The impact of credit risk management on level of loan performance in Ugandan Commercial Banks : a case of Tropical Bank

Abstract

This study was about the level of loan performance in Uganda Commercial Banks, a case study of Tropical Bank Limited. The study examined the relationship of credit risk management on the level of loan performance in Ugandan commercial banks, Tropical bank in particular. Credit risk management was the independent variable; and risk identification, credit risk analysis, and credit risk control were the measures of the independent variable of the study. The level of loan performance was the dependent variable. The study adopted a cross-sectional research design. Data was collected through a questionnaire survey of 80 respondents from 4 branches of Tropical bank in Kampala. The results indicate that there is relationship between level of loan performance and risk identification (r= 0.463**, p>0.05) for credit risk analysis (r= .740**, p>0.05), and credit risk control (r= 0.540, p < 0.05) and responses from respondents further confirmed it. A regression analysis conducted to determine the strength of the relationship and revealed an R-value of 0.542, R 2 of 0.294 for risk identification, credit risk analysis, and credit risk control. The study recommended that banks should strengthen on their credit risk analysis and this can be achieved by letting employees know the risks inherent in their responsibilities and checking the authenticity of client’s information before advancing loans. The study is significant to researchers, bank managers, credit officers, loans officers, and risk officers and findings will help banks in managing credit risks hence improving the level of loan performance.