THE CONTRIBUTION OF LOAN MANAGEMENT ON THE FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN RWANDA. A CASE OF BANK OF KIGALI PLC Period: 2020-2023

Abstract

The study was about the contribution of loan management on the financial performance of commercial banks in Rwanda. A case of Bank of Kigali PLC. Within the period of 2020-2023 Specifically this study examined the effectiveness of loan management applied by Bank of Kigali PLC, analyzed the financial performance of Bank of Kigali PLC within the period of 2020-2023 and evaluate the contribution of loan management to the performance of Bank of Kigali PLC. Regarding the effectiveness of loan management applied by Bank of Kigali PLC, results shows that on the issues of credit appraisal the majority of the respondents strongly agreed that credit department always checks at the capital of the borrower during credit review (mean=4.590, STD=0.449). Also respondents also strongly agreed that the credit department always checks at the character of the borrower during credit review (mean=3.790, Std =0.670). Regarding to the financial performance of Bank, results shows that from 2020up to 2023 the ratios of net profit margin 37.60%; 35.98%; 31.23% and 33.35 respectively. The ratio of Return on Assets are 2.95%; 2.95%; 3.22% and 3.53% respectively. On the other side from 2020 up to 2023, the ratios of Return on Equity are as follow: 14.86%; 18.16%; 18.72% and 20.42 respectively. The contribution of loan management to the performance of Bank of Kigali PLC was analyzed through multiple regression analysis and results shows that that credit appraisal, credit risks management, loan recovery policies, loan supervision, loan Reschuling and repossession of security to a constant zero, financial performance would be at 0.347. A unit increase on credit appraisal would lead to increase in financial performance by a factor of 0.162, a unit increase in credit risks management would lead to increase in financial performance by a factor of 0.282, a unit increase in loan recovery would lead to increase in financial performance by a factor of 0.194 and unit increase in loan supervision would lead to increase in financial performance by a factor of 0.198 and unit increase in loan rescheduling would lead to increase in financial performance by a factor of 0.211 and unit increase in repossession of security would lead to increase in financial performance by a factor of 0.222. Therefore, these shows that loan management contribute a lot to the performance of Bank of Kigali PLC