Abstract:
The purpose of the study was to examine and establish the effect of credit policy and debt collection performance on savings and loans companies. This study was also to contribute to ways in which proper policies will be put in place to manage creditors. From the analysis of our findings it came to light that, credit policy has a correlation with debt collection. The data used in this study were collected from 57 respondents. The sample was gathered from 25 staffs and 37 customers. Questionnaires and interviews were the instrument of obtaining information. The study was guided by the following questions: do customers always meet credit requirement?, does credit policy ensure that credit and debt collection staff work as a team?, does debt collection methods used effectively and efficiently? The findings reveal that; cash discount, collection procedure, credit payment period and skills of debt collection staff have positive impact on the management of debt collections. Efficient implementations of the above policies would help in the recovery of all debt advanced to various customers. It was also evidenced that all stakeholders play an important role in improving credit policy and debt management of Multi credit financial institution.
Based on the above findings, the following recommendations have been made: Multi credit policy on credit should ensure that; the credit and debt collection staff work as a team, must have excellent communication skills especially when identifying business risks and how to minimize bad debtors.
The credit policy that is to be redesigned should ensure operational consistency and that its functions like approving and verification of loans should be broken down into two units; one verifies and the other monitors the implementation of the loan agreement. It should also involve effective initiation, analysis, credit monitoring and evaluation.
Multi credit debt collection performance levels should be a guide on how to carefully screen new and old customers seeking credit and redesign strategies from past experience. This will help Multi credit to meet obligations as they fall due. Management should also use cash discounts to lure debtors pay on time to avoid the accumulation of debts.
There should also implement an effective credit policy in order to achieve high debt collection in terms of returns.
