Determinants of client ability to effect on-time loan repayments: case study Barclays bank (u), Luwum street branch

Abstract

The study intended to find out the determinants of client ability to pay monthly installments within the required time at Barclays Bank Luwum branch. The major objective of this study was to investigate the effectiveness of the credit management system on client ability to loan repayments after increased cases of loan defaults and bad debts at Luwum branch. The study design used was a retrospective one. This was looking at successful loan applicants for the period 2002 to 2006. In this design, loan repayment levels, client ability to pay on-time, client capacity assessed and profitability on the side of the bank were the main variables considered among others. A sample of 30 clients was selected from each year giving a total of 150 clients for the study. The data was analyzed at three levels; univariate, bivariate and multivariate (logistic model fitting). Significance for tests for relationships was 5% for bivariate and multivariate analysis. Depositing a security to secure a loan significantly determines client ability to effect on-time payment. Clients with a much valued security have absolute capacity to effect on-time payments. Monthly repayments below one million shillings are less likely to be paid after the repayment date has passed than monthly payment above one million shillings. Loan period of four years and above is more likely to increase the chance of client ability to effect on-time payments than for loan period below four years. The major determinants of client ability to effect on-time payments as far as loan repayment is concerned are loan period, loan amount, security deposited and marital status of the client.