LOAN MANAGEMENT TO THE PERFORMANCE OF FINANCIAL INSTITUTIONS

Abstract

The main objective of this research was to evaluate how loan Management affect the performance of financial institutions with Bank of Kigali as case study. BK faces the issues of poor performance indicated with fluctuated return on assets from 2019-2021, for instance, the BK has 3.66% in 2019 decreased to 2.95% in 2020 and then increased to 3.26 in 2021. BK’ net profit margin in 2019 was 39.6 in 2020 was decreased to 34.1%. BK also its return on equity been fluctuated from 2019-2021, for instance, the BK has 16.9% in 2019 decreased to 14.9% in 2020 and then increased to 18.2 in 2021. Different concepts, theories and available related literatures published on the variables made this study were used. In this study the researcher adopted explanatory and correlation research design to enable the researcher accomplishes the objectives of the study. The study was carried out at the Bank of Kigali headquarter. Data was analyzed using Microsoft Excel and SPSS version 22. The findings showed that non-performing loans indicated with 2018 is 4.9%; 5.7% in 2019. NPL ratio in 2020, 2021, and 2022 are 5.6%; 4.6% and 2.6%. The net profit margin of BK in 2018, 2019, 2020, 2021, and 2022 represents 36.1%, 39.6%, 34.1%, 38.1%, and 43.3% respectively. These meaning that for every 1 Rwf of sales, Bank of Kigali made Rwf 36.1, 39.6, 34.1, 38.1, and 43.3 in 2018, 2019, 2020, 2021, and 2022 respectively. Bank of Kigali’s ROA in 2019 is 3.7%. In 2020, 2021, and 2022, the return on asset ratio are 2.9%,3.3, and 3.2% respectively. Bank of Kigali’s ROE is 14.1% in 2018. In 2019 the ratio is the following 16.9% indicates that Bank of Kigali’s return on equity is in increased based on previous year. Bank of Kigali’s ROE is 14.8% in 2020. In 2021 and 2022 the ratio are the following 18.2% and 18.7% respectively and this indicates that Bank of Kigali’s return on equity are fluctuated from 2018-2022. The findings arose from the study, it can be concluded that non-performing loans affect positively performance of financial institutions at the significant value of 0.020 and r=0.715, implying that that there is a positive high correlation between non-performing loans and performance of financial institutions. However, researcher recommends that Bank of Kigali should assess carefully their process of delivering loans.