CREDIT MANAGEMENT AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN UGANDA

Abstract

This  study  examined the  relationship  between  credit  management and financial  performance of banks in Uganda. The research used secondary data based on banks  audited financial statements and Bank of Uganda  annual supervision reports for the period under analysis 2012-2017.Universal sampling technique  was used as the research was conducted on all 24 commercial  banks licensed and  operational in Uganda. In analyzing the research hypotheses,  the study  adopted  the use of both descriptive and inferential  statistics  specifically using  regression  and  ANOVA  to  establish  the  significance /  fitness  of the model and  also to establish the link between credit management  and  financial performance of commercial banks in Uganda.The results indicate that  there  is a negative relationship  between credit management as measured by LR, CAR and NPL/TL  ratio with financial performance measured by ROE. This indicates that banks  in Uganda can increase their financial performance by reducing their non-perfarming  loans which is  heavily correlated to  financial  performance i.e. increasing the quality of their credit standards.The findings reveal that  all indicators used in credit management explain up  to  41%  of variation  of the financial performances of banks in Uganda. This suggests that other factors apart from the  credit policy, capital adequacy and credit risk control affect the financial performance of Banks in Uganda.