Determinants of Non-performing Loans at Kenneth Consultants International Management Consultants Harare, Zimbabwe

Abstract

Lending money is the main traditional function of Microfinance Institutions, and this aspect of lending to date. However, loan defaults among Micro Finances Institutions remain high leading to financial distress of the Micro Finances Institutions which may eventually cause collapse. The study researched whether Interest rates, Information Technology Systems, credit evaluation and collection policy have an effect on loan repayment and how best to manage them so as to reduce loan defaults. Thus, the study sought to assess the ways of managing non-performing loans in Zimbabwe using Kenneth Consultants International Management Consultants as a case study. This study adopted a mixed methods research design with a population of 167 credit controllers and Loans officers within Kenneth Consultants International Management Consultants and a sample size of 69. The researcher used stratified sampling and within the strata a simple random sampling procedure was used. Secondary data was collected on all the mentioned variables which are interest rates, Information Technology Systems, and credit evaluation and collection policy used by Kenneth Consultants International Management Consultants to see how they affect non-performing loans. The data which was collected was analyzed using both descriptive and inferential statistics from multiple linear regression analysis using a Statistical Package for the Social Sciences (SPSS) software package. The findings were presented in tables and figures. The findings were presented in tables and figures. The study’s findings established strong, positive and good linear relationships between Non-performing loans and Information Technology Systems, interest rate, Collection Policy and a weak position relationship between Non performing loans and Credit Evaluation. Strong, positive and good linear relationships between Non-Performing Loans and Information Technology Systems, interest rate, and Collection Policy were also adduced. The study concluded that there is a positive relationship between Non-performing loans and Information Technology Systems, interest rate, Collection Policy and Credit Evaluation. The study recommended that there is need for microfinance institutions to apply better Information Technology systems for efficiency and accuracy to reduce non-performing loans, also to apply efficient and effective credit risk management that will ensure that loans are matched with ability to repay and minimize on their interest rate spread so as to reduce loan default.