Credit management practices and loan portflio performance of commercial banks in Uganda:

Abstract

The study was conducted to examine the effect of credit management practices on loan portfolio Performance of commercial banks mainly Finance Trust Bank Iganga Branch and it was based on three specific objectives; to determine the effect of debt collection on loan portfolio performance, to determine the effect of client appraisal on loan performance and to determine the effect of lending policy on loan portfolio performance. The study adopted cross-sectional research design and quantitative approach to test the fundamental relationship and predictive power of the independent variable on dependent variable. Data was collected from a target population of 55 employees with reachable unit of analysis being 44 employees of Finance Trust Bank Uganda Iganga Branch, using simple random and purposive sampling techniques. Data was collected using a close ended questionnaire which was later entered in SPSS version 20 and analyzed using descriptive statistics that is frequencies, correlation and Regression results were obtained. The findings revealed that; all variables had a positive relationship on loan portfolio performance having lending policies and client appraisal ranking the highest and debt collection policies respectively. The study established that debt collection policies, client appraisal and lending policies predict loan portfolio performance in banks. In view of the above, the following conclusions can be drawn: commercial banks should pay much attention to debt collection policies characterized with Trust bank should deploy lending policies branded with credit limits and lending terms to bolster loan portfolio performance and banks should implement robust risk management practices to assess and mitigate potential risks associated with lending.