Assessment of loan interest repayment in commercial banks : a case study of Post Bank Uganda Limited

Abstract

This study assesses loan interest repayment and comes up with strategies to improve its repayment at Post Bank Uganda Limited. Specific objectives were to assess the application of loan interest repayment, examine loan interest repayment challenges among clients and identify strategies of improving loan interest repayment at Post Bank Uganda Limited. A case study research strategy and participatory research design were adopted where data was collected from 85 Post bank clients who had acquired loans and 3 Bank administrative staff-Key Informants using a questionnaire and interview-guide respectively. Data was analyzed descriptively using the Statistical Package for Social Sciences (SPSS) and thematic analysis for quantitative and qualitative data respectively. Post bank management has put in place innovative strategies to increase loan interest repayment among clients. It was concluded that Post Bank clients were required to follow a formal process for loan application, and this was adhered to manage credit risks or frauds. The applications were considered the first step for loan accessibility. The applications followed a bank policy where client appraisal was conducted to determine creditworthiness. The interest repayment was dependent on the interest rate, which was applied to the principal, which is the amount of the loan and the period. Unfavorable economic conditions in Uganda due to social, administrative, and economic factors hampered loan interest repayment by the clients. Strategic mechanisms were provided to revamp business in a post COVID-19 era as loan interest repayment is improved. Strategic business management, innovation, risk management and technology are the best strategies to improve loan interest repayment for commercial banks. It was recommended that management at Post Bank Uganda limited should make the application of loan interest more attractive to the customers. This is likely to increase the number of clients taking up loans from the bank. In the end, financial institutions particularly Post Bank Uganda Limited should reduce and charge appropriate interest rates according to the economic conditions in the country.