Abstract: Credit management is one of the most important activities in any company and cannot be overlooked by any economic enterprise engaged in credit irrespective of its business nature. Sound credit management is a prerequisite for a financial institution’s stability and continuing profitability, while deteriorating credit quality is the most frequent cause of poor financial performance and condition. As with any financial institution, the biggest risk in bank is lending money and not getting it back. The study sought to determine the effect of credit management on the financial performance of commercial banks in Rwanda. The study adopted a descriptive survey design. The target population of study was 57 employees of Bank of Kigali in credit department. Entire population was used as the sample giving a sample size of size of 57 employees. Purposive sampling technique was used in sampling where the entire population was included in the study. Primary data were collected using questionnaires which were administered to the respondents by the researcher. Descriptive statistics, ANOVA were used to analyze data. Findings of the study revealed that client appraisal; credit risk control and collection policy had effect on financial performance of bank of Kigali. Findings also showed that there is a positive relationship between credit management and financial performance of bank, where a unit increase in client appraisal would lead to increase in performance of BANK by a factor of 0.335, a unit increase in credit risk control would lead to increase in performance of BANK by a factor of 0.234 and also unit increase in collection policy would lead to increase in performance of BANK by a factor of 0.243.The study recommends that there is need for BANK to enhance their client appraisal techniques so as to improve their financial performance. Through client appraisal techniques, the BANK will be able to know credit worth clients and thus reduce their non-performing loans. There is also need for BANK to enhance their credit risk control this would help in decreasing default levels as well as their non-performing loans hence improving their financial performance.
Keywords: Credit management practices, financial performance of bank.
Title: EFFECT OF CREDIT MANAGEMENT PRACTICES ON FINANCIAL PERFORMANCE OF BANKS IN RWANDA
Author: Jackline Dusabe, Dr. Patrick Mulyungi
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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