Factors affecting financial performance of commercial banks in Uganda: evidence from DFCU Bank

Abstract

The study sought to establish the factors affecting financial performance of commercial banks in Uganda. The objectives of the study included; to examine the role of credit policy in financial performance in DFCU Bank, to assess the role of capital adequacy in financial performance in DFCU Bank and to find out the role of loan management in financial performance in DFCU bank. Descriptive research was used in this study. The sample of the study consisted of 65 respondents out of a total of 78 respondents. Out of a total sample of 65 respondents, 7 were unable to respond and therefore the researcher collected data from 58 respondents. The data collected was analyzed using Statistical Package for Social Sciences (SPSS). The study concluded that credit policy, capital adequacy and loan management play a critical role in the financial performance of commercial banks in Uganda. The study recommends that bank management should accommodate customer demand by offering loan waivers, competitive repayment periods, and credit terms adjustments. The study further recommends that commercial Banks should revise and reform their credit scoring systems to accurately determine the credit worthiness of potential borrowers as a strategy on how to minimize incidences of default. Finally, the study also proposes that Bank of Uganda should launch strict supervision exercises that emphasize the need for banks to review their capital positions.