An analysis of loan recovery in commercial banks of Uganda: a case study of Bank of Baroda Uganda Limited

Abstract

This study investigated the loan recovery process in Uganda’s commercial banking sector, with a specific focus on Bank of Baroda Uganda Limited. The research aimed to analyze the procedures employed in loan recovery, identify the factors influencing recovery outcomes, and examine the relationship between credit policies and loan recovery. Utilizing a quantitative correlational research design, data was collected from 102 respondents, including senior management, loan officers, and other relevant staff across the bank’s head office and 17 branches, achieving a response rate of 77.3%. The study employed purposive sampling, self-administered questionnaires, and interviews, with data analyzed using descriptive statistics, Pearson’s correlation coefficient, and regression analysis. Findings show effective recovery procedures: real-time monitoring (Mean = 4.41), borrower follow-ups (4.47), restructuring (4.28), collateral liquidation (4.38), legal action (4.26), and portfolio segmentation (4.17). Key factors include credit policies (4.53), borrower creditworthiness (4.50), macroeconomic conditions (4.29), collateral (4.35), and monitoring (4.53). Interest rates (3.65) showed mixed perceptions. A strong correlation (r = 0.914, p < 0.01) links credit policy to recovery. The study concluded that Bank of Baroda’s loan recovery framework is effective, driven by technology, borrower engagement, and regulatory adherence, though challenges remain in standardizing restructuring processes and optimizing interest rates. Recommendations include standardizing loan restructuring guidelines, adjusting interest rates for affordability, and balancing legal actions with alternative recovery strategies. Areas for further research include the impact of digital transformation, non-legal recovery methods, borrower demographics, long-term economic effects, and comparative collateral management practices. This study provides valuable insights for policymakers, bankers, and researchers to strengthen loan recovery practices and ensure financial stability in Uganda’s banking sector.

Subject Keywords: Loan recovery; commercial banks; Uganda; Bank of Baroda Uganda Limited