Credit Management and the Performance of Agriculture Loans in Uganda: A case of Hofokam Limited

Abstract

Despite several efforts by government, the private sector and Non Governmental Organisations (NGOs) to support agriculture through agricultural loans, the performance of agricultural loans to develop agriculture in Uganda is still below average. The study sought to examine the effect credit management have on the performance of agriculture loan as a product in HOFOKAM Limited. The study adopted a case study correlational survey design with a population of 99 respondents from which purposive sampling and simple random sampling methods were used to select the respondents. Data were collected from both the staff and clients of HOFOKAM using self administered questionnaires and interview guide. The findings indicated that there were positive significant relationships between credit risk assessment, credit monitoring, credit control and the performance of agricultural loans which was confirmation that credit management was a major determinant of agricultural loans performance at HOFOKAM. From the regression results, credit risk assessment, credit monitoring and credit control were strong predictors of agricultural loans performance. This is implication that improvement in credit risk assessment, credit monitoring and credit control would enhance the performance of agricultural loans at HOFOKAM. The study recommends therefore, that management at HOFOKAM offer specialized training to staff and clients in the area of credit management and also create awareness about the existing national polices and regulations to staff and clients. Management could consider putting in place a fully fledged customized credit management system to coordinate the risk assessment, monitoring and control functions. To study the true nature and quality of credit risk assessment, credit monitoring, credit control and the performance of agricultural loans, a longitudinal study is more appropriate. Since the model could only explain 30.6% in variance of the performance of agricultural loans, the study recommends that another study be carried out comprising of other variables which were not part of the model.