When we come to Ethiopia the government appreciate and support micro finance institution, According to proclamation number 40/1996 of the federal government of Ethiopia, micromanage business means an activates that extending credit, in cash or in kind to peasant (Beanie, 2007). To under take proper manipulation of funds, financial institution practices credit management activities. Credit management involves many activities ranging from credit investigation to contract with borrowers, appraisal review and follow up, documentation nursing, covers and write offs, having two main functions: Those are credit sanction (Provisions) and credit follow up functions which are valuable in managing credit it risks, improves return from credit and making proper credit decision of the institution (Yardage, 2007).Currently there are around 30 licensed micro finance institution in Ethiopia working both rural and urban areas so this study would be conducted on Aroma credit and saving micro finance institution which was established in 1995 (COMMITS, 2010). Therefore, this study tries to examine the issue of credit management in micromanage institutions in he case of Aroma credit and saving Share Company on Jimmy branch. 8 Micro finance is recognized as an effective tool to fight poverty by providing financial services to those who do not have access to or are neglected by the commercial banks and financial institutions finances service provided by micro finances institution, generally include saving and credit.
According to an estimate, currently 67. 6 million people around the world have access to micro finance 0. Whom.Manifestation. Org). Aroma credit and saving micromanage insinuation operates with in Aroma and Addis Baby more than 50 branches. To day Aroma credit ND saving Share Company was established in 1995 being named Aroma Rural credit and saving scammed development. After 7 years of operation in November 11, 2002 Jimmy branch of Aroma credit and saving Share Company was established.
To reach out its services to the other parts of the country, there is a plan to establish its branches in all over the Aroma region. 9 Micromanage in Ethiopia has been established in Accordance with the proclamation issued by the national bank of Ethiopia in 1996.Micromanage is one of the financial institutions that provides loans to clients to help them engage in productive activities and to raise their mall business. Most of micromanage institutions approve loans for productive purpose, because income increment is positively indicator to which all development activities are addressed (Daniel, 2010). Credit management is the most important activities in micro finance institutions. An attending credit management policies and procedures makes it sound at the time of managing credit risk and credit decisions.
Umlaut (2003) argues that if you not follow the credit management policies and procedures one can not think of managing credit risk and at the same time credit decision will be come arbitrary subject to individual discrimination and judgment.The group base lending method is not effective in achieving the micromanage objective, because due to default payment is made by the group members. In addition the beneficiaries who use this method also face a problem in the repayment of loan, the rest who pay regularly were enforced to pay the default amount (Amaze, 2010). The researcher observes most customers did not show progress and some of the m become rent suckers.
This makes me to propose for study. Even though some of them show progress and change to high level. So what would be the source for this? Is that due to ineffectiveness of credit management of micro finance institution or not?Therefore, the researcher motivated to study related to credit management practice in Aroma credit and saving micro finance institution by answering the following basic questions. 10 1. What are the activities practiced in credit management of institution Aroma micro finance institution, in Jimmy branch? 2.
What method the institutions use to follow up the loan? 3. What polices and procedures the institution follows? 4. What are the monitoring mechanisms to collect credit in the institution? 1 . 4. 1 . General objective The main objective of the study is to examine the credit management of credit management in micromanage institutions on Aroma credit and saving Share Company in Jimmy branch.
1. TO assess the activities practiced credit management Of the institution. . To assess the effectiveness of polices and procedure the institution follows in providing loans. 3.
To assess the methods of the institution uses to follow up loan. 4. To identify the monitoring mechanism used by the institutions to collect credit 11 The importance of this study is to enhance the competitive position of Aroma credit and saving micro finance institution by finding ways that improve the credit management system of the institutions. The researcher also believes that the result of this study was pave the way for the clients of the institutions, also for the institutions and additionally serves as reference for other researcher.