Effect of Credit Policies on Financial Performance of Commercial Banks in Uganda
Keywords:
Credit policies, financial performance, commercial banks, UgandaAbstract
Aim: The purpose of this study was to investigate the effect of credit policies on the financial performance of commercial banks in Uganda.
Methods: This research employed a descriptive research design. The target population consisted of 40 credit managers from 20 commercial banks in Uganda. Purposive sampling was used to select the credit managers. Quantitative data was collected using a structured questionnaire and analyzed using SPSS version 26 through correlation and regression analysis. Qualitative data was collected through interviews with the bank managers. Qualitative data was analyzed thematically and presented in a narrative form.
Results: The results revealed a positive and significant relationship between credit policies and financial performance in commercial banks in Uganda. The null hypothesis was rejected, indicating that effective credit policies contribute to improved financial performance.
Conclusion: It was concluded that effective credit risk assessment, strategic credit allocation, an efficient credit monitoring system, the use of technology, a robust credit culture, and employee training and development are key factors influencing the effectiveness of credit policies and bank financial performance.
Recommendations: Banks should design and implement comprehensive training programs that cover all aspects of credit policies, including risk assessment, strategic credit allocation, credit monitoring, and the use of risk assessment software and data analytics tools. These programs should be tailored to employees' roles and responsibilities to ensure maximum relevance and effectiveness. Banks should foster a learning culture within the organization that encourages employees to continuously update their credit management skills and knowledge.
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