Analysis of the effectiveness of credit practices at DFCU Bank Uganda Limited

Abstract

The study purposely investigated credit risk management practices at DFCUBankUganda Limited. The study was premised on three objectives; to examine the differentcredit risk practices used by DFCU Bank Uganda Limited, to determine credit riskmanagement challenges at DFCU Bank Uganda Limited and to suggest waysofimproving credit risk management at DFCU Bank Uganda Limited. The study adoptedadescriptive research design. The study employed both quantitative and qualitativeapproaches. An interview guide and questionnaires were the main tools to useindatacollection, which combined qualitative and quantitative techniques, respectively. Inthisstudy, the population was comprised of DFCU staff and heads of departments. Thestudyfound that DFCU Bank Uganda has made progress in credit risk management, particularly in identification through staff training (mean = 4.22) and client interviews(mean = 4.00), and in assessment using credit scores (mean = 3.85). However, gapsremain in checklist use (mean = 2.61), audited financial reliance (mean = 2.84), andstafftraining for control (mean = 1.92). Monitoring practices show strengths incovenanttracking (mean = 3.64) but weak role clarity (mean = 2.61) and limited field verification(mean = 2.86). The bank faces challenges from external economic factors (mean=3.97), legal delays (mean = 3.71), and poor loan monitoring systems (mean = 2.47). Toimprove, respondents endorsed a centralized risk unit (mean = 4.18), credit bureau collaboration(mean = 4.13), and automation of loan monitoring (mean = 3.83), though promotingarisk-aware culture (mean = 3.13) remains a lower priority. Therefore, thestudy recommends strengthening staff training across all credit risk functions, automatingloan monitoring and breach detection systems, enhancing borrower profilingthroughcollaboration with credit bureaus, streamlining legal recovery processes, and promotinga risk-aware culture through accountability mechanisms and regular audits.

Subject Keywords: Credit practices; credit risk management practices; DFCU Bank; Uganda