Loan Portfolio Management and Financial Performance of Commercial Banks in Uganda: Case of Centenary Bank- Mapeera Branch

Abstract

The purpose of the study was to examine the effect of loan portfolio management on financial performance of commercial banks in Uganda using Centenary Bank as a case study. The study was guided by the following specific objectives; to examine the effect of loan approval process on financial performance; to examine the effect of borrower‟s economic condition on financial performance; to establish the effect of borrower collateral condition on financial performance; and to examine the effect of credit risk analysis on financial performance of commercial banks. The study adopted a case study design and a sample size of 71 respondents comprising of staff who were selected using purposive sampling and simple random sampling. Data was collected using structured questionnaires and in-depth interviews. The data was analyzed using Microsoft excel and SSPS version 20. The major findings of the study revealed that there were significant relationships between loan approval process, borrower's business condition, collateral condition, credit risk analysis and financial performance. In conclusion, loan approval process, borrower's business condition, collateral condition, credit risk analysis as dimensions of loan portfolio management determine the financial performance at Centenary Bank. The study recommends therefore, that management of the bank should make efforts to ensure that there is proper loan portfolio management in regard to loan approval processes, borrower's business condition, collateral condition and credit risk analysis as this will enhance the financial performance of the bank. The stakeholders in Uganda‟s financial sector should develop strategies in line with the study variable relationships to so as to enhance the financial performance of their institutions. These strategies will help promote the development and implementation of loan portfolio management structures that promote the financial performance of the institutions.

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