Assessment of credit risk management practices at Equity Bank Uganda

Abstract

This report aimed at evaluating the effectiveness of Credit Management Practices at Equity Bank Uganda. The study was premised on three objectives to identify the major credit risks associated with Equity Bank Uganda’s lending practices, to analyze the identified credit risks and their impact on the bank’s loan portfolio performance and to evaluate the effectiveness of Equity Bank Uganda’s current credit risk management measures, including strategies to avoid, accept, or mitigate risk. The study employed a cross-sectional and descriptive research with a mixed study approach which involved collecting numerical data from 72 respondents and interviewing 5 key informants. Quantitative Data was analyzed using the statistical package for social science (SSPS Version 27) while qualitative Data was analyzed using Atlas ti (version 9). The study found that Major risks included inadequate borrower assessment, overexposure to high-risk sectors, inconsistent collateral enforcement, and limited staff capacity in credit evaluation. These weaknesses were found to negatively affect loan portfolio performance, contributing to nonperforming loans and unstable recovery outcomes. While political shocks and small-scale borrowers were not universally seen as disruptive, current risk mitigation strategies were viewed as insufficient. The effectiveness of existing credit risk management measures received mixed feedback, with concerns about unclear procedures, weak internal audits, and underutilized monitoring tools. However, recovery procedures were generally seen as beneficial. Overall, the findings highlight the need for stronger institutional frameworks, improved staff training, and more robust risk assessment systems.