CREDIT MANAGEMENT AND FINANCIAL INCLUSIVITY IN MICROFINANCE INSTITUTIONS: A SYSTEMATIC REVIEW

Abstract

Microfinance institutions play an importance role in promoting financial inclusivity by providing broad range of financial services to the underserved population. The quest for inclusive finance gave rise to micro credit and later microfinancing. Credit management is essential for microfinance institutions (MFIs) to attain financial sustainability while ensuring that clients receive appropriate financial products. Lifting the poor out from poverty through financial and social inclusion is the ultimate target and raison d'etre of microfinance Institutions. The study was set to systematically review the impact of microfinance institutions’ Credit management on the financial inclusivity in Nigeria. Several researches on the related topic were analysed to identify best practices in credit management that can improve financial inclusivity, reduce default rate, and increase MFI’s overall financial sustainability. It is surprising that despite all the Government efforts and programmes to reduce the number of people living in abject poverty and include them to the traditional banking system, limited researches exist on how Credit management of the Microfinance Institutions impacted on the financial inclusivity. The research was able to establish that microfinance credit management has a significant impact on financial inclusion in Nigeria. This systematic review synthesizes existing researches on credit management and financial inclusivity in MFIs, examining the intersection of these two critical aspects. We analysed several studies published between 1990 to 2023 and identified that credit appraisal, credit scoring, credit officer behaviour and client selection, financial literacy and the use of Fintech are factors that are fundamental to achieving success in credit management in MFIs and they have direct relationship with financial inclusion. The paucity of exclusive research on the contributions of Microfinance Institutions in including those excluded by the traditional banks in Nigeria makes it difficult to ascertain the proportion of Nigerians that have accessed credit because of the existence of Microfinance Institutions’ Credit Management.