Analysis of non-performing loans and provision for bad and doubtful debts at Tropical Bank Uganda Limited
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The purpose of the study was to analyze non-performing loans (NPLs) and provisions for bad and doubtful debts (PBDDs) at Tropical Bank Uganda Limited (TBL) for the period from 2012 to 2018. The study focused on the trends of NPLs, PBDDs and bad debts written off at TBL, the causes or factors for NPLs as well as the appropriate strategies to improve the performance of NPLs at TBL. The study adopted a descriptive survey research design. The study used both primary and secondary data from 2012 to 2018. The main sources were TBL Audited financial statements and published annual reports which were mainly accessed from the Company website while Primary data was collected directly through face to face interviews with the 12 Heads of Departments (HODs) at TBL with the help of an interview guide. The study population was the sixteen (16) HODs and the sample size used was the twelve (12) HODs which were purposively selected and represented a 75 percent of the total population. Quantitative data was analyzed using SPSS Version 22 used. The findings showed that NPLs, bad debts written off as well Loan loss provisions (LLPs) were generally high from the period 2012 to 2018. The study found out the major causes of NPLs as inadequate credit review process, inadequate loan supervision and monitoring, poor credit appraisal, internal weak policies, inadequate and inexperienced staff, low GDP, inflation and fluctuating currency, fluctuating interest rates and lending to agricultural sector. The study suggested the following; proper lending practices, diversifying loan portfolios, strengthening both monetary and fiscal policies by policy makers, proper monitoring and supervision of loans and advances and ensuring that employees are accounted reliable for any loss incurred as a result of imprudent as the appropriate strategies that can improve on the performance of the bank loans. The study concluded that proper credit policy should be adapted by TBL management through ensuring effective and appropriate procedures in monitoring their credit financing activities. Basing on the findings, the study suggested more recommendations that help in improving the performance of loans and these included; provision of business counselling services to borrowers who lack business management knowledge, conduct training programs to enhance the credit knowledge of credit staff, adopting and implementing a sound and comprehensive credit risk management frame work that should be constantly reviewed to ensure that there is effective management and proactive monitoring of borrowers in order to reduce on non-performing loans and loan default levels.