The impact of credit risk management on the financial performance of commercial banks in Uganda :

Abstract

This study was carried out with the purpose of analyzing the effect of credit risk management on the financial performance of commercial banks in Uganda with DFCU bank as the case study. Specifically, the study sought to establish whether there is a relationship between credit risk control, NPLs, and capital adequacy ratio and financial performance. In achieving the objectives assigned by the study, a descriptive cross sectional research design was used and that was facilitated by the use of both primary and secondary data which was obtained from the field and the published audited financial statements and the BOU annual supervision reports. The study used the census sampling technique where all members of the staff of DFCU bank participated in the study. The data was collected using questionnaires and analyzed using correlations and regression analysis. The findings revealed that there was a positive and significant relationship between credit risk control, NPLs, capital adequacy ratio and financial performance of DFCU bank. In conclusion, the findings showed that the above dimensions of credit risk management influence financial performance of commercial banks and therefore, the study recommended that DFCU bank should be well capitalized according to the size of its loan portfolio and regulatory requirement in order to advocate for improvement in its financial performance.