Analysis of asset-liability management practices in financial institutions in Uganda. a case of Tropical Bank Uganda

Abstract

Asset-Liability Management (ALM) is a means of making a financial institution profitable. Organizations use various ALM practices from time to time to grab greater market share, which in turn leads to profit which is the whole sole aim of companies. The banking business in Uganda operates in a lot of competition and thus adopting the best ALM practices would help them to remain competitive. The study specifically sought to analyse ALM practices in Ugandan commercial banks with a case study of Tropical Bank Ltd. The study adopted a descriptive research design. The sample size constituted 40 staff from 4 branches of Kampala road, Kawempe, Katwe, and Nakivubo. The research used stratified and purposive sampling methods. Stratified sampling technique was used to select the five branches. Staff were selected using Purposive method. Data was collected using structured questionnaires which employed a five-point Likert scale in rating various responses. Data was analysed using statistical package for the social sciences, (SPSS). The descriptive analysis was done to show the mean, frequency distribution and percentage results. Findings revealed that three ALM practices of liquidity management, core or stable deposit base and minimum net profit margins are implemented by Tropical bank. However net profit margin practices were found more effective followed by core or stable deposit base while liquidity practices came least. From the study findings, the appropriate strategies for improving on the ALM practices used by tropical bank include Board of Directors and Senior Management getting involved in ALM implementation, introducing an effective information management system, putting in place a formal policy to guide ALM, introducing a sound liquidity management plan, and management getting committed to adapting to new changes in ALM.