Credit management and loan portfolio performance in financial institutions in Uganda:

Abstract

The study aimed to establish the effect of credit management on loan portfolio performance in Centenary Bank Bugiri Branch. It specifically examined the effect of credit approval on loan portfolio performance, analyzed the effect of credit appraisal on loan portfolio performance and examine the effect of credit documentation on loan portfolio performance. The study adopted a quantitative approach and collected primary data in a cross-sectional. The sample size for this study was 52 which was determined using the table of Krejcie and Morgan. A questionnaire served as the research instrument. Quantitative data collected were coded into Statistical Package for Social Sciences (SPSS) version 22, cross-checked for entry errors, and analyzed. Regression analysis was used to test the relationship between dimensions of the independent variable and the dependent variable. The study was steered by agency theory by Jensen and Meckling (1976). The study found positive and statistically significant effect credit management (credit approval, credit appraisal and credit documentation) on loan portfolio performance. credit appraisal had a stronger significant effect on loan portfolio performance. The study concludes that loan portfolio performance in financial institutions is influenced by credit approval, credit appraisal and credit documentation. It recommends that management reinforce their credit approval processes by emphasizing creditworthiness assessments, setting appropriate credit limits, and ensuring strict adherence to internal lending policies, adopt comprehensive credit appraisal practices and ensure that all client data and loan details are meticulously recorded, comply with regulatory standards and are securely stored for easy retrieval.