LOAN MANAGEMENT AND FINANCIAL PERFORMANCE OF FINANCIAL INSTITUTIONS IN RWANDA. CASE STUDY: BANK OF KIGALI, MAIN BRANCH PERIOD: 2021 - 2023

Abstract

The purpose of the study was to examine the contribution of loan management on financial performance of Bank of Kigali Ltd headquarter branch. The specific objectives of the study were to analyze the effectiveness of loan management provided by Bank of Kigali Plc and to find out if the loans management of Bank of Kigali Plc contribute to its performance. However secondary data were analyzed using trend analysis and ratios analysis. Regarding to effectiveness of loan management within Equity Bank Rwanda PLC, level of performance of Equity Bank Rwanda PLC Results presented in the table 4.1 demonstrate that BANK OF KIGALI PLC recognized a continuous increase in deposit amount where it increased by 10.3% in 2022 and by 27.8% in 2023. Increases of that deposit come from good service. For deposits services and for loan products and the bank itself get liquidity from members deposits and gets earnings from loan granting. Increase in customer deposit lead to Banks performance.. Looking at the table 4.4 it is clear that Bank of Kigali PLC have been able to recover almost all the money they granted where in 2021 it recovered 93.3 %; in 2022 it recovered 94.7 %; in 2023it recovered 97.4 % and in 2023 it recovered 95.5% of granted loans. Therefore, this shows that the ratio as per BNR’s standard was not respected since BNR’s regulations from 2020 to 2021 in credit management indicated that the ratio between Performing Loans and gross loans issued should not be under 95%. Table 4.7 shows that for 100Rwf invested in Bank of Kigali PLC by shareholders generated returns of 22.6Rwf in the year 2021 which increased at 27.8 in the year 2022 and also, they increased again in 2023 up to 32.7Rwf. Net profit margin was 0.121in 2021, 0.155 in 2022 and 0.172 in 2023. Based on these findings, it was established that net profit margin generated as compared to the operating expenses incurred was 12.1% in 2021, 15.5% in 2022 and 17.2% in 2023. This indicates that Bank of Kigali PLC generated 12.1Rwf of profit from 100Rwf of sales in 2021, 15.5Rwf of profit from 100 Rwf of sales in 2022 while it generated 17.2Rwf of profit from 100Rwf of sales in 2023. In this context, therefore, the researchers concluded that the second hypothesis which was” Loan management has positive impact to the performance of bank of Bank of Kigali PLC” Was verified and confirmed