EFFECT OF LOAN MANAGEMENT ON FINANCIAL PERFORMANCE IN BANKING SECTOR IN RWANDA CASE STUDY: BANK OF KIGALI PLC PERIOD: 2020-2023

Abstract

Sound financial performance and its sustainability in commercial banks and its relationship with loan portfolio has remained a subject of interest to most scholars. The current research study is motivated to the effect of loan Management on Financial Performance in Banking Sector in Rwanda Case Study: Bank Of Kigali Plc from 2020 up to 2023. The main objective of this study is to analyze the effect of loan Management on Financial Performance of Bank of Kigali Plc, While specific objective is to analyse effectiveness of loan management applied by Bank of Kigali Plc; to assess the level of financial performance and to assess the relationship between loan management and financial performance of Bank of Kigali Plc. The study adopted Quantitative Descriptive case study design through the case study design and the main instruments used to collect data for analysis is document analysis as it helped to collect relevant data from secondary sources. Set of collected data were carefully prepared for tabulation, analysis and interpretation through editing, coding and tabulation from the research findings. Findings discovered that loan management influenced the commercial banks‟ financial performance in Rwanda. Profitability ratios gauge the financial success of Bank of Kigali Plc where the ROE indicates profit efficiency; it improved from 0.46 in 2020 to 0.67 in 2023, showing effective expense management and profit growth. The ROA measure the profitability relative to total assets; it rose from 0.029 in 2020 to 0.036 in 2023, highlighting better asset utilization. Indicates short-term financial health; it fluctuated between 1.07 and 1.27 from 2020 to 2023, suggesting stable liquidity and an ability to meet obligations. Overall, Bank of Kigali Plc has shown consistent profitability, stable liquidity, and effective management of its financial resources over the past four years. The reseracher recommended that BK should respect the BNR regulation about loans it means that it should not distributed the loans above 80% of deposit received.