Credit policy and financial performance of commercial banks in Uganda

The study sought to determine on an empirical basis, whether credit policy influences the financial performance of commercial banks in Uganda. The objectives of the study were to examine the effect of credit standards, credit terms and loan monitoring and recovery on financial performance of commercial banks. A survey was conducted on a sample of Credit officers, Managers, Accountants and Auditors and Banking Assistants, drawn from Centenary bank in order to consider statistically significant relationships between financial performance and components of credit policy. Findings reveal significant positive relationships between credit standards, credit terms and loan monitoring and recovery and financial performance of commercial banks in Uganda.. The study concluded that credit policy is crucial to financial performance of commercial banks in Uganda. The study among others, recommended that credit standards for commercial banks should be linked to credit worthiness of prospective borrowers and that banks should maintain loan ageing records to guide loan monitoring and to make accurate and adequate provisions for loan losses.