Relationship between loan recovery practices and loan portfolio performance of commercial banks in Uganda. a case of centenary bank -Entebbe road branch

Abstract

The general objective of the study was to examine the relationship between loan recovery practices and loan portfolio performance of commercial banks in Uganda. Specifically it focused on centenary bank Entebbe road branch as a case study. Specific objectives of the study was; to examine the relationship between reminder strategies and loan portfolio performance of Centenary Bank, to assess relationship between legal and procedural enforcement and loan portfolio performance of Centenary Bank, to evaluate relationship between loan monitoring and loan portfolio performance of Centenary Bank. In methodology, the researcher used a case study and correlation survey. The target populating was centenary bank Entebbe road branch staff and customers. Among the staff included; loan officers, banking of ficers, managers, credit Administrators, customer service consultants and management trainees in total this population was 114 and the researcher sampled I 07 basing on Kre_jcie & Morgan ( 1970) table. Unfortunately those who returned the questionnaires were 84. Therefore, the researcher used a sample of 84 respondents . The study findings indicated that reminder strategies had significant relationship on loan portfolio performance with higher overall mean of 3.906725 and correlation coefficient of(r=0.798 with a significant relationship ofO.OOO<O.OI) and the equation of Loan portfolio performance was = 0.798 Reminder strategies + Constant. On the side of Legal and procedural enforcement the overall mean was 3.7821 with a very strong positive but significant associative relationship and coefficient of (r=0 .986; significant relationship of 0.000<0.01) and the equation of Loan portfolio performance was = 0.986 Legal and procedural enforcement + Constant. Finally Loan Monitoring its overall mean was 3.7673636 with a very strong positive but significant associative relationship and correlation coefficient of (r=0 .984; significant relationship of 0.000<0.01) and the equation of Loan portfolio performance was found= 0.984 Loan Monitoring + Constant. The researcher recommended that bank should closely watch the reminder strategies, educate and sensitize customers and other users of the financial , recruiting recovery officers, adopting group recovery policy, facilitating the recovery process and the enforcement, create a department for follow up action and carrying out standard loan appraisal, formulate a separate legal department and recovery department at each branch, involve LCs chair persons, use guarantors all these will help increase Loan Portfolio Performance.