The role of loan portfolio management in commercial banks of Uganda, a case of KCB bank Uganda.

Abstract

The study investigated the role of loan portfolio management of KCB Bank Uganda Limited. The study aimed at establishing the loan portfolio management strategies in KCB Ltd, finding out the challenges faced when implementing loan portfolio management strategies at KCB Ltd and suggesting strategies for enhancing loan portfolio management practices to improve performance of KCB Ltd. A cross sectional survey design was adopted for this study and applied convergent mixed methods where the researcher collected both quantitative and qualitative approach was used. A sample size of 79 respondents was selected and the response rate was 76 respondents (96.2%). Purposive sample technique was used to select members of top management while, a simple random technique was used to select middle level and lower level staff. Quantitative data analysis mainly consisted of descriptive statistics (mean, standard deviation and percentages). Narrative analysis was used to analyze qualitative data. Findings revealed that KCB has an effective Loan Portfolio Management (LPM) policy, however loan portfolio management strategies fall short of not reviewing and revising the LPM Policies periodically to accommodate changes in the bank’s strategic direction and the bank loan department holding recovery meetings does not regularly with the clients and defaulters are not given stringent repayment conditions once they default on the first instalment. The findings also identified challenges faced when implementing loan portfolio management strategies at KCB Ltd including poor risk assessment prior to loan approval, failure to screen and appraise clients, low staff morale to report risks, inadequate monitoring and follow-up of clients, financial mismanagement by clients , lack of aggressive credit collection methods, staff inexperience in credit risk management, volatility of banking environment and lack of sound financial management advice provided to clients by bank staff . The study recommended that KCB should regular personal visits and recovery meetings with the clients, properly appraisal all the loan proposal of clients, put in place a strong loan portfolio risk management strategy, carry out financial literacy programs to clients, periodically review and revise LPM Policies and put more efforts in identification and measurement of LPM risks. Key words: Loan portfolio management, Commercial Banks, KCB Bank Uganda Limited