TABLE OF CONTENTS
APPROVAL
DECLARATION .
ii
TABLE OF CONTENTS iii
LIST OF TABLES vi
LIST OF ACRONYMS vii
CHAPTER ONE 1
INTRODUCTION I
1 .0 Introduction 1
1 .1 Background of the Study
1 .1 .1 Historical perspective
1 .1 .2 Theoretical perspective 2
1 .3 Conceptual perspective 3
1 .1 .4 Contextual perspective 4
1.2 Statement of the problem 4
1.3 The purpose of the study 5
1 .4 General objectives 5
1 .4.1 Specific objectives 5
1 .5 Research questions 5
1.6 1-lypotheses of the study 5
1.7 Scope of the study 6
1.7.1 Geographical Scope 6
1.7.2 Content Scope 6
1.7.3 Time Scope 6
1.8 Significance of the study 6
1 .9 Operational Definition of key terms 7
CHAPTER TWO 8
LITERATURE REVIEW 8
2.0 Introduction 8
2.1 Conceptual Framework 8
2.2 Theoretical review 9
2.3 Review of related literature 10
2.3.1 .1 Credit standards 10
2.3.1.2 Credit risk controls 10
2.3.1.3 Collection policy 11
2.3.2.1 Financial Performance 1 3
2.3.2.2 Liquidity 14
2.3.2.3 Profitability 15
2.4 Related Studies 15
2.5 Gaps 18
CHAPTER THREE 19
METI-IODOLOGY 19
3.0 Introduction 19
3.1 Research design 19
3.2 Population of the study 19
3.3 Sample size 19
3.4 Sampling procedure 20
3.5 Sources of data 20
3.5.1 Primary sources 20
3.5.2 Secondary sources 21
3.6 Research instrument 21
3.6.1 Questionnaire 21
3.6.2 Interview guide 21
3.7 Validity and reliability of the instrument 21
3.7.1 Validity 21
3.7.2 Reliability 22
3.8 Data gathering procedure 22
3.9 Data Analysis 22
3.10 Ethical considerations 23
3.11 Limitations of the study 24
iv
CHAPTER FOUR .25
DATA PRESENTATION, ANALYSIS AND INTERPRETATION OF RESULTS 25
4.0 Introduction 25
4.1 Profile of Respondents 25
4.2 Credit policy 26
4.3 Financial performance 29
4.4 Relationship between credit standards and financial performance 30
4.5 Relationship between Credit risk controls and financial performance 30
4.6 Relationship between Collection policy and financial performance 3 1
4.7 Regression analysis 32
CHAPTER FIVE 33
DISCUSSIONS, CONLUSIONS AND RECOMMENDATIONS 33
5.0 Introduction 33
5.1 Discussions 33
5.2 Conclusions 35
5.3 Recommendation 36
5.4 Areas for further research 37
REFERENCES 38
APPENDICES 41
APPENDIX 1: SECTION A: DEMOGRAPHIC CHARACTARISTICS OF RESPONDENTS ..41
CHAPTER ONE INTRODUCTION 1.0 Introduction This chapter will include the background of the study. The background is drawn from the following perspectives i.e. historical, theoretical, conceptual and contextual perspectives. It also includes the statement of the problem, general objectives, specific objectives, research questions, scope of study, significance of the study and conceptual framework. 1.1 Background of the Study 1.1.1 Historical perspective The concept of credit policy can be traced back in history and it was not appreciated until and after the Second World War when it was largely appreciated in Europe and later to Africa (Ahmed. 2010). Banks in USA gave credit to customers with high interest rates which sometimes discouraged borrowers hence the concept of credit didn’t become popular until the economic boom in (USA in 1 885) when the banks had excess liquidity and wanted to lend the excess cash (Baxler, 2011). In Africa the concept of credit was largely appreciated in the 1 950’s when most banks started opening the credit sections and departments to give loans to white settlers. In Africa credit was initially given to the rich people and big companies and was not popular to the poor. Most suggestions were for the evaluation of customer’s ability to repay the loan, but this didn’t work as loan defaults continued (Humphrey, 2012). The concept of credit policy became widely appreciated by financial Institutions (Fl’s) in the late 1990s, but again this did not stop loan defaults to this date (Brand, 2010).
