TABLE OF CONTENTS
DECLARATION ............................................................................................................... i
APPROVAL .................................................................................................................... ii
LIST OF TABLES ........................................................................................................ viii
LIST OF FIGURES ......................................................................................................... ix
LIST OF ACRONYMS ..................................................................................................... x
ABSTRACT .................................................................................................................... xi
CHAPTER ONE: INTRODUCTION ................................................................................. 1
1.1 Background of the study ............................................................................................ 1
1.2 Statement of the problem .......................................................................................... 4
1.3 Purpose of the study ................................................................................................. 5
1.4 Objectives of the Study ............................................................................................. 5
1.5 Research Questions .................................................................................................. 5
1.6 Scope of the study ..................................................................................................... 5
1.6.1 Content scope ........................................................................................................ 5
1.6.2 Geographical scope ............................................................................................... 6
1.6.3 Time scope ............................................................................................................. 6
1. 7 Conceptual frame work ............................................................................................. 7
1.8 Significance of the study ........................................................................................... 8
CHAPTER TWO: LITERATURE REVIEW ...................................................................... 9
2.0 Introduction ................................................................................................................ 9
2.1 Credit risk managment techniques used by commercial banks ............................... 10
2.1.1 Risk avoidance techniques ................................................................................... 10
2.1.2 Risk diversification techniques ............................................................................. 11
2.1.3 Credit policies ....................................................................................................... 12
2.1.4 Risk transfer ......................................................................................................... 13
2.1.5 Risk retention ....................................................................................................... 15
2.2 Factors influencing financial performnace of commercial banks ......................... 16
v
. 2.2.1 Liquidity ................................................................................................................ 17
2.2.1.1 Current Ratio ..................................................................................................... 17
2.2.1.2 Quick Ratio ........................................................................................................ 18
2.2.2 Profitability ............................................................................................................ 18
2. 7.2 Net Profit Margin .................................................................................................. 19
2.7.2.1 Return on Investment and Return on Equity ...................................................... 19
2.2.3 Loan recovery ....................................................................................................... 19
2.2.4 Financial statements; ........................................................................................... 20
2.2.4 Level of non-performing loans .............................................................................. 22
2.3 The relationship between credit Risk management and financial performance ....... 24
CHAPTER THREE: METHODOLOGY ......................................................................... 27
3. 0 Introduction .............................................................................................................. 27
3.1 Research Design ..................................................................................................... 27
3.2 Study Population ..................................................................................................... 27
3.3 Sample size ............................................................................................................. 28
3.2.3 Sampling method ................................................................................................. 29
3.3 Data collection ......................................................................................................... 30
3.3.1 Data sources ........................................................................................................ 30
3.3.2 Data collection Instruments .................................................................................. 30
3.3.3 Procedure ............................................................................................................. 31
3.8 Data gathering procedure ................................................................................... 31
3.9 Data analysis ........................................................................................................... 32
3.10 Ethical Considerations ........................................................................................... 32
CHAPTER FOUR: DATA PRESENTATION, INTERPRETATION AND ANALYSIS .... 34
4.1 Introduction .............................................................................................................. 34
4.2 Background of the Respondents ............................................................................. 34
4.2.1 Gender of the respondents ................................................................................... 34
4.2.2 Level of Education of the Respondents ................................................................ 36
4.2.3 Time spent working with Barclays Bank ............................................................... 37
VI
- 4.3. Empirical Findings .................................................................................................. 38
4.3.1 Findings on Credit Risk Management Techniques Used In Barclays Bank .......... 38
4.3.2 Findings on Financial Performance of Barclays Bank ......................................... .40
4.3.3 Findings on Relationship between Credit risk management and financial
performance of Barclays bank ....................................................................................... 45
CHAPTER FIVE: SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS .......... .48
5.1 Introduction .............................................................................................................. 48
5.2. Summary of the main findings ............................................................................... .48
5.2.1 Credit risk management techniques used in Barclays Bank ................................. 49
5.2.3 Financial Performance Of Barclays Bank ............................................................. 50
5.2.4 Credit Risk Management And Financial Performance .......................................... 50
5.3 Conclusions ............................................................................................................. 51
5.4 Recommendations .................................................................................................. 51
5.5.Areas for further Research ...................................................................................... 53
REFERENCES .............................................................................................................. 54
APPENDIX 1: ................................................................................................................. 57
QUESTIONNAIRE FOR EMPLOYEES AND CREDIT RISK STAFFS .......................... 57
APPENDIX II: ................................................................................................................ 61
INTERVIEW GUIDE FOR KEY INFORMANTS (Bank managers) ................................ 61
APPENDIX 111 ................................................................................................................ 62
TIME SCHEDULE ......................................................................................................... 62
APPENDIX IV ................................................................................................................ 63
ESTIMATED BUDGET .................................................................................................. 53
ABSTRACT
The study set out to investigate the relationship between credit risk management and financial performance of commercial banks. Credit risk management is very important to commercial bank's improvement of their financial performance, thus this research is intended to address the extent to which credit risk management can led to increased financial performance of commercial banks. On the other hand, the study was intended to discuss the other factors that may hinder financial performance of the commercial banks apart from credit risk control. The study employed a survey research design and used self-administered questionnaires and face to face interviews. A sampling design of 30 respondents was selected which composed of 4 management executives, 6 loan officers and 10 employees from Barclays bank Kampala Road Branch. Findings from the study show that financial performance of commercial banks has improved due to the good credit risk management techniques and process like training of stuff on credit risk reduction. Findings also show that financial performance has been hindered by crashing ATMs, longlines made by the customers each day and switching systems. Findings also show that credit risk and financial performance of commercial banks are positive hence alot of awareness and training of employees has been put in place at the bank so curb the credit risk. The researcher thus recommends that; Barclays bank should continue with the credit risk management short courses and seminars and should penetrate into the unleashed financial community so as to boost the financial performance.
