does the institution give Yes 25 83.3
training about its credit policy
No 5 16.7
for the employees?
Total 30 100

I. If your answer is yes in question Enough 24 80

2, what is your opinion about the
sufficiency of training to the Not Enough 6 20
employees?
Total 30 100

3. Is there any training about the Yes 30 100

loan utilization for credit
No _
beneficiaries?
Total 30 100

I. If your answer is yes in question Face to face individual 9 30

3, what are the training training
mechanisms?
Face to face group 21 70
training

Other - -

Total 30 100

Sources: survey questionnaire 2015.

From table 4.1.3, the research tried to find out the institution's employee capacity building on the credit policy a
of loan utilization for credit its beneficiaries. The finding indicated that, 83.3 % of the employee fully agreed
training on the credit policy. In addition to this, 80 % of respondents replied that, the training is sufficient and en
the rest 20% answered that, the training is not enough.

From table 4.1.3 the researcher also finds out, 83.3 % of the respondent agreed that the institution is giving
training about loan utilization for its credit beneficiaries. Regarding to the training mechanism, 30 %
answered the training mechanism is face to face individual, 70 % face to face group training. Based on the
finding, the institution is more focus on groups training than individuals. This may be related to in saving of
time, energy and human power for the training.

21
This research also tried to assess the respondent knowledge about the importance of loan approval
procedure. Their responses are summarized as follows:

It gives sufficient time to know about every customers profile and to meet the terms of necessary
legal requirements.

It makes the work easy, good for control and ensures accountability.

To decide the loan size by comparing the capacity of the beneficiaries’.

It minimizes risks and help employee to exercise level of authorities.

Table 4.1.4 Assessment of loan giving procedures

Description of Questionnaire Response options Respondent

Count %

5. Do you collect credit Yes 30 100

information from customer?
No - -

Total 30 100

6. Do you provide loan for Yes 30 100

individuals and group?
No - -

Total 30 100

7. If your answer is yes for Individuals 13 43.3

question 6, which loans perform
Group 17 56.7
betters?
Both

Total 30 100

Sources: survey questionnaire 2015.

The assessment of loan utilization procedures in this research focus on collection of information from
customer, loan provision on individuals and groups and loan performances. Based on the survey result, 100
% of the respondent replied that the institution collected every customer’s detailed information before the
loan provided. The institution collects different types of information regarding its clients and outlined as
follows:

22
 The clients full profile: Name, age , sex , family size and educational level

Clients permanent address , location and economic status

Plan of action how the clients to invest the loan and market

The working capacity of their customers, behavior of customers and their acceptance level.

This research finds out that, the institution provides loan for individuals and group of people. Accordingly
on table 4.1.4 indicated, 100 % of the respondent agreed that the institution provide loan for individuals and
groups. This survey also revealed that, 43.3 % of the respondents answered individuals loan performs well,
and 56.7 % respondents replied that of group loan is more perform better than individuals’. The group
performance is better because of the following reasons.

The group’s loan is higher and people also contribute additional resources (free labor, money and
time).

Group’s people have good access for information to link their products to market than individuals.

The group’s people have a good opportunity to discuss their challenges and future direction more
than individuals.

Table4.1.5. Assessment of loan Management and follow up

Description of Questionnaire Response options Respondent

Count %

8. Is there a good loan Yes 30 100

administration or follow up after
loan is provided? No -

Total 30 100

9. When Do you visit clients? Weekly - -

Monthly 29 96.7

Quarterly 1 3.3

Yearly - -

Other - -

23
 Total 30 100

Sources: survey questionnaire 2015.

As indicated in table 4.1.5 above, 100 % of the respondent replied that, the institution has a good loan
administration or follow up after loan provided. Some the mechanisms of loan follow up mechanisms are:
Credit officers help and visit individuals on their performance and motivate them.
There is also simple supervision on clients after loan provided.
There is also action plan for individuals and groups supervision on regular way to ensure effective
loan utilization and profitability.
There is also cluster /centre meeting to discuss with individuals and groups on the problems they
faced doing their business.
As indicated in table 4.1.5 above, 3.3 % of clients visited on quarterly, 96.7 % on monthly and no %
answered yearly. More clients visit done at the beginning of clients business and reduced as they become
more effective.

Table 4.1.6 Assessment of measures taken, when default occurred

Description of Questionnaire Response options Respondent

Count %

10. Do you give reminder to Yes 26 86.7

your borrower when they
default? No 4 13.3

Total 30 100

11. When the users default to re By enforcing to re pay the 26 86.7

pay the loan at repayment loan
schedule. What are the measures
taken by the institution? By writing off the loan 1 3.3

By selling their collateral 3 10

Other - -

Total 30 100

Sources: survey questionnaire 2015.

24
This survey also tried to asses giving reminder to borrower when they default and measure to be taken to
repay the loan repayment schedule. As indicated on table4.1.6, 86.7 % of the respondent agreed that the
institution gives reminder (oral and written) timely and the other 13.3% of respondent not agreed give
reminder to borrower when they default.

As indicated table 4.1.6, 86.7% respondent answered that enforcing to repay the loan, 10 % selling of their
collateral and 3.3 % mentioned others (negotiation)as measured to be taken by the institution to re pay the
loan repayment schedule from default borrowers. The Institution is also use the following process action if
the borrower did not correct their defaults timely and effectively:

The institution officers discuss the default issues with borrowers and put action plan for correction.

The institution also gives oral and written warning.

The institution also tries to negotiation with borrowers before it goes to court.

Lastly, the intuition takes the default cases to court after try all the above options.

4.1.7. INERVIEW AND OBSERVATION

1. For what purpose do you give loan?

According to interview of manager and observation dedebit micro finance institution provides loan for the
purpose of business, house construction, and group borrowers.

2, is there any training the institution gives to the customer? Also by what interval and when?

And in little beat there is training to their customer provided by yearly interval. However, this training is not
enough since the customer of the institution are illiterate .Based on the manager information implies that the
institution has an assignment to do more in the following years by training their customer. But sometimes
the institution manual training and loan officer gives interaction face to face individual or group decision by
the yearly interval.

3, is there any follow up or supervision the customer by the institution?

25
Based on the manager’s information the institution supervise and follow-up their customers how to use the
loan efficiently and effectively. But due to the customers lack of awareness this supervion and follow –up is
not adequate said the manager.

4, what are the problems in group lending?

The problems associated with group lending are due to there are different or Varity of idea, skills, decision
making, responsibility, accountability, and un limited liability. They need critical treatment due to the Varity
of the above terms on their day to day activity of the organization they happen a conflict and dis agreement.
Therefore, the group lending of the organization has its own advantage and dis aevantage.

5. Are all employee and customer are well informed that policy and procedure of the institution?

Somewhat even the institution tries to inform all employee and customer of the institution about the
policy and procedure.

This is not sufficient said the manager. Because all employee and customers should know the policy and
procedure of the institution very well.

CHAPTER FIVE

CONCLUSION AND RECOMMENDATION

26
 5.1 Conclusion
Based on the major findings of this study, the following conclusions could be drawn and brought to the
attention of the institution, university any other interested parties. The evidences in this study reveal the
following conclusion:
The overall institution has a good composition in terms of education composition and gender of
its employee. The institution is giving a better opportunity for young professional experts.
The institution has credit policy and these policies are updated per year.
It is also found that the institution has use different training employee mechanism. Accordingly,
the institution use face - to - face individual, face-to-face group training and both mechanism.
Generally, the institution is more focus on groups training than individuals. This may be related to
in saving of time, energy and human power for the training.
The performance of loan in groups is more perform well than individuals do. The institution has
also a good loan administration or follows up after loan is provided.

The institution uses different method of measures to re pay the loan repayment schedule from
default borrowers. Enforcing to re pay the local, writing letter, selling of their collateral and
negotiation are the measured taken by the institution.

The institution has the problem of follow up and supervision in little beat since the reason for this problem
is due to shortage of employee it is advised to employee additional employees.
The institution doesn’t mostly collect on the specified time period, rather it mostly collects mechanisms that
encourages it customer to pay on the specified time period. Example by giving prizes at the end of the loan
payments.
According to respondents of the institution most of the customers fulfill the criterion required to taken loan.
Almost all of the customers use the loan for business, house constructions
Most of the respondents said that there is problem in group borrowing that is due to idea skills un
limited liability creates conflict among the members. Therefore the institution should be train and
Provide critical awareness to their borrowers adequately to settle the difference.
Generally, dedebit microfinance activities have significant importance in the economy of developing
countries. The sector contributes a lot by minimizing unemployment by prove ding jobs opportunities for
those who are actively seeking jobs. Therefore, even though the operation is danger unless and otherwise it
strengthens its follow up and supervision on the activities of the customers rather than relying on group
members or court procedures.

27
 5.2 Recommendation

Since halite, kebele11 number2 branch of dedebit micro finance institution is one of the micro finance
institutions in mekelle; it must create its own core competency and must improve its credit management
system to attract more customers than competitors.
Based on the finding of this research, the researcher has recommended as follows:
The institution should revise and make sure its customers loan utilization plan before giving loan. This will
help to minimize the risk of default by using for unintended purpose.

The institution should provide loan for the purpose of business opportunities by considering people interest
and government development strategy to alleviate poverty at family level.
The institution must focus in giving training on entrepreneurship training to motivate youth to bring change
from the loan they taken before their engage on the actual business.
The institution should promote diversification of economic activities who take loan for income generating
activities. To do so it is better to create awareness that clients are engaged in diversified activities rather than
sticking in very similar activities.
The institution should undertake clear impact assessment of its loan utilization and profitability at
individuals and groups level. Then make correction based on the research findings and provide the findings
to policy makers. This also helps the organization to make corrective action on problems obtaining from the
assessment.
The institution has problem of giving training for its employee how to become competency to deliver adequate enough
service to the customer about the loan, but since the majority of its employees are illiterate, they need repeated
training so, the institution is advised to do this.

APPENDIX

References
1. Association of Ethiopian Micro Finance Institution (AEMFI). 2002
2. Burt Edwards, (2004), “Credit management Handbook.”ICM.

28
3. Carl Hycel. 1982. The Encyclopedia of Management. 3rd edition
4. Fabozzi. Financial Institution and Capital Marketing.
5. GemeehuDabiso. 2002. Training paper of loan management for Microfinance institution
6. Getaneh G (2005). Regulating Microfinance in Ethiopia: Making it more Effective. dedebit Credit
and Savings Institution (DCSI)
7. Girma (1996). Credit and repayment in women’s small scale enterprises; Maker ere University,
Kampala.
8. Horne, C. Van, (2007),” Financial Management and Policy,” New Delhi.
9. Kandkar and Khan (1998), targeted credit programmed and rural poverty in Bangladesh fighting
poverty with micro credit; New Delhi publishers
10. Ledger Woods. 1999. Principles of Credit management

11. Murdoch, J. (1999),”The Microfinance Promise, “Journal of Economic Literature, Princeton

University.
12. MullatDemeke. 2002. Association of Ethiopia Micro Finance Institution
13. Pandey, I. M. (2008),” Financial Management.” Vikas Publishing House (PVT) Ltd, New Delhi
14. Ross. 2002. Fundamental of corporate finance. 4th edition
15. Weston, J.F and Brigham E.F. (1982). Essentials of Managerial Finance.
16. Wolday A (2000). Networking Microfinance Activities in Ethiopia: Challenges and Prospects.
Occasional Paper No. 1 .AEMFI. Addis Ababa, Ethiopia

29
 MEKELLE University
College of Business and Economics
Department of Accounting and Finance
Dear respondents: this questionnaire is prepared to collect data on the issues related to the assessment of
Credit Management in Mekelle, Keble 11, and number2 branch of Dedebit microfinance institution.
Therefore, you are politely requesting to respond genuinely and honest because your response is the base for
the study. Whatever information you provide is strictly confidential and it is only for academic purpose.

We would like to thank you and your institution in advance

Instruction: write your response on the provided blank space and mark (✓) on the table box where
appropriate.

Part one: Personal data

Sex: Male Female

Educational level:

Master Degree Diploma Certificate

Part two: questionnaire related to credit management

1. Do you have credit policy in your institution?

Yes No

I. If your answer is, yes in question 1. When the credit policy updated?

Weekly Quarterly Monthly Yearly

If other: ____________________________________________________________________

2. Does the institution give training about its credit policy for the employees?
Yes No

I. If your answer is yes in question 2, what is your opinion about the sufficiency of training to the
employees?

Enough Not Enough

30
3. Is there any training about the loan utilization for credit beneficiaries?

Yes No

I. If your answer is yes in question 3, what are the training mechanisms?

A. Face to face individual training

B. Face to face group training

If other mechanisms: ____________________________________________________________

4. What is the importance of loan approval procedure?

___________________________________________________________________________________
________________________.

5. Do you collect credit information from customer?

Yes No

I. If your answer is yes in question 5, what type of information you collect?

6. Do you provide loan for individuals and group?

Yes No

7. If your answer is yes for question 6, which loans perform betters?

A. Individuals B. Group C. Both

I. If your answer for individuals or groups what is the possible reason for better loan performs?
_________________________________________________________________

__________________________________________________________________.

8. Is there a good loan administration or follow up after loan is provided?

Yes No

31
 I. If your answer is yes, how?

9. Do you visit clients regularly?

A, yes B, No

10. Do you give reminder to your borrower when they default?

Yes No

If your answer is yes:

i. What is your legal action :

ii. When is your legal action :

iii.

11. When the users default to re pay the loan at repayment schedule. What are the measures taken by the
officers?

By enforcing to re pay the loan

By selling their collateral

By writing of the loan

If others: __________________________________________________________________

32
 INTERVIEW FOR MANAGEMENT BODY
Part one: General question

1. Sex Male  Female

2. Level of education
a) Diploma
b) Degree 
c) Above 
d) Part two: Questions related to dedebit micro finance institution
1. For what purpose do you give loan?
2. Is there any training the institution gives to the customer? Also by what interval and when?
3. Is there any follow- up and supervision the customer by institution?
4. What are the problems in group lending?
5. Are all employee and customer are well informed the policy and procedure of the institution?

33