Analysis of the loan performance in Uganda’s credit institutions: a case study of Post Bank, Ntungamo Branch

Abstract

The purpose of the study was to analyze loan performance in Postbank, Ntungamo branch. The Objectives that guided the study included; to assess the factors influencing Loan Performance in post Bank Uganda, to identify the challenges that Post Bank faces in managing Loan Performance of Post Bank Uganda, to determine strategies for mitigating the poor loan performance in Post Bank Uganda. The study was guided by the 5 C’s model and Asymmetric Information Theory. Both qualitative and quantitative research method were used in the study. The study considered 60 employees for Post Bank Uganda. The employees included Administrators, Business Development personnel, Credit analyst, Credit Manager, Recovery/ monitoring officers, Relationship manager among others. The sample of 52 respondents were determined based on the Krejcie and Morgan Table of 1970, making a response rate of 92%and these were selected purposively. The study used both primary data and secondary data (Nicholson & Bennett, 2009). Primary data for the study collected data using a close-ended questionnaire. This showed that female participants were more in number compared to male participants, majority of people were between the ages of 25 – 35. Majority of the respondents in this study had undergraduate education, majority of the respondents had spent 6 – 10 years with post bank and 62.5 % had spent Less than 5 years in the credit department. From the study, majority of the respondents had agreed that poor monitoring / follow up by credit officers was a challenge Post Bank faces in managing Loan Performance of Post Bank Uganda. Findings showed that majority of the respondents Lacked sound financial management advice provided to clients by bank staff. Furthermore, the study revealed that fraudulent approval affected Post Bank in managing Loan Performance of Post Bank Uganda. The study findings indicated that usage of adequate and enforceable collateral or guarantees requirements was a major strategy for mitigating the poor loan performance in Post Bank Uganda. The study concluded that the main factors influence loan performance include;- the client’s characteristics , repayment mode and repayment amount, the size of interest rates, From the study, it can be concluded that main challenges that Post Bank faces in managing Loan Performance of Post Bank Uganda;-poor monitoring / follow up by credit officers. The study recommends that banks in Uganda should emphasis active monitoring and management of credit risk positions.