Credit policy and financial performance of commercial banks: Case study Barclays bank

Abstract

This study examined the effect of credit policy on financial performance of commercial banks in Uganda. The specific objectives were; To examine the effect of credit standards on the financial performance of commercial banks in Uganda; To examine the effects of credit terms on financial performance of commercial banks in Uganda; To find out the effect of collection procedure on financial performance of commercial banks in Uganda. A case study design was adopted and data collected from a sample of 35 respondents. Self-administered questionnaires and documentary review guide were used in the study. Data was analysed using SPSS version 16. And findings were presented in a tabular format showing frequencies, percentages and means. The study revealed that Credit standards have a non significant weak and negative relationship with the financial performance of commercial banks, however, this relationship is not significant which means that even if the credit standards increase or decrease, the financial performance of commercial banks is not affected in any way. The study revealed that that there is a weak negative relationship between Credit terms and financial performance of commercial banks. This means that when credit terms management is high, the financial performance of commercial banks declines however, there is a non significant relationship between the two variables therefore whether the credit terms increase or decrease in management, the financial performance of commercial banks is not greatly affected, the impact is minimal and almost not felt. It was also revealed that the collection procedure has a negative relationship with the financial performance of commercial banks which implies that an increase in the operations of the collection procedure leads to a decrease in the financial performance of commercial banks performance is significant and therefore collection procedure has an effect on the financial performance of commercial banks. The key recommendations of the study include; the collection policy of the bank should keep collection costs down and bad debts within limits, there is need for the banks to impose a proper policy regarding the credit terms that will help increase financial performance. It is important to note that Barclays bank credit policy has a negative impact with the financial performance of the organization however small it may be.