Interest rates and loan portfolio performance in commercial banks: a case study of Centenary Bank Entebbe Road Branch Uganda
Kateregga, Stella Kaggwa (2013)
Kateregga, Stella Kaggwa
Lahden ammattikorkeakoulu
2013
All rights reserved
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2013120219430
https://urn.fi/URN:NBN:fi:amk-2013120219430
Tiivistelmä
The study was about the contribution interest rates have on loan portfolio performance in commercial banks, the study focused on Centenary Bank, Entebbe road branch. The study was based on three objectives that is; To examine how Centenary Bank has ensured that the bank’s loan portfolio has been maintained within acceptable limits to enhance performance, To examine how the bank has ensured compliance with regulatory requirements to enhance its performance, and To examine how the bank has worked out problem loans, including rescheduling and restructuring so as to enhance its performance
A sample of 73 respondents of Centenary Bank, Entebbe road branch was contacted. The study employed a case study research design and the methodology used in this study was both qualitative and quantitative. Questionnaires and documentary review were the major tools of data collection.
The study findings indicate that although Centenary Bank has tried to follow procedures and regulations in administering credit, there is still clients’ defaulting on loan repayments and increasing the effect of bad debts in the bank. This has created risk in loan portfolio performance and has affected profitability. The findings further revealed that there is lack of effective analysis on the impact of increasing interest rates on loan repayment trends. The researcher recommends that; there is need for an effective loan portfolio management which begins with oversight of the risk in individual loans. Economic trends need consideration before deciding interest rates on loans. Fair interest rates favour clients’ willingness to repay affordably. There is need for adequate loan review policies and strict enforcement to credit officers who issue credit without following the credit policies of the bank.
A continuous improvement in internal controls is a requirement to enforce compliance with policies and regulations. All these should be directed to benefit the Bank and Clients for the purpose of increasing loan utilization and effective loan portfolio performance, involving more responsible clients who respect and meet their obligations.
A sample of 73 respondents of Centenary Bank, Entebbe road branch was contacted. The study employed a case study research design and the methodology used in this study was both qualitative and quantitative. Questionnaires and documentary review were the major tools of data collection.
The study findings indicate that although Centenary Bank has tried to follow procedures and regulations in administering credit, there is still clients’ defaulting on loan repayments and increasing the effect of bad debts in the bank. This has created risk in loan portfolio performance and has affected profitability. The findings further revealed that there is lack of effective analysis on the impact of increasing interest rates on loan repayment trends. The researcher recommends that; there is need for an effective loan portfolio management which begins with oversight of the risk in individual loans. Economic trends need consideration before deciding interest rates on loans. Fair interest rates favour clients’ willingness to repay affordably. There is need for adequate loan review policies and strict enforcement to credit officers who issue credit without following the credit policies of the bank.
A continuous improvement in internal controls is a requirement to enforce compliance with policies and regulations. All these should be directed to benefit the Bank and Clients for the purpose of increasing loan utilization and effective loan portfolio performance, involving more responsible clients who respect and meet their obligations.