Credit management policies and the performance of commercial banks in Uganda:

Abstract

This paper examines the effect of credit management policies on the performance of the commercial banks in Uganda. The performance of commercial banks is an important aspect in the community because it’s through them that the community receives services. Many commercial banks are coming up and this has increased the need for proper control of the finances of the people as a means to improve on the quality of services offered to the community. While there are many commercial banks that have good credit management policies, a large number still seem to have inadequate credit management policy systems, this gives a gap on the efficiency especially of the financial resource allocation by the commercial banks. The study examines the effect of credit management policies on the performance of commercial banks taking a case study of Centenary Rural Development Bank. The study obtained empirical data obtained through questionnaires, review of the existing documents and interview guide with the bank management, accountants, finance committee and support staff. The data was analyzed both qualitatively and quantitatively to assess the effect of credit management policies and the performance of commercial banks. The sample size consisted of 20 Board of directors, 15 finance committee members, 10 management team, 5 accountants and 30 support staff. The sample comprised 80 individuals from the target population of 64 respondents. The findings of the study show that the main sources of revenues for the bank are user fees, interest on the loans people take and bank charges from the deposits of the people daily. The main challenges to effective credit management policy were lack of adequate capital, poor inventory management, lack of integrity and lack of participatory budgeting. The analysis showed a strong correlation between credit management policies and performance of commercial banks. The study therefore concludes that to ensure efficient and effective credit management policies in the bank, management needs to strengthen the internal control procedures, and policies diversify the sources of revenue, improve on the infrastructure, staff development and monitor