EFFECTIVE LOAN MANAGEMENT AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN RWANDA

Author: Dr. Rudahigwa Oswald PhD

ABSTRACT

The aim of this study was to find out the effective loan management and   financial performance of commercial banks in Rwanda. The methodology employed descriptive and correlational designs. Purposive sampling technique was applied to select sampled respondents. Data was analyzed using descriptive statistics, spearman correlation, regression analysis and financial ratios analysis.  After all the following findings were reached: The effectiveness of loan management was measured by loans planning, client appraisal and collection policy.

Qualitatively analysis was used to explain the effectiveness of loan management and financial performance. According to the financial performance considering the overall   mean of 3.97   which is interpreted as high mean. The quantitative results that were examined through the financial statements of Bank of Kigali Group Plc   in form of profitability ratio, liquidity ratios and efficiency. To the third specific objective, it was found that there is high correlation between loan management and profitability of Bank of Kigali Group Plc. This is explained by the correlation (r) of 0.734 which is interpreted as high and the p-value of 0.00 which is less that the significance value of 0.01.

Based on findings have provide the suggestions to BK Plc: It is suggested that periodically relevant training programs are organized for credit officers particularly in the area of risk management, management of loan default and financial analysis. This helps improve the knowledge and analytical skills of the loan officers so as to improve their client’s appraisal techniques.  The credit committees at all levels must review clients’ bank statements in order to ensure that credit is collected in a timely manner. The Bank of Kigali Plc should check at the character of the borrower during loan review and to enhance their loan risk control.

Key concepts: Effective Loan management, financial performance of commercial banks in Rwanda

REFERENCES

  • Antoine. (2015). Effect of loan management on the financial performance of commercial bank: the case of Gank of Kigali. East African Journal of Science and Technology, Vol.5, Issue 1, 2015.
  • Berkowitz. (2005). The role of global procurement in the value chain of Japanese steel‟. Colombia Journal of World Business, 22, 79 – 110.
  • Berkowitz, M., & Mohan, K. (1987). The role of global procurement in the value chain of Japanese steel‟. Colombia Journal of World Business, 22, 79 – 110.
  • Berkowitz; Mohan, . (1987). the role of global procurement in the value chain of Japanese steel‟. Colombia Journal of World Business, 22, 79 – 110.
  1. (2018). BK Annual report 2017. Kigali: BK.
  • BNR. (2013). National Bank of Rwanda. Kigali: BNR.
  • Boateng, O. (2011). Optimal loan portfolio management (a case study of cal bank, nhyieaso branch – KUMASI). . Accra: Public library.
  • Emmy, T. (2014). Marketing strategies and performance of Telecommunication Company. Kigali.
  • Erickson, G., & Jacobson, R. (2010). Gaining comparative advantage through discretionary expenditures: The returns to R&D and advertising,Manage. Journal of Sciences and management, 321-345.
  • Gieseche, K. (2004). Credit risk modeling and valuation: An introduction, credit risk: Models and Management. London: Cornell University.
  • Greuning, H. B. (2003). Analyzing and Managing Banking Risk: A Framework for Assessing Corporate Governance and Financial Risk, 2nd ed., The World Bank. Washington.
  • Hinson, R., & Mahmoud, M. (2011). “Qualitative Insights into Market Orientation in Small Ghanaian Businesses”. International Journal of Marketing Studies, Vol. 3 No. 1, pp. 36-44.
  • Horace, A. S. (2007). Business accounting, eighth edition, Pearson education Asia, . India.
  • Jackson. (2011). the impact of credit risk management on financial performance of commercial banks in Kenya. Nairobi: University of Nairobi.
  • Kakuru, J. (2003). The Management of loan portfolios and the performance of indigenous commercial banks in Uganda: A case study of Uganda Commercial Bank and Centenary Rural Development Bank, MBA. Thesis, Makerere University, . Kampala.
  • Koontz, H., & Weihrich, H. (2007). Essentials of Management. New Delhi: Tata McgrawHill.
  • Laurence. (2013). Loans management and performance of Nigieria banks. ISSN 2277-5846. Lagos: Hill house.
  • Nestor, A. (2017). Loan management and financial performance of quoted deposit money banks in Nigeria. . Awka, Nigeria: Nnamdi Azikiwe University.
  • Noraini, I. &. (2006). Credit Risk Management and Profitability of Bank Listed on Bursa Malaysia. Bursa : Universiti Tenaga Nasional (UNITEN).
  • Oliver, R., & Swan, J. (1989). “Consumer perceptions of interpersonal equity and satisfaction in transactions: a field survey approach”. Journal of Marketing, Vol. 53, pp. 21-35.
  • Signoriello, V. J. (2001). Commercial Loan Practices and Operations.
  • Sinkey, J. F. (2001). C om m ercial Bank F inancial M anagem ent. Macmillan: Macmillan Perspective Publishing Company.