Microcredits Management Practices: A Critical Success Factor for Rural and Community Banks

Microcredits are the largest assets and the main sources of income to rural and community banks in Ghana. That notwithstanding, microcredit is relevant to rural and community banks in Ghana but it is risky and expensive to manage. Based on a review of extant literature, this study aims to demonstrate how microcredits are managed in rural and community banks. This was achieved by examining literature on the criteria used in managing credit worthy clients, the effectiveness of the loan disbursement procedures, the extent to which the banks educate and supervise the customers and problems encountered in recovering bank loans granted. The review indicates that the bank had higher default rate as a result of the high interest rate and time of making credits available to the beneficiaries, hence, operating far below the expected recovery rate. It was recommended that banks should be mindful of the time they give out credits to the clients to meet the purpose for which loans were taken by the clients. It was also recommended that banks should adopt innovative lending methodologies such as group lending and dynamic lending to joint-liable group to solve the problem of high default rate.