Debt management policies and quality of loans in commercial banks of Uganda. Case study: Centenary Bank Limited-Mapeera house

Abstract

This paper sought to find out the impact of debt management policies on the quality of loans in commercial banks in Uganda. The argument was built on the fact that debt management policies such as collateral security, loan interest rate and credit counselling were put in place to control the quality of loans in Centenary Bank, and so, bank officers as well as the clients must be able to honour them so as to uphold the quality of loans set. It was for this reason that i sought to find out: the impact of collateral security in ensuring the quality of loans in commercial banks in Uganda, the impact of interest rates on the quality of loans in commercial banks in Uganda and to examine the impact of the credit counseling on the quality of loans in commercial banks in Uganda. Literature review was discussed objectives by objectives and a questionnaire was used because it was appropriate given the sample size of 55 respondents in their different capacities. The study population was the staff of Centenary bank and her clients using a cross-sectional design with a representative sample of respondents from both groups of people. This number was reliably large enough to yield reliable data and to guard against non-responses. Findings from the research revealed that: some clients’ collateral security is not audited, interest rates are very high though affordable, there is ignorance of the bank rates by some clients, many clients go for credit counselling much as others are forced to go for it, credit counselling has helped the clients know the terms and conditions of the loans they would want. The following recommendations were suggested: increase in the grace and payback period of the loan according to the different loan amounts received from the bank, during the credit counselling sessions, clients be informed of the interest rates, other debt management policies such as debt restructuring and debt portfolio risks and liability management be introduced, more credit counselling to the bank’s clients by the loans’ officers, interest rates be reduced to a percentage that can best serve all persons, the loans’ officers should make sure that the collateral security of all clients is properly audited.