Implication of Credit Supervision Practices on Portfolio at risk of Microfinance Institutions in Tanzania

This study seeks to establish the implication of credit supervision practices on portfolio management of microfinance institutions in Tanzania. Utilizing multivariate regression technique over sampled 219 microfinance institutions from Dar es Salaam, Morogoro and Dodoma regions, it documents two plausible results. First, the study finds that timely loan release and number of borrowers per loan officer have positive and statistically significant impact on portfolio at risk of microfinance institutions. Second, it reveals that operation cost per borrower and provision of training sessions to borrowers have negative and statistically significant impact on portfolio at risk of microfinance institutions. These results suggest that microfinance institutions can diminish portfolio risks by (1) decreasing number of days for processing clients’ loan applications and releasing funds; (2) decreasing number of clients per each loan officer in order to increase efficiency of loan management of the officers; (3) increasing training sessions on various skills given to their borrowers which will increase knowledge and skills of clients on the best ways to keep their business records and proper utilization of funds, and so successful repayments; (4) allocating enough budgets for overall supervisory purposes including loan appraisal processes, disbursement procedures and collection of funds from their clients.