Browsing by Author "Faith James Keji"

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    Loan default and the sustainability of microfinance institutions: a case study of Finca Mukono branch
    (Uganda Christian University, 2026-04-16) Faith James Keji
    This paper examined how default on loans affects the financial sustainability of the Mukono Branch of FINCA Uganda, a microfinance institution (MFI) that operates in a semi-urban environment in Uganda. The study was based on the information asymmetry theory as proposed by Stiglitz and Weiss (1981) and aimed to test the role of institutional, borrower, and macroeconomic variables in causing defaults and the consequent impact on main sustainability indicators. The study used a mixed-method case study design, which involved gathering, and the triangulation of data on 36 employees through questionnaires, six in-depth interviews with key informants, and a review of the branch financial records in the years 202025. The data were analyzed using descriptive statistics, multiple regression analysis and thematic analysis. The results showed that there was a definite post-COVID recovery path, and Non-Performing Loan (NPL) ratios decreased, going to 18.0% in 2020 and 8.5% in 2025; Operational and Financial Self-Sufficiency increased to 115% and 110, respectively. Borrower-specific attributes such as multiple borrowing, low financial literacy, and health crises were also determined as the strongest predictors of default ( 0.45, p < 0.001). Other negative impacts were also significant with institutional (high workload of staff and lack of monitoring) and macroeconomic (post-pandemic disruptions and inflation) factors. The regression model was able to argue out 68 percent of the overall impacts on perceived sustainability (R 2 = 0.68, p = 0.001). The research finds that although loan defaults are a major challenge to the sustainability of MFI, specific management of client risks, institutional capacity enhancement and responsive measures to economic shocks can help ensure long term sustainability. Some of the recommendations made are to build capacity to enhance the capacity to screen borrowers and financial literacy programs, enhance staff capacity to monitor clients and promote credit information sharing across the sector to reduce over-indebtedness, which eventually builds the long-term financial inclusion agenda of MFIs in Uganda.