ABSTRACT The study aimed at assessing" the impact of credit policy on the performance of financial institutions in Equity Bank of Uganda taking the study to be Kabalagala branch. The study mainly looked at the credit risk policy and the performance of Equity bank and to find out whether this policy was effective to the bank. For effectiveness of the research, the researcher used a research design and data collection and analysis were used to arrange the information in such a way that enhanced the researcher r to come up with the reliable recommendations and conclusions .Different methodologies were employed which were research design, study population, sample design, research instruments and analysis of data where the researcher used pie charts and presentations done in bar graphs. It was s realized that the performance of any financial institutions depends on its existing credit policy at any given period thus Equity bank uses credit policy to evaluate credit worthiness of its customers hence has enabled the bank to run smoothly and effectively. It was found out that Equity Bank uses the credit policy rating policy which helps them to rate the credit wo1ihiness of its customer's .Credit rating also helps the bank to reduce the defaulters of the bank. It was also revealed that the bank uses credit evaluation where this looks at the in- depths analysis in a client's application. It is the duration it takes a client to access the funds from the time, an application on credit facility is tendered in to the time the bank disburses the loan. It is true that the majority of clients take a month for their loan to be approved from Equity Bank thus is seen when the customer has met all the requirements s needed by the bank
TABLE OF CONTENTS
Declaration ................................. ............................................................... I
Approval. .................................................................................................. II
Dedication................................ . .................. Ill
Acknowledgements.................. . ................... .IV
Table of contents..................... . ........................ V
List oftables........................... . .................. IX
Abstract................................... . ............................................................. X
CAPTER ONE: INTRODUCTION ... ............................................................. 1
1.0 Introduction ..................................................................................... I
1.1 Background to the study ....................................................................... I
1.2 Statement of problem .......................................................................... 2
1.3 Objectives of study ............................................................................ 2
1.4 Research questions .................................................................................. .3
1.5 Scope of the study ............................................................................... 3
1.6 Purpose of the study ............................................................................ 3
1.7 Significance of the study ....................................................................... 3
1.8 Conceptual frame work ...................................................................... .4
CHAPTER TWO: LITERATURE REVIEW .................................................... 5
2.0 Overview of credit policy in financial institutions ......................................... 5
2.1 Related literature ................................................................................ 5
2.2 Credit risk model ............................................................................... 6
2.3 Consumer bank credit.. ......................................................................... 7
2.4 Importance of credit .............................................................................. 7
2.5 Credit policy .................................................................................... 8
2.5 Credit standards and analysis ................................................................. 8
V
2.5.2Credit terms ........................................................................................ 8
2.5.3Determinants of credit terms in commercial banks ........................................... 9
2.5.4Col/ection policy ................................................................................... 9
2.6.0 Effects o credit on the performance of commercial banks ....................... _ ....... ... 9
2. 7.0 Functions of credit management policy in the economy ................................... I 0
2.7. I Reducing the rate of defaulters ................................................................ 1 O
2.7.2 Maintains Liquidity ............................................................................. 11
2.7.3 Maintains a favorable spread .................................................................... 11
CHAPTER THREE RESEARCH METHODOLOGY ..................................... 12
3.0 Introduction ...................................................................................... 12
3.!Research design ..................................................................................... 12
3.2.0 Research population ............................................................................ 12
3.3Sampling design .................................................................................... 12
3.3.1 Sample size .......................................................................................... 12
3.4 Data source, collection methods ................................................................. 13
3.4.1 Data source ........................................................................................ 13
3.4.2 Data collection instruments ..................................................................... 13
3.4.2.1 Questionaires method .......................................................................... 13
3.4.3 Data processing and analysis .................................................................. 13
3.5 Limitations of the study ................................................................................. 14
