Finance is an important phenomenon that leads organizations towards ensuring smooth operations (Gitman, Juchau & Flanagan, (2015). Therefore, firms need efficient and effective financial management to achieve their goals. Financial management is involved in planning and control of organizational financial resources. It is part of overall management of an organization in the area of sourcing of funds and utilization of the same for the purposes of generating returns for the company (Bolton, Chen & Wang, 2011). The practice of financial management determines the way and the level at which microfinance institutions performs financially. It indicates the extent to which the micro-finance goals are achieved. The results are measured against the goals and policies in the business operations of the organization (Ahmed & Malik, 2015). Provision of loans is the main reason for existence of microfinance institutions (Khavul, 2010). Loans generate a lot of revenue to the microfinance institutions in the form of interest and other charges on loans. This revenue takes a high a percentage of the entire revenue, performance and profitability of financial institutions. Loans, as said, are a doubleedged sword. This means that if loans are not well managed it can be a bane to the development of a microfinance institution; this happens when loans become delinquent (Greuning & Bratanovic 2014).When this happens, the performance of the institution is put in jeopardy. This is because when banks have chunks of non-performing loans, it makes it impossible for that institution to grant more loans; in effect reducing the profit level of the said bank and even results to retrenchment of employees leading to unemployment. Loss of interest income can cause financial crisis leading