FACULTY OF COMMERCE

NAME: MANGONGO BATSIRAYI

REG NUMBER: L0160425T

RESEARCH TOPIC: AN INVESTIGATION ON THE PERCEIVED

RISKS OF EXCHANGE RATE VOTALITY ON MICROFINANCE

INSTITUTIONS: A CASE OF STUDY OF HARARE, ZIMBABWE

LECTURER: DR SIMANGO

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 RESEARCH PROPOSAL

1.1 Background

Business is all about risk taking. However, the level of risk from one industry to another varies and it

depends largely on the nature and services provided by the organization. Banking business worldwide is

exposed to more risk than any other business concern as a result of their trading in money market

instruments. Though, some Microfinance Institutions (MFI) does not take deposit, but operate through

grants and donor fund. However, majority of them (MFI) are deposit taking organization just like a

conventional bank. Hence, as a result of accepting deposit and giving of credit, the MFI are therefore

exposed to risks that are inherent in their line of business. In order to prevent the occurrence of distress in

financial sector as experienced by conventional banks in some countries in the past, risk management in

MFI need to be considered now. According to Oluyombo and Ogundimu (2006), MFI are not banks, even

though, some seems to work like banks while others may be called Microfinance Bank (MFB), but their

services and products are peculiar and targeted to the low income earners. Hence, the need for overview of

microfinance before risk issue is examined.

CONCEPTUAL CLARIFICATION

There is need to examine some concepts like microfinance, features of microfinance, risk and risk

management in this paper.

1.2 BACKGROUND OF THE STUDY

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Overview of Microfinance

According to Asian Development Bank (2000), microfinance is the provision of a broad range of financial

services such as deposits, loans, payment services, money transfers, and insurance to poor and low-income

households and their micro enterprises. Microfinance services are provided by three types of sources:

formal institutions, such as rural banks and cooperatives; semiformal institutions, such as non-

governmental organizations; and informal sources such as money lenders and shopkeepers. Institutional

microfinance is defined to include microfinance services provided by both formal and semi-formal

institutions. Microfinance institutions are defined as institutions whose major business is the provision of

microfinance services.

Otero and Rhyne (1994) defines microfinance as a revolution that involves the large scale provision of

small loans and deposit services to low-income people by secure, conveniently located and competing

commercial financial institutions thereby generating the process needed to democratize capital. This

definition means that the numbers of microfinance institutions should be enough to meet the needs of low

income earners in the nation through the provision of loan facilities and to give room for healthy

competition among them. Robinson (2001) described microfinance as small-scale financial services-

primarily credit and savings-provided to people who farm or fish or herd; who operate small enterprises or

micro enterprises where goods are produced, recycled, repaired or sold; who provide

services; who work for wages or commissions; who gain income from renting out small amounts of land,

vehicles, draft animals, or machinery and tools; and to other individuals and groups at the local levels of

developing countries both rural and urban. This definition is encompassing as it tries to state those who

may benefit from microfinance institutions and also inform that developing countries need microfinance

institutions more than developed countries and especially, that microfinance is meant for those operating

small and micro enterprises.

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Microfinance has been described as an economic development approach intended to benefit low-income

women and men. Lidgerwood (2000). It means that the purpose of microfinance is to reach the low

income earners either in the urban or rural areas with financial services that will enable them create

wealth without any discrepancy as to the sex of such person.Ndiaye (2005) opined that access to

improved financial services – access to more and better ways of turning savings into lump sums –

helps poor people from sliding deeper into poverty and helps them lay foundations for their ambitions to

better themselves and their families. Microfinance is about providing financial services to the poor who

are traditionally not served by the conventional financial institutions. Three features distinguish

microfinance from other formal financial products. These are: (I) the smallness of loans advanced and or

savings collected (ii) the absence of asset-based collateral, and (iii) simplicity of operations. Central

Bank of Nigeria (2005). This give a clue that the CBN is aware that there are people that are not served by

the conventional banks because the loan requires by them is very small compare to the activities and loan

portfolio of these banks. Microfinance institution is now a growing phenomenon all over the world. It is

emerging as a rapidly growing financial services industry worldwide as a solution to the crippling effects

of the conventional banks interest on the poor and those operating micro and small scale enterprises

(MSSE).

Microfinance can therefore be defining as an economic approach to take financial services to those that

are hitherto un-reached at a reasonable fee that is affordable and economic to the users of such services,

and also, using funds from the providers of financial services to generate adequate returns for the users,

thereby building up their enterprises and creating employment opportunities which will reduce the

poverty level in the economy. Microfinance is a holistic approach that has been used in different

countries to alleviate the plight of MSSE both in the rural and urban areas in accessing fund as at when

required which was not possible from the conventional banks.

Risk

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Risk can be examined both internally (within the MFI operations) and externally (factors beyond the

control of the MFI). Van Horne (1983) defines risk as the possibility that the actual return will deviate from

that which was expected.

1.3 STATEMENT OF THE PROBLEM

When MFIs fail to manage the risks well, it will likely fail to meet its social and economic

objectives. When poorly managed risks begin to result in financial losses donors, investors, lenders,

borrowers and savers tend to lose confidence in the organization and funds begin to dry up. When funds

dry up, MFI cannot able to meet its social objective of providing services to the poor and quickly goes out

of business. Managing risk is a complex task for any financial organization, and increasingly important in a

world where economic events and financial systems are linked. Global financial institutions and banking

regulators have emphasized risk management as an essential element of long-term success. Rather than

focusing on current or historical financial performance, management and regulators now focus on an

organization’s ability to identify and manage future risks as the best predictor of long-term success (Stein

wand, 2000). The risks that hold back the growth of microfinance can be either from internal or external to

the institution. These risks can be different in their effect. Some of them are severe and bring high effect

on the financial viability and total operation of micro finance institutions while others are low. However,

these risks can hinder the development and the contribution of microfinance sector for economic growth.

Henceforth these risks ought to be identified so as to give them a cure that uphold the growth and

performance of the microfinance and help them in achieving their objectives. Studies carried out so far

have different in their aim and conclusions.

Some of them depend on a single micro financial institution and others rely on a single type of risk that the

institutions face. For instance, Amaya (2012) focused only on credit risk assessment in the microfinance

industry in Vietnamese while, Marrez and Schmit (2009) focused on credit risk analysis in microcredit.

According to (Bashara, 2014), microfinance in Pakistan faces among others credit risk, liquidity risk,

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fraud-honesty of MFI staffs and client especially at loan staff level, interest rate risk, political interference

and others which totalled to twenty-seven risks.

In Zimbabwe poor people have a limited access to loan from banks as they lack adequate collateral. This

makes micro finance institutions preferred source of finance as compared to formal banks. Since these poor

people get financial services from micro financial institutions well-functioning of these institutions should

be given due attention. There are a number of factors that impede the well-functioning of these institutions.

Hence these factors should be clearly assessed, identified and ranked microfinance institutions in order to

provide appropriate solutions for the identified factors. Therefore, this study differs from prior studies in

scope and will try to find out the risks that affect the performance of microfinance.

1.4 OBJECTIVES OF THE STUDY

The general objective of this study is to find out the severity of risks that micro finances encounter in

their business.

Specifically, the study aims:

 To know the sources of risks in microfinance institutions

To investigate the highest and the lowest severe risks in microfinance institutions.

To examine the risk mitigation mechanisms used by microfinance institutions.

1.5 Research Questions

This study attempts to answer the following questions:

1. Do the institutions’ staffs understand risk and risk management?

2. Have the institutions clearly identified the potential risks relating to each of their declared aims and

objectives?

3. Do the institutions efficiently assess and analyse risk in general?

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4. Do the institutions have an efficient risk monitoring and controlling system?

5. Do the institutions have efficient risk management?

6. How the institutions leverage or hedge their risk exposure to exchange rate volatility

1.5.1 Objective of the Study

The main objective of this concurrent mixed approach study is to empirically assess the performance of

sample micro finance institutions in credit risk management case of Harare.

1.5.2 Specific objectives

 To evaluate the credit risk management practices of selected micro finance institutions in Harare.

♦ To assess and identify the possible sources of credit risk in micro finance institutions.

♦ To see the efficiency and effectiveness of institutions in internal credit quality review to manage credit

risk.

 To assess the institution’s practice in credit administration and loan documentation procedures to manage

credit risk.

To recommend alternative solutions for the actual problems that will be identified by this research.

1.6 Scope and Limitation of the Study

The researcher believes that the findings of this study will be more productive if it can be conducted on all

micro finance institutions in Zimbabwe. However, due to time and financial constraints, it is out of the

reach of the researcher to incorporate all micro finance institutions in this study. Due to this, the paper is

limited to purposively selected micro finance institutions in Harare. Besides, the research is also subjected

to limitation of empirical research because no more access of previous research on the issue of micro

finance institutions performance in credit risk management especially in Zimbabwe.

1.7 Significance of the study

The researcher believes that the result of this research will contribute the following significances.

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This paper could be used as an initiation for those who are interested to conduct a detailed and

comprehensive study regarding the performance of micro finance institutions in credit risk management

practice.

It will enable the governing body, specifically the managements, and the higher responsible body, risk

management department of the institutions to be aware of about credit risk management and its effect on

growth of institutions income.

1.10 LITERATURE REVIEW

1.10.1 Theoretical Review

According to risk management frame work in micro finance institutions by GTZ (released in 2000) risk is

an integral part of financial services. When financial institutions issue loans, there is a risk of borrower

default. When MFI collect deposits and on-lend them to other clients (i.e. conduct financial

intermediation), they put clients’ savings at risk. According to GTZ frame work any institution that

conducts cash transactions or makes investments risks the loss of those funds. Development finance

institutions should neither avoid risk nor ignore risk. Like others financial institutions, microfinance

institutions (MFIs) face risks that they must manage efficiently and effectively to be successful. If the MFI

does not manage its risks well, it will likely fail to meet its social and financial objectives. As Nancy et al.

(2001) noted when poorly managed risks begin to result in financial losses, donors, investors, lenders,

borrowers and savers tend to lose confidence in the organization and funds begin to dry up. When funds

dry up, MFI is not able to meet its social objective of providing services to the poor and quickly goes out of

business. Nancy et al. (2001) also noted that managing risk is a complex task for any financial

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organization, and increasingly important in a world where economic events and financial systems are

linked.

Global financial institutions have emphasized risk management as an essential element of long-term

success. Rather than focusing on current or historical financial performance, management and regulators

now focus on an organization’s ability to identify and manage future risks as the best predictor of long-term

success. Therefore, since micro finance institutions are part of these financial institutions they are also be

aware of about risk particularly credit risk they face and the way how to manage these risks. On the other

hand, microfinance institutions (MFIs) were established to fill the gap in the financial services sector by

providing funds to the poor and lower income group and thus alleviating poverty and enhance their

business activities. The MFIs also provide funds for start-up business or for working capital (Woller et al.,

n.d). In addition, some MFIs also provide funds for non-business activities such as for education and

emergencies purpose. In doing so agency problems like, moral hazard and adverse selection of clients exist

because of information asymmetries.

Information asymmetries are the main obstacle for MFIs to provide loans to clients. This finally result

credit risk which is the one that negatively affect the performance of MFIs (Nawai 2010). Therefore,

efficient credit risk management is required. According to Silwal (2003) to minimize these problems

financial institutions usually requires business proposal, borrower past credit information and collateral

before approving the loan. MFIs also offer credit through group-based lending method to mitigate agency

problems, moral hazard and adverse selection and to replace the collateral requirement.

In group-based lending, borrowers must form a group before applying loans and they also responsible to

other loan membeill be denied access for the next loans.

According to Adewunmi (2005) to survive in today’s very competitive and turbulent economic and social

environments, business and financial institutions in particular must learn to live with risks by intelligently

and professionally managing them (risks). Risk is the probability that the consequence of an event will be

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different from the original plan due to certain factors and that the outcome may not be in the interest of the

planner. It should be noted that there would be no risk where there is no exposure and uncertainty. Where

outcome of a decision can be predicted with 100% level of accuracy without any exposure, then risk will

be absent. However, in today’s business world, the outcome of any plan and/or decision is based on many

parameters and economic factors such that MFI are exposed to outsider and there is no guarantee that all

loans and advances will be paid as at when due, hence risk is present in MFI.

RISKS IN MICROFINANCE BUSINESS

Like any other business organizations, those involved in microfinance business are also exposed to some

peculiar risk. Although, their (risks) names may seems to be the same with other sector of the economy.

However, these risks affected MFI in different ways.

Risk Factors of Microfinance Institutions

The following factors brought about a different risk for MFI compared to other conventional banks.

I. MFI services and products are targeted to the poor and low income earners in the society.

ii. Most clients of MFI do not have physical assets (house, land, automobile, plant and

machinery) and financial assets (share, bond, stock and debenture certificates) to pledge as

collateral for loans and advances collected.

iii. There is no supportive regulatory and supervisory policy framework on the part of some

government which lead to physical and economic challenges for MFI.

iv. Where regulatory framework exists, the peculiarity of MF business in most cases is not taken

into consideration. In such country, MFI and other banks are regulated under the same

policy.

v. The ownership structure of MFI is dominated by donors in many countries instead of private

investors as owners. (MFI are dominated by private ownership in Zimbabwe).

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Major Risks in Microfinance Sector

Haven’t considered the risk factor of MFI, the question that follow is what are these risks? Berenbach and

Churchill (1997) and Lidgerwood (2000) identified four main areas of risks that are peculiar to MFI as:

Portfolio risk, Ownership and governance risk, Management risk and New industry risk. Adewunmi

(2005) recognized risks like: Credit risk, Operational risk, Interest rate risk and Liquidity risk as those

affecting financial institutions. However, this paper is of the opinion that Liquidity risk, Credit risk, Foreign

exchange risk, Ownership return risk and Operational risk are those that affect MFI directly and they are

discussed below.

Figure 1. Major Risks in Microfinance Sector

Liquidity

Risk

Ownership
Credit Risk Return Risk

Operational Foreign Exchange

Risk Risk

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Liqutiy Risk

This is the risk associated with meeting regular and unplanned high withdrawals by large depositors who

are always few in numbers. Some MFI get funds from mandatory legal deposit from banks and government

at different levels. For such MFI, a change of government or change in government policy may reduce

available fund to MFI considerably, which possess liquidity risk to them. Liquidity risk will also arise

through donor fund which the donors might call back for some period or suspend forever. In such case, the

financial base of such MFI will be threatened.

Credit Risk

Oilfield and Santomew (1997) opined that credit risk arises from non-performance by a debtor. It may arise

from either an inability or an unwillingness to perform in the pre-committed contracted manner. This can

affect the lender who underwrote the contract, other lenders to the creditor, and the debtor’s own

shareholders. This is the risk associated with default in loan repayment as at when due or the uncertainty

of meeting financial obligations by client at the right time. This risk is pronounced in MFI as a result of

inadequate collateral for loan disbursed if the borrower is unable to pay due to financial constraint and/or

complete refusal to pay.

Credit risk is not limited to unrepaid loans and advances alone, but extend to those loan applications that

were turn down by MFI, because it may hinder their growth and cause reduction in size, earnings and

profitability.

Ownership Return Risk

It is apparent that MFI cannot boast of profit like the conventional banks. Where the owners of MFI are

desirous of getting a sizeable return on their investment in a short time, which is common in a private

ownership led businesses; this may lead to unhealthy practice in the operation and management of MFI so

that appropriate return can be given to the owners.

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Actually, this risk is in force from the inception of MFI except the owners see their investment as part of

their modest contribution in alleviating the plight of the poor at the short run before dividends could be

declared. However, this is not the case because average investors want adequate return from the

investment at shortest possible period, or else, the fund will be invested in another line of business with

less risk and better return.

Operational Risk

Adewunmi (2005) defined operational risk as the risk of loss resulting from inadequate or failed internal

processes, people and systems or from external events. However, the operational risk of MFI essentially has

to do with the employee who works in the organization. In most nations, banks’ employee earns relatively

more than many other sector of the economy.

If employee of MFI sees them self as banker and form their mind set, it will create a disorder and

operational breakdown. It is expected that this will lead to agitation for better welfare package and may

tend towards unionism which hamper the operation of MFI since they will found it difficult to pay similar

remuneration like the conventional banks and other notable financial institutions.

Foreign Exchange Risk

Most MFI, especially those in developing countries source for funds from international

organization/donor in foreign currency but lend such fund in their local currency. Despite lending in

local currency, the repayment to the agencies/donors will always be in foreign currency. As a result of

inconsistency in foreign exchange policy in most developing nations, at the time the loan is due for

repayment, the exchange rate would have gone up, which will have made it impossible for MFI to earn

profit from the fund. Repayment may have to be met from another source which may wipe out depositor’s

funds if adequate care is not taken.

RISK MANAGEMENT

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 Risk management (RM) is a term that is synonymous to different area of human endeavors. Risk

management was defined by Biffa (1990) as the planning and controlling of all the

conceivable elements of risks which are inherent in the daily operations of an organization in order to

ensure the organization’s continued existence as well as the realization of its set goals and objectives’.

7 Meyer (2000) opined that in managing risk, banks must decide which risks to take, which to transfer and

which to avoid. If banks have options as to their risk exposure, do MFI have such options?

Risk Management Tools

Risk need to be managed in MFI to avoid mishaps, hardship and loss of financial and human assets and to

guarantee continuous supply of loanable fund to the end user as at when needed. According to Oilfield and

Santomew (1997), it has been argued that risk is an essential ingredient in the financial sector and that

some of this risk will be borne by all but the most transparent and passive institutions. In short, active risk

management has a place in most financial firms. Risk management is an integral part of monitoring and

evaluating both liquid and illiquid assets and depositor’s liabilities of MFI to ensure the sustainability of

the industry. It should be understood from the outset that risk cannot be managed in any MFI if the

management did not set a goal in that direction. Therefore, the first thing to be done is that there must be a

written goal and drive from the owners and managers as to the need to manage risk on daily basis before

they arise and/or as they become known. Furthermore, the management should put in place a risk

management policy and procedures covering all areas of their microfinance business, including those areas

they (MFI) intend to venture into in the nearest future.

The policy should be followed in managing risks as they are identified in the industry or in their own

location, but not necessarily until it affects the business negatively. Management should also be ready to

review the RM policy and procedures at regular interval especially when there is change in regulation,

economic policy and other indicators that may affect their business locally and internationally. The need for

investment strategies and guidelines cannot be over emphasized, because this will help considerably to

manage credit risk. Not all investment opportunity presented to MFI should be financed as a result of the

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volatile of the industry or trade that may be involved. In this case, selected trading should be identified,

especially those with low risk profile. However, this depends on the deposit base of the MFI, location and

her source of fund. A motivated employee is the one that will defend the course of his or her employer. Risk

can never be managed without the employee, hence MFI management should be ready and willing to

properly remunerate and motivate the workforce. The motivation should not be limited to financial reward

alone, but it should include an open acknowledgement of the employee who works very well in the

reduction of the firm’s risk without compromising the business ethics. From economic point of view, risk

should be prioritized using a simple scale of preference in handling them (risk).

Although, all form of risk should be managed, but the impact of these risks on MFI business differs

considerably, hence these risks should be analyzed and given their appropriate scale. For example,

ownership return risk must be given higher priority, if not; all other risk cannot be managed if the owners

agitate for more return on their investment. Prioritization of risk will help the MFI management to know the

level of resources that will be deployed to each risk and the likely effect on their business. If this is done,

the owners and management will not be caught unaware when these risks are about to occur and/or

increase. Sound internal control system (ICS) is another tool for risk management which has proved to be

necessary and reliable in any financial institution.

The ICS should be able to monitor, review and evaluate all business processes on regular basis to be able

to determine the effectiveness or otherwise of the processes in tracking risk. This process is very essential

because risks are assumed out of the daily business operation as a result of mistake, incompetence, fraud

and lack of concentration by one or more personnel that do not do one thing or the other during or after the

business process. However, with sound ICS, some or all of the processes left undone can be detected

early enough so that corrective measures can be taken on time before the risk is passed to the MFI.

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Risk is a daily phenomenon in every area of life and business. The management of these risks is therefore

important to reduce to the barest minimum the untold hardship of not recognizing and managing the

risk.MFI are therefore enjoyed to rise above board in their risk management strategies and procedures to

protect the industry and also to encourage the generous national and international donors who are eager to

see many people lifted above the poverty level. If the owners and management of MFI are not proactive

and fully committed in their risk management, the future of many poor people around the world will be

jeopardized.

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1.11 RESEARCH METHODOLOGY

Research Design

Research design is specific research methodology, philosophies and techniques used to achieve the

objectives of the study. It encompasses philosophies and techniques used in choosing alternative research

methodology and technique issues, sources of data, sampling plan and methods of data collection and

analysis. The research will use approaches and methods of data collection and analysis that will be used in

this study as explained in the following sub-sections.

Research Approaches Used in the Study

There are three alternative strategies of inquiry: qualitative, quantitative and mixed approaches. In order to

achieve the research questions stated in the previous section, the researcher will use both qualitative and

quantitative approach (mixed approach) in collecting and analyzing data. The selection of one over the

other approach for the conduct of the study is based on the research problem (issue or concern that needs to

be addressed), the researcher’s own personal experience and the will and support of the audiences

(Creswell 2009).

Sample Population and Sampling Techniques

Sample population

The researcher will incorporate all the micro finance institutions in Zimbabwe as the study population.

Sampling frame

The researcher considers those micro finance institutions with head office in Harare as sample frame.

Sampling Size

A sample of these micro financial institutions in Harare will be selected using purposive sampling in the

sense that the study will select a sample believed to deliver the best information regarding the performance

of selected micro finance institutions in credit risk management particularly information in relation with

Loan repayment performance, collateral valuation and security documentation, credit disbursement

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practice, credit monitoring system ,maintenance of credit files and identification of financial position and

business conditions of borrower and other related information to the study area. The researcher believes

that those institutions which are established in early time will provide more comprehensive and organized

data or information on the study area.

Methods of Data Collection

Research methods are the technique used to collect data. In this study, the researcher will use mixed

methods approach, which are employed concurrently in collecting and analyzing data. There are different

tools available to the researcher to collect the required data including questionnaires, observation,

interview, and document analysis. For this study, the researcher will apply quantitative (survey).

Quantitative aspect: Survey

Survey design is a research method that provides a quantitative or numeric description of trends, attitudes,

or opinions of participants with the intent of generalizing from a sample to a population (Creswell 2009).

Typically, surveys gather data at a particular point in time with the intention of describing the nature of

existing conditions, or identifying standards against which existing conditions can be compared, or

determining the relationships existed between specific events (Cohen et al. 2000). As Weisberg et al.

(1996) cited in Cohen et al. (2000) stated, surveys are useful to gather factual information and data on

attitudes, preferences, beliefs, predictions, behavior and experiences. Survey research has its own strengths

and weaknesses. The strengths of survey research include; highly flexible, possibly cover a wide range of

research questions, describe an existing situation, easy to guarantee respondents anonymity (for instance,

questionnaires may lead to more honest answers), easier to generalize findings, and efficient in gathering

large amounts of data at reasonably low cost and effort.

The limitations include that it is difficult to come to deeper understanding of processes and contextual

differences through questionnaires, which are standardized and by their nature limited in length and depth

of responses (Muijs 2004). This thesis has an objective of describing the performance of some micro

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finance institutions in credit risk management. Thus, survey method of quantitative approach is appropriate

and will be employed in this study. Descriptive statics analysis will be used.

Survey Instruments

Survey instruments include self-administered questionnaire, structured interview and structured

observations (Creswell 2009). This study will use questionnaires, which is a widely used and useful

instrument for collecting survey information. As Wilson and McLean (1994) stated, questionnaire provide

structured information, being administered without the presence of the researcher, and often comparatively

straightforward to analyze. Questionnaire as a tool for data collection has its own advantages and

limitations. The advantages found from the literature includes that the data collected through the use of

questionnaire are efficient, reliable because of anonymous, honest, economical (in terms of time and

money), quick (even possibly mailed), consistent (little scope for bias), offers the possibility of

standardizing and comparing scales, and enables the anonymity of the data sources to be preserved.

Nevertheless, the major limitations are nonflexible (no longer possible to backtrack once the administration

phase is under way), lack of qualitative depth, low response rate, inability to offset a lack of sufficient data

or an error in the scale used (Thietart et al. 2001 and Cohen et al. The researcher will select several types of

questionnaires, from highly structured (closed ended) to unstructured (open ended). Structured

questionnaires are appropriate in gathering straight forward and uncomplicated information. It is easy to

classify and quantify, require less time and effort, and ingenuity to answer. But it is tedious and time

consuming to prepare questions.

The researcher also may not have a full range of responses to prepare closed ended questionnaire. In

addition, the respondents have no chances to express their own views, and to qualify, develop or clarify

19
their own answers. On the other hand, unstructured questionnaire gives a greater insight and understanding

of the topic being studied. But it may be difficult to classify and quantify and must be carefully interpreted.

Thus, the use of either mere structured or unstructured questionnaire has its own flaws. To mitigate the

limitations of both types of questionnaire, semi-structured questionnaire is a powerful tool (Cohen et al.

2000). Dawson (2002) also stated that researchers tend to use a combination of both open and closed

questions. Such questionnaires begin with a series of closed questions, with boxes to tick or scales to rank,

and then finish with a section of open questions for more detailed response.

However due to researcher experience and others individual experience in our country that most of

respondents are not voluntary to answer open ended questions, the researcher might be obligated to employ

structured questionnaire (close ended) for survey data collection. The questionnaires will be distributed to

60 purposively selected employees of selected micro finance institutions specifically to those employees

that are considered of having better understanding about credit risk management practice (i.e. loan officers

or credit officers and general managers and branch manager, operation manager and operation officers,

auditors, finance mangers and others like accountant and MIS officers in head office and branch of

Harare). The questioners are distributed equally to selected micro finance institution in Harare.

1.14 WORK PLAN

This study will be presented in five chapters. The first chapter is background of the study and it includes

introduction about the study, statement of the problem, general and specific objectives, scope of the study,

significance of the study and limitation of the study. The second chapter is related literature review and it

encompasses theoretical concept and empirical studies focused on the topic. The third chapter will contain

the research methodology detail used by the researcher. The fourth chapter is data presentation and analysis

by using the method adopted to test objectives and answer questions and interpretation of the result from

the analysis is also included under this chapter. The fifth chapter includes the study findings, conclusions

and some recommendations forwarded by the researcher.

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Running head: [SHORTENED TITLE UP TO 50 CHARACTERS] 21

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