Credit risk management and financial performance of commercial banks in Uganda: a case study of standard chartered bank, Kampala branch

Abstract

The study examined the role of credit risk management on financial performance of commercial banks in Uganda focusing on a case study of Standard Chartered Bank, Kampala Branch. It was guided by three objectives i) to examine how credit terms influences financial performance in Standard Chartered Bank, ii) to assess how debt collection influences financial performance in Standard Chartered Bank and iii) to examine how credit risk control influences financial performance in Standard Chartered Bank. The study adopted a mixed method approachusing both qualitative and quantitative research approaches. The results of the study indicated that there is a statistically significant relationship between credit risk management and financial performance of Standard Chartered Bank which was represented by (r (78) = .580, P=0.01) and as such the null hypothesis was rejected In conclusion, the study notes that Interest rates charged had a negative effect on the performance of the loans, the higher the interest rates the lower the loan performance and that the involvement of credit officers and customers in formulating credit terms affects Standard Chartered Bank loan performance. The study suggested that the management of banks should also proactively and reactively act on the corrective actions on raised credit in the credit risk monitoring practices. It was also suggested that bank managers in SCB should develop an effective credit risk monitoring system which makes credit risk monitoring easy and flexible so as to boost Performance of Banks. SCB should develop an effective credit risk analysis system and make sure they always have a risk analysis plan that enables them have minimum frauds at all times, this will help them control credit and hence increase on financial performance.