Findings from AMFIU’s recent research reveal that many SACCOs and Microfinance Institutions (MFIs) in Uganda continue to struggle with sustainability and profitability. Key challenges include poor governance, fraud by staff and board members, weak financial management practices, and most significantly, high delinquency rates.
While a certain level of delinquency is expected in any lending institution, it must remain within acceptable industry thresholds. When not properly managed, delinquent loans can silently eat away a financial institution’s portfolio and eventually spiral out of control. Since the loan portfolio is the largest and most critical asset of any financial institution, maintaining its quality is essential for sustainability and growth.
High delinquency rates often stem from weaknesses across the entire credit management cycle. These include poor client mobilization strategies, inadequate loan application and appraisal processes, weak collateral and security management, substandard loan documentation, lack of loan monitoring and supervision, poor client relationship management, and absence of structured delinquency management strategies. These challenges are frequently compounded by lack of robust policies, tools, and systems for loan tracking and monitoring.
In response to these challenges, AMFIU with support from aBi Finance has been working to strengthen the capacity of 15 financial institutions in delinquency control and management. This initiative aims to mitigate the risks associated with poor credit administration by promoting best practices across the credit cycle.
The project is designed to improve the competencies of staff and board members in delinquency management, loan administration, and portfolio management. It also supports the full implementation and adherence to risk management frameworks and tools.
The intervention began with comprehensive institutional assessments, portfolio audits, and review of existing credit policy manuals. These assessments evaluated areas such as governance, information management systems, financial performance, product offerings, outreach, and staff capacity.
The resulting reports revealed both institution specific and cross-cutting challenges. These insights informed the development of tailored capacity-building interventions and training materials aligned with the identified needs. Through this support, SACCOs and MFIs are better positioned to manage risk, enhance their portfolio quality, and move toward greater sustainability.
We recently concluded Delinquency Management trainings, supported by aBi Finance, and we are confident that the participating institutions are now better equipped to manage credit risk, improve loan performance, and build healthier, more sustainable portfolios.