Credit Management, Credit Policy and Financial Performance of Commercial Banks in Uganda (Published)
This study was carried out with the purpose of analyzing the effects of credit management on the financial performance of commercial banks in Uganda. Specifically, the study sought to establish whether there is a relationship between credit policy and performance, Capital Adequacy and performance and credit risk control and performance. In achieving the objectives assigned by the study, a causal research design was undertaken and that was facilitated by the use of secondary data which was obtained from published audited financial statements of commercial banks and the BOU annual supervision reports. The study used universal sampling techniques, where all banks licensed and operational in Uganda were selected, multiple regression was used. The findings indicated a significant relationship (r = 0.639) between credit management and the financial performance of commercial banks in Uganda. The coefficient of determination R² was 0;408 meaning that credit management indicators explain up to 40.8% of variations in the financial performance of commercial banks in Uganda. The results from the coefficients summary in the regression model indicate that the significance of coefficients of credit policy (LR), capital adequacy (CAR) and Credit Risk Control (NPL/TL) are -0.031, -0.555 and -1.005 respectively. It was therefore found that both the CAR and the NPL/TL are significant though have an impact at different significance i.e. capital adequacy and Credit Risk control have a greater impact compared to Credit policy (LR) on the financial performance of commercial banks in Uganda. It was established that there is no significant relationship between credit policy and performance of banks in Uganda, however, a significant relationship between the credit risk control, capital adequacy and the performance of commercial banks was established. It was recommended that should use a moderate credit policy as a stringent credit will undermine the financial performance. Moreover, commercial banks should seek to adequately control their credit risk by keeping lower their ratio of nonperforming loans which is the major determinant of commercial banks’ financial performance as shown in the study. The bank of Uganda should encourage banks in Uganda to use credit metrics model in controlling its risks
Keywords: Commercial Banks, Credit Management, Credit Policy, Financial Performance, Uganda
Effect Of Credit Management on Performance of Commercial Banks in Rwanda a Case Study of Equity Bank Rwanda Ltd (Published)
Credit management is one of the most important activities in any company and cannot be overlooked by any economic enterprise engaged in credit irrespective of its business nature. Sound credit management is a prerequisite for a financial institution’s stability and continuing profitability, while deteriorating credit quality is the most frequent cause of poor financial performance and condition. As with any financial institution, the biggest risk in bank is lending money and not getting it back. The study sought to determine the effect of credit management on the financial performance of commercial banks in Rwanda. The study adopted a descriptive survey design. The target population of study consisted of 57 employees of Equity bank in credit department. Entire population was used as the sample giving a sample size of size of 57 employees. Purposive sampling technique was used in sampling where the entire population was included in the study. Primary data was collected using questionnaires which were administered to the respondents by the researcher. Descriptive and inferential statistics were used to analyze data. The study found that client appraisal, credit risk control and collection policy had effect on financial performance of Equity bank. The study established that there was strong relationship between financial performance of Equity bank and client appraisal, credit risk control and collection policy. The study established that client appraisal, credit risk control and collection policy significantly influence financial performance of Equity bank. Collection policy was found to have a higher effect on financial performance and that a stringent policy is more effective in debt recovery than a lenient policy. The study recommends that Equity bank should enhance their collection policy by adapting a more stringent policy to a lenient policy for effective debt recovery.
Keywords: Commercial Banks, Credit Management, Equity Bank Rwanda
Effect of Credit Management on Performance of Commercial Banks in Rwanda (A Case Study of Equity Bank Rwanda Ltd) (Published)
Credit management is one of the most important activities in any company and cannot be overlooked by any economic enterprise engaged in credit irrespective of its business nature. Sound credit management is a prerequisite for a financial institution’s stability and continuing profitability, while deteriorating credit quality is the most frequent cause of poor financial performance and condition. As with any financial institution, the biggest risk in bank is lending money and not getting it back. The study sought to determine the effect of credit management on the financial performance of commercial banks in Rwanda. The study adopted a descriptive survey design. The target population of study consisted of 57 employees of Equity bank in credit department. Entire population was used as the sample giving a sample size of size of 57 employees. Purposive sampling technique was used in sampling where the entire population was included in the study. Primary data was collected using questionnaires which were administered to the respondents by the researcher. Descriptive and inferential statistics were used to analyze data. The study found that client appraisal, credit risk control and collection policy had effect on financial performance of Equity bank. The study established that there was strong relationship between financial performance of Equity bank and client appraisal, credit risk control and collection policy. The study established that client appraisal, credit risk control and collection policy significantly influence financial performance of Equity bank. Collection policy was found to have a higher effect on financial performance and that a stringent policy is more effective in debt recovery than a lenient policy. The study recommends that Equity bank should enhance their collection policy by adapting a more stringent policy to a lenient policy for effective debt recovery.
Keywords: Banks’, Client Appraisal, Credit Management, Debt Recovery, Financial Performance, Lending, Money, Risk Control