Evaluation of bank loan payment: a case study of Post Bank Uganda Limited

Abstract

This study assessed bank loan payment and formulated strategies to enhance its repayment at Post Bank Uganda Limited. The specific objectives were to evaluate the implementation of bank loan practices at Post Bank Uganda Limited, investigate the difficulties faced by clients in making loan payments, and propose solutions for improving bank loan repayment at the bank. The research employed a case study research strategy and participatory research design, collecting data from 85 Post Bank clients who had acquired loans and 3 Bank administrative staff who served as Key Informants, using a questionnaire and interview guide, respectively. Data was analysed descriptively using the Statistical Package for Social Sciences (SPSS) for quantitative data and thematic analysis for qualitative data. The study found that Post Bank management had implemented innovative strategies aimed at increasing loan interest repayment among clients. It was concluded that Post Bank clients were required to follow a formal process for loan application, which was adhered to in order to manage credit risks or fraud. This application process served as the initial step for loan accessibility and followed the bank's policy, including client appraisal to determine creditworthiness. The interest repayment was contingent on the interest rate applied to the principal amount of the loan and the repayment period. Challenges in loan interest repayment were attributed to unfavourable economic conditions in Uganda, influenced by various social, administrative, and economic factors. The study proposed strategic mechanisms to revamp businesses in the post-COVID-19 era while simultaneously improving loan interest repayment. Strategic business management, innovation, risk management, and technology were identified as effective strategies for enhancing loan interest repayment for commercial banks. Based on these findings, it was recommended that Post Bank Uganda Limited's management should take steps to make the application of loan interest more attractive to customers. This approach was anticipated to increase the number of clients taking up loans from the bank. Additionally, the study recommended that financial institutions, particularly Post Bank Uganda Limited, should adjust and charge appropriate interest rates in accordance with the prevailing economic conditions in the country.