This study reviewed the effect of credit risk
management on the financial performance of microfinance institutions (MFIs) in
Nigeria. Utilizing a qualitative review methodology, the review found that
proactive risk assessment, thorough credit appraisal, proper loan monitoring,
and prompt loan recovery procedures are essential components of efficient
credit risk management, which has a substantial impact on MFI performance.
Credit risk management is also improved by well-defined regulations, qualified
personnel, and suitable technology infrastructure. The study cites difficulties
MFIs confront, including restricted access to credit information, insufficient
regulatory frameworks, and operational limitations. By addressing these issues,
financial performance and sustainability can be increased. Enhancing credit
information sharing systems, encouraging stakeholder cooperation, and offering
capacity-building initiatives are some recommendations. This study offers
insightful information that can help practitioners, regulators, and
policymakers create a climate that supports efficient credit risk management
while boosting financial performance and promoting Nigeria’s long-term growth.
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