ASSESSING THE IMPACT OF LOAN RECOVERIES ON THE FINANCIAL PERFORMANCE OF MICROFINANCE INSTITUTIONS

Microfinance institutions (MFIs) play an essential role in fostering financial inclusion by extending credit and other financial services to low-income individuals and small enterprises that are typically excluded from traditional banking systems. In Malawi, MFIs such as Vision Fund Malawi have become vital instruments for poverty alleviation and economic empowerment by providing microcredit, savings opportunities, and financial literacy training. Despite their social mission, the financial sustainability of these institutions depends heavily on the efficiency of their loan recovery mechanisms, which determine their ability to maintain liquidity and operational stability in the face of repayment challenges.
This study investigates the impact of loan recovery practices on the financial performance of Vision Fund Malawi, with a particular focus on its Lilongwe branch. Specifically, it examines how the institution’s loan recovery strategies influence key performance indicators such as profitability, liquidity, and operational sustainability. The research also seeks to uncover the internal and external challenges that hinder effective loan recovery, including client default, inadequate monitoring, and economic factors affecting borrowers’ repayment capacity.
Using a mixed-methods approach that combines both qualitative and quantitative techniques, the study analyses financial data, institutional records, and stakeholder perspectives to assess the effectiveness of current loan recovery mechanisms. The findings aim to establish a clear link between recovery efficiency and financial performance, providing evidence-based insights into how improved recovery strategies can enhance institutional sustainability. Ultimately, the study aspires to contribute to the broader discourse on microfinance management by recommending practical measures to strengthen credit management, reduce default rates, and promote resilient financial systems. The insights generated will not only support Vision Fund Malawi’s operational resilience but also inform broader policy and practice among MFIs striving for sustainable financial inclusion across Malawi’s economic landscape.