CREDIT MANAGEMENT.pdf - Christian Service University College

department with regards to accounts receivable collection. This collaborative partnership
will help these financial institutions stay ahead of the game and not be caught unaware
resulting in being saddled with bad debts which could in turn jeopardize the entire
survival of the company due to poor profitability, losses and mounting cash problems.
All in all, effective implementation of credit management practices are perceived by
many as an effective mechanism of minimizing the amount of capital tied up in debtors
and the exposure of a business to bad debts.
1.1 PROBLEM STATEMENT
The major concern of every lender is to ensure the safety of his money. In the business
world, loans are placed at a person’s disposal by a bank upon application and usually to
be repaid with interest on the stipulated date. There is therefore the risk of financial loss
to an institution if a customer or counterparty to a financial instrument fails to meet its
contractual obligation. One of the ways by which an institutions exposure to bad debts
could be minimized is the implementation and maintaining a set of credit management
practices.
The main problem with some MFIs credit facilities is the problem of loan recovery which
depends on the system of credit management. However, the question for research is
whether or not the implementation of these set of policies and procedures is really
fulfilling its purpose as an effective mechanism to minimize the amount of capital tied up
in debtors and the exposure of MFIs to bad debts.
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