Analysis of loan repayment in Uganda's commercial banks: a case of home loans and overdraft facilities at Stanbic Bank (U) Limited.

Abstract

For the period ended December 31, 2019 Uganda‘s Commercial Banks recorded about Shs685.7bn in non-performing loans. This was a growth from Shs535.8bn that the sector registered in the same period in 2018 (Monitor, 22 May 2020). Stanbic Bank which is Uganda‘s largest bank by assets, registered the biggest share of NPLs, posting Shs120bn in 2019 and that the bank also registered the same amount in 2018(Daily Monitor Newspaper, Friday, 22 May 2020). According to BOU‘s December 2020 Annual report, Uganda‘s banking sector Asset quality ―remains a concern‘‘. The value of NPLs was largely unchanged throughout the course of the year ending December 2020. The ratio of NPLs to total gross loans stood at 5.3% as at end of December 2020 compared to 4.9% at the end of December 2019.This was the basis of this the research. The objectives of the study were three; i) to establish the factors that determine loan repayment at Stanbic Bank (U) Limited in the case of home loans and overdraft facilities, ii) to investigate the causes of poor loan repayment in respect of home loans and overdraft facilities at Stanbic Bank (U) Limited and iii) to suggest measures that can improve loan repayment at Stanbic Bank (U) Limited in the case of home loans and overdraft facilities From the findings, the percentage of Home loansin NPL was generally increasing across the 18 months as shown by the trendline. In Business Banking, the Overdraft facilities in non Performing status were also generally increasing gently across the 18 months as shown by the trendline. A large percentage of Personal Banking Home Loans and Overdrafts were in breach of the set maximum NPL risk appetite across the 18 months period as represented by the color ‗RED‘. The researcher recommended a number of measures to improve loan repayment in commercial banks, starting with Stanbic Bank (U) Limited. These included; lenders to consider borrowers‘ income, debts, ability to repay the loan periodically, willingness to repay, and credit reference bureau reports. Establish Robust Credit committees to make collective analysis and decisions which lead to improved loan underwriting.