MJAAR

Credit Management Policies and Loan Portfolio Performance of Equity Bank, Kampala District, Uganda

Nakkazi Joyce, Magala Muhammed


Abstract

This study examined the relationship between credit management policies and loan portfolio performance at Equity Bank, Kampala District, Uganda. Lending is a core banking activity and a principal source of both income and risk, and sound credit management is widely regarded as essential to a healthy loan portfolio, yet its contribution in the Ugandan banking context remains under-examined. The study investigated how credit appraisal, credit terms and limits, collection policy, and credit monitoring relate to loan portfolio performance. A cross-sectional survey design with a mixed-methods approach was adopted, and data were collected from 170 respondents comprising credit officers, branch managers, and other banking staff using structured questionnaires and interviews. Descriptive statistics, exploratory factor analysis, Pearson correlation, and structural (path) analysis were used. Factor analysis confirmed the construct validity of the credit management dimensions, which loaded onto coherent factors and explained 68.6% of the variance. The results revealed a strong positive and significant relationship between credit management policies and loan portfolio performance (r = 0.68, p < 0.01), with the dimensions jointly explaining 66.0% of the variance in loan portfolio performance (R² = 0.660). Credit appraisal (β = 0.33) and collection policy (β = 0.30) emerged as the strongest path predictors. The study concludes that sound credit management significantly enhances loan portfolio performance and recommends strengthening credit appraisal, collection, and monitoring.

Keywords

credit management loan portfolio performance credit appraisal collection policy Equity Bank
Metropolitan Journal of Academic and Applied Research

Cite This Article

Nakkazi Joyce & Magala Muhammed (2026). Credit Management Policies and Loan Portfolio Performance of Equity Bank, Kampala District, Uganda. Metropolitan Journal of Academic and Applied Research, 5(8). https://journals.miu.ac.ug/pages/article.php?article_id=739

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