The effect of credit policies on the performance of commercial banks in Uganda; Case study: Kenya Commercial Bank, Kampala

Abstract

This research examined the effect of credit policies on the performance of commercial banks in Uganda with Case study Kenya commercial bank (KCB). It looked at the objectives which are; To evaluate the effect of credit appraisal on the performance of Kenya Commercial Bank, To evaluate the effect of loan approval on the performance of Kenya Commercial Bank., To evaluate the effect of loan disbursement on the performance of Kenya Commercial Bank., To establish the relationship between loan recovery and the performance of Kenya commercial banks. A descriptive research design was used to collect the data from the field and a simple random sampling and Purposive sampling techniques were used to come up with a sample of 48 respondents. A questionnaire was used to collect data from 48 respondents in KCB. However only 48 questionnaires were returned. Both descriptive and inferential analysis was done. Analysis of Variance and regression analysis were used to test the hypothesis. The results showed that there is a positive relationship between Loan Recovery management and financial performance of commercial banks in Uganda. The main motive for this research was to come up with policies such that KCB can recover loans from defaulters, bank can provide some advice to the borrower for repaying the loan. However from the findings of the research study, a strong positive relationship (r = 0.755) was revealed which implies that reasonable loan recovery values boosts financial performance of the financial institution. Therefore, the researcher recommended that there is need for commercial banks to enhance their customer’s techniques so as to improve their financial performance. Through client appraisal techniques, the companies could be able to know credit worth customers and thus reduce default and enhance their collection procedures and policies by adapting a more policies for effective loan recovery.