Credit Management Policies and Loan PortfolioPerformance in Commercial Banks: A case of Equity Bank, Adjumani Branch.

Abstract

This study was about the relationship between credit management policies and loan portfolio performance in commercial banks in Uganda focusing on Equity Bank Adjumani Branch as the case study. This study was guided by three research objectives which included; establishing the effect of Credit terms on loan portfolio performance in Equity Bank Adjumani Branch; to assess the effect of credit standards on loan portfolio performance in Equity Bank Adjumani Branch and to find out the relationship between collection procedures and loan portfolio performance in Equity Bank Adjumani Branch. The study used a cross sectional case study design which involved triangulation (use of multiple data collection techniques simultaneously) i.e. utilizing both quantitative and qualitative approaches. A representative sample of 218 respondents was selected from a population of 420 based on the Krejcie and Morgan 1970 table (Amin, 2005) for determining sample size for research activities. Out of the two hundred and eighteen (218) questionnaires distributed to the respondents, only 192 (one hundred and ninety two) questionnaires were returned representing 88.07% response rate. The findings revealed that Credit terms had a positive correlation with the Loan Portfolio Performance in commercial banks(r = 0.259** P< 0.01). This meant that the two variables are positively related. On the other hand, Correlation results indicated a significant positive relationship between Credit standards and Loan portfolio performance (r = 0.845**, p<.01) while on the other hand collection procedures had a positive correlation the loan portfolio performance (r =0.169**, p<.01). This means that the two variables were positively related. The study recommended improvement of staff and customer understanding on recovery of loans and its benefits. That loan scoring process is shortened. That credit department be properly resourced and facilitated to visit the client regularly.