Non-Performing Loans and Performance of Financial Institutions in Kabale District

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Kabale University


This study was undertaken to assess the impact of non-performing loans on the performance of financial institutions in Kabale district. The study was guided by the following research objectives: to assess the determinants of non-performing loans on financial institutions: to assess credit monitoring and recovery strategies adopted by financial institutions; and to determine the relationship between non-performing loans and performance of financial institutions. The study adopted a descriptive survey design. The population of the study included 10 financial institutions (commercial banks as the unit of analysis). A sample size of 140 respondents was used as determined by Krejcie and Morgan (1970) table, and the study used purposive and random sampling techniques. Questionnaire Survey and interview guides were used for data collection while both quantitative and qualitative data analyses were used. The study concludes that non-performing loans among financial institutions in Kabale district are as a result of poor credit assessment, failed loan monitoring, underdeveloped credit culture, lenient credit terms and conditions, aggressive lending, compromised integrity, weak institutional capacity, unfair competition among financial institutions, willful default by borrowers and their knowledge limitation, fund diversion for unintended purpose, over/under financing by financial institutions. However, the study recommends that financial institutions should put in place a vibrant credit process that ensures proper customer selection, robust credit analysis, authentic sanctioning process, proactive monitoring and clear recovery strategies for sick loans; formulate a clear policy framework that addresses issues of conflict of interest, ethical standard and check and balance in credit process; organizational capacity enhancement of financial institutions, deliberate effort to develop culture of the public towards credit and its management by financial institutions and ensuring prudent policies that govern loans.


A Research Dissertation Submitted to the Directorate of Postgraduate training in Partial Fulfilment of the Requirements for the Award of a Master of Business Administration of Kabale University


Non-Performing Loans, Performance of Financial Institutions