Loan management and financial performance in financial institutions

Abstract

This was a case study on the effects of loan management on financial performance at Barclays Bank Uganda Ltd with the objectives of examining the effects of loan pricing, loan vetting, loan collection and competition on financial performance. A case study research design using both quantitative and qualitative approaches was used on a population of loan staff and borrowers of Barclays Bank of Uganda of which 181 were sampled using systematic and simple random sampling. Quantitative and qualitative data was collected using a questionnaire, interview schedules and a documentary checklist. The data collected was analyzed using SPSS of which graphs, mean, standard deviation, correlation analyses and regression analysis techniques were used. The study found out that correlation between loan pricing, loan vetting, loan collection and competition on financial performance of BBU was 0.4, 0.5, 0.6, and 0.5 respectively while they each predicted 16%, 23%, 45% and 17% of the variance in financial performance at the bank. The study concluded that loan pricing, loan vetting and loan collection had significant impact on the financial performance of the bank and that competition also had a significant influence on the relationship between loan management and financial performance at Barclays Bank. The study recommends that for sustained financial performance; the board, management and staff of commercial banks should always ensure that the responsible persons effect reasonable loan pricing, vetting, collecting while considering competition and making appropriate changes to adopt to the industry competition. The bank’s management and responsible persons should also educate customers on credit issues through customer promotions. The study recommends that other studies need to examine the influence of loan product design and customer retention on financial performance in the banking sector of Uganda.