THE EFFECT OF CREDIT RISK MANAGEMENT ON THE PERFORMANCE OF LOAN PORTFOLIO IN FINANCE TRUST BANK, KAMPALA MAIN BRANCH

LIST OF ABBREVIATION

ABSTRACT

The study was aimed to analyze the effect of credit risk management on the performance of loan portfolio in Finance Trust Bank, Kampala Main Branch. The study was aimed at achieving the three specific objectives. To establish the types of risks affecting the loan portfolio performance in Finance Trust Bank, Kampala Main branch. Secondly to, Assess the extent to which the exposure to risks affect Credit monitoring of loan portfolio in Finance Trust Bank, Kampala Main branch and to analyze the strategies used in credit risk control on loan portfolio performance in Finance Trust Bank Kampala Main Branch. The study employed qualitative and quantitative research paradigms in which a cross sectional research design was employed. The researcher found out that there is a significant relationship between the types of risks, credit monitoring and credit control in the loan portfolio performance in Finance Trust Bank, Kampala main branch. Credit risk control in form of giving credits, critical evaluation and collateral evaluation are very fundamental in the performance of loan portfolio in Banks. The types of risks in terms of interest risks, liquidity and transaction risks have a significant positive relationship on the performance of loan portfolio in Banks. Credit monitoring in form of written standards, policies and regulations has no relationship on the performance of loan portfolio in Banks. From the conclusions different recommendations were reached. Loan officers should identify and monitor actual and potential concentrations of credit so as to improve on loan portfolio performance in banks. Banks should be in position to use standardized methods used by financial institutions in order to ensure credit control. Supervisors should be in position to use effective management of the different types of risks such as liquidity risk, price risks that can be used to improve on the performance of loan portfolio in bank.

CHAPTER ONE

INTRODUCTION

1.1 Back ground to the study

This study focuses on analyzing the effect of risk management on the performance of loan portfolio in Finance Trust Bank, Kampala main branch. Risk management refers to the process of identification, analysis and either acceptance or mitigation of uncertainty in investment decision-making.  Simply put, risk management is a two-step process – determining what risks exist in an investment and then handling those risks in a way best-suited to your investment objectives.  Risk management occurs everywhere in the financial world. It occurs when an investor buys low-risk government bonds over more risky corporate debt, when a fund manager hedges their currency exposure with currency derivatives and when a bank performs a credit check on an individual before issuing them a personal line of credit (Diamond, 2009). According to Scott (2009), loan portfolio means those loans that have been made or bought and are being held for repayment. Loan portfolios are the major asset of banks, thrifts, and other lending institutions. The value of a loan portfolio depends not only on the interest rates earned on the loans, but also on the quality or likelihood that interest and principal will be paid.

Internal credit ratings are becoming increasingly important in credit risk management at large U.S banks. Banks’ internal rating are somewhat like ratings produced by Moody’s Standard and Poor’s, and other public rating agencies in that they summarize the risk of loss due to failure by a given borrower to pay as promised. Essentially, risk management occurs anytime an investor or fund manager analyzes and attempts to quantify the potential for losses in an investment and then takes the appropriate action (or inaction) given their investment objectives and risk tolerance. Inadequate risk management can result in severe consequences for companies as well as individuals. For example, the recession that began in 2008 was largely caused by the loose credit risk management of financial firms. However, banks’ rating systems differ significantly from those of the agencies (and from each other) in architecture and operating design as well as in the uses to which ratings are put. One reason for these differences in those banks’ ratings is assigned by bank personnel and is usually not revealed to outsiders. For large banks, whose commercial borrowers may number in the tens of thousands, internal ratings are an essential ingredient in effective credit risk management (Archarya, 2008).

Without the distillation of information that ratings represent any comparison of the risk posed by such a large number of borrowers would be extremely difficult because of the need to simultaneously consider many risk factors for each of the many borrowers. Most large banks use ratings in one or more key areas of risk management that involve credit, such as guiding the loan origination process, portfolio monitoring and management reporting, analysis of adequacy of loan loss reserves or capital, profitability and loan pricing analysis and as inputs to formal portfolio risk management models. Banks typically produce ratings only for business and institutional loans and counterparties, not for consumer loans or other assets. In short, risk ratings are the primary summary indicator of risk for banks individual credit exposures. They both shape and reflect the nature of credit decisions that banks make daily. Understanding how rating systems are conceptualized, designed, operated, and used in risk management is thus essential to understanding how banks perform their business lending function and how they choose to control risk (Boyd & Prescott, 2009).

The Finance Trust bank Uganda is the pioneer microfinance institution which was started by a group of professional women in 1984. Finance Trust bank Uganda is living to its mission of promoting financial independence by providing unique financial services to low income people in Uganda hence empowering them to be independent financially.

The Uganda Women Finance Trust started as an NGO in 1984 offering microfinance business to its customers when the saving capacity of the poor was still doubted. Of course in other developing countries, it had already been proved that the poor can save and small scale entrepreneurs, who were least likely to receive the attention of formal financial microfinance institutions, emerged, but Uganda Women Finance Trust remained outstanding for its focus on regarding poor women, both in rural and urban areas. In October 2004, Finance Trust bank Uganda was transformed from an NGO limited by guarantee to Finance Trust Bank (MDI) limited, a company limited shares. Then, the company obtained license as a microfinance depot taking institution in October 2005 and it became the forth licensed MDI in the country (Bank of Uganda Report, 2006).

1.2 Problem Statement

Financial institutions wishing to thrive in this ever changing globe should be in position to address their loan portfolio performance in regards to reducing the cost of debt collection, reduce time on loan repayment as well as ensuring proper usage of the borrowed monies. Unfortunately, in Finance Trust Bank Uganda (BOUR, 2010) reported that the ratio of non-performing loans to the total branch portfolio has been increasing year after year and the branch has not been able to achieve its annual targets of non-performing asset ratio during the period under review (2008-2011). This has been evident in the sense that there are high costs of debt collection, loan repayment has constantly been a problem as well as the usage of the borrowed monies has not been given eminent attention. There too, are still cases of accounts being  abandoned because of loan attachments, the increase in provision of bad loans and increasing non-performing asset threatens the soundness of the branch.

If the current scenario continues to suffice in Finance Trust Bank Uganda, a decline in loan portfolio would continue to occur and the eventual collapse of the bank would be evident. While there could be several factors that do contribute to the loan portfolio performance in Finance Trust Bank Kampala main branch, the contribution of credit risk management may have a role to play in this study, hence the need for the researcher to examine the effect of credit risk management on the performance of loan portfolio in Finance Trust Bank Uganda, Kampala main branch.

1.3 Objectives of the study

Both the general and specific objectives were used in conducting this study. These are given below:

1.3.1 General objective of the study

The general objective of the study was to analyze the effect of credit risk management on the performance of loan portfolio in Finance Trust Bank, Kampala main branch.

1.3.2 Specific objectives of the study

The study was guided by the following three specific objectives:

1. To establish the types of risks affecting the loan portfolio performance in Finance Trust Bank, Kampala Main branch.
2. Assess the extent to which the exposure to risks affect Credit monitoring of loan portfolio in Finance Trust Bank Kampala Main branch
3. To analyze the strategies used in credit risk control on loan portfolio performance in Finance Trust Bank Kampala Main branch.

1.4 Research questions

The study was guided by the following three research questions:

1. What are the types of risk that affect the loan portfolio performance in Finance Trust Bank, Kampala main branch?
2. To what extent does the exposure to risks affect credit monitoring of loan portfolio in Finance Trust Bank Kampala main branch?
3. What are the strategies used in credit risk control on loan portfolio performance in Finance Trust Bank Kampala main branch?

1.5 Scope of the study

The scope is in three forms- subject, geographical and time as explained below.

1.5.1 Subject scope

The study covered credit risk management and the performance of loan portfolio in Finance Trust Bank Uganda. It  focused on the following components that constitute variables of credit risk management such as; types of risk, credit risk monitoring and credit risk control and how they do affect performance of loan portfolios in Finance Trust Bank, Kampala main branch.

1.5.2 Geographical scope

The study was carried out within Finance Trust Bank, Kampala main branch which has the biggest loan portfolio out of all the branches and the focus area will be credit risk management.

1.5.3 Time Scope

For the time scope, the study inquiries  covered the period from 2012-2015. It is within these years that bank’s loan portfolio increased after the introduction of commercial lending and other products like Animal traction loans, investment loan, and veterinary loan, among others (Bank of Uganda Report, 2010).

1.6 Significance of the study

The study might help human resource department in Finance Trust Bank Uganda to formulate better credit risk management for better service delivery in the bank.

The findings of the study are expected to be very useful to financial institutions when they are managing credit risk management in order to enhance better loan portfolio performance at all levels.

The outcomes of the study are expected to provide useful information to policy makers especially among Finance Trust Bank top administrators in designing appropriate and practical policy guidelines that will help improve on loan portfolio performance among the banks in Uganda.

The study might help future researchers to add to the existing body of knowledge by stimulating new areas for future research through the findings and subsequent recommendations.

1.7 Conceptual frame work

Fig 1.1 illustrates the conceptual frame work relating credit risk management on the performance of loan portfolios.

Independent variable                                                                  Dependent variable

Credit risk management                                                          Loan portfolio performance

Extraneous variable

Developed by the researcher (2016)

In the conceptual frame work in fig 1.1, illustrates the independent variable credit risk management which is conceptualized into: types of risks, credit monitoring and credit risk control. Fig 1.1 further suggests that the independent variable (credit risk management) has a significant effect on the dependent variable (loan portfolio performance) were the dependent variable is being conceptualized into: recognition of loan repayment, proper use of borrowed money, reduced cost of debt collections and high target rates. In regards to this study, there are certain extraneous variables which include; political environment, motivation, leadership styles and organizational climate which are competing with the independent variable to influence the dependent variable loan portfolio performance in Finance Trust Bank Uganda.

1.8 Definitions of key terms

Loan portfolio is defined by (Armstrong, 2006) as the total cash amount of loans outstanding at any time, that is, money that has been advanced but not yet repaid to a bank or finance company. In addition, Loan portfolio according to (Scott 2009) means those loans that have been made or bought and are being held for repayment. Loan portfolios are the major asset of banks, thrifts and other lending institutions.

Risk management is defined by (Berger & Straham, 2009) as the process of identification, analysis and either acceptance or mitigation of uncertainty in investment decision-making.

Credit risk is most simply defined by (Cole, 2010) as the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms. In addition, Credit risk according to (Diamond, 2009) refers to the likelihood a potential borrower will default on his or her financial obligations with a lending institution. Credit risk management is the lending institution’s primary line of defense to protect itself against customers who fail to meet the terms of the loans or other credit that was extended to them.

Performance according to (Armstrong, 2006) is defined as the results of activities of an organization or investment over a given period of time.

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

The literature review was sectionalized into three perspectives in relation to objectives of the study. That is, it covers the review of literature on the effect of the types of risk, credit monitoring and credit risk control strategies on loan portfolio performance in Finance Trust Bank, Kampala main branch.

2.1 The effect of the types of risk on the loan portfolio performance in banks.

Delong (2008) observed that in regards to credit risk as a type of risk, most banks, loans are the largest and most obvious sources of credit risk. However, there are other pockets of credit risk both on and off the balance sheet, such as the investment portfolio, overdrafts and letters of credit. Furthermore, many products, activities and services such as derivatives, foreign exchange and cash management services, also expose a bank to credit risk.

Villalonga (2008) found out that banks have focused on oversight of individual loans in managing their overall credit risk. While this focus is important, banks should also view credit risk management in terms of portfolio segments and the entire portfolio. The focus on managing individual credit risk did not avert the credit crisis of the 1980s. However, with the portfolio approach to risk management practices, banks might have at least reduced their losses.

In regards to the types of risks, interest rate risk (Conment and Jarrell, 2006) found out that the level of interest risk attributed to the banks’ lending activities depends on the composition of its loan portfolio and the disagreement to which the terms of its loan (for example maturity rate structure, embedded options) expose the banks’ revenue stream to changes in rates. In a similar instance, banks must be able to assess the expected risk/return profile of transaction during its underwriting, analyze and manage the ongoing risk of its credit portfolio in order to determine the most efficient use of its capital. To maintain an accurate view of risk adjusted return on capital (RAROC), it is important for a bank to continuously identify important trends or relationships within its business to determine factors that are impacting the profitability of products, customers or operating units.

Johnson (2009) found out that in regards to liquidity risk, the size of the loan portfolio, effective management of liquidity risk requires that there should be close ties to and good information flow from the lending function. Obviously, loans are a primary use of funds and while controlling loan, growth has always been a large part of liquidity management. Historically, the loan portfolio has not been viewed as a significant source of funds for liquidity management. However, practices are changing and banks can use the loan portfolio as a source of funds by reducing the total dollar volume of loans through sales, securitization and portfolio run-off.

Hauswald & Marquez (2009) observed that most of the developments that improve the loan portfolios, liquidity have implications for price risk. Traditionally, the lending activities of most banks were not affected by price risk. Because loans were customarily held to maturity, accounting doctrine required book value according treatment. However, as banks develop more active portfolio management practices and the market for loans expands and deepens, loan portfolios will become increasingly sensitive to price risk.

Diamond (2009) pointed out that foreign exchange risk is present when a loan or portfolio of loans is denominated in foreign currency or is funded by borrowing in another currency. In some cases, banks will enter into multi currency credit commitments that permit borrowers to select the currency they prefer to use in each roll over period. Foreign exchange risk can be intensified by political, social or economic development. The consequences can be unfavorable if one of the currencies involved becomes subject to stringent exchange controls or is subject to wide exchange rate fluctuations.

Misty (1997) observed that in the lending area, transaction risk is present primarily in the loan disbursement and credit administration processes. The level of transaction risk depends on the adequacy of information systems and controls.  The capability and integrity of employees’ significant losses in loan and lease portfolios have resulted from inadequate information systems, procedures and controls. For example, banks have incurred increased credit risk when information to identify concentrations expired; or can not state financial statement.

2.2 The effect of Credit Monitoring on loan portfolio performance

Monitoring a risk is always a crucial part in risk management process, and as suggested by Lins & Servacs (2009), quantifying credit risk can be complicated due to the lack of sufficient historical data and diversity of involved borrowers and the variety in default causes with the dramatic development of technology credit risk measurement evolves greatly during the last 20 years. Generally speaking, measuring a risk is about trying to obtain some measures of the depression of possible future outcomes, and in practice, the focus is usually on the downside outcomes (Lowe, 2009). The credit risk in banks should be measured by size as well as scope of the exposure and as pointed out by Lowe (2009). All kinds of credit risk measuring approaches comprise of four common building blocks, including the probabilities of borrowers default (PDS), the correlation of PDS across borrows the possible loss an event of default (LGD) and the correlation between PDS and LGD.

Keeley (2006) pointed out that in the wake of the global financial crisis; banks are under increasing pressure to improve credit risk management, especially as the lack of effective credit risk management was one of factors that helped to trigger the economic downturn. With regulators seeking higher capital requirements and liquidity buffers, the cost of doing business is increasing for banks worldwide. To manage credit risk more effectively and to meet regulatory demands, banks must be able to assess, analyze and manage risk in their credit portfolios and maintain an accurate view of return on risk-adjusted capital (RORAC) – while holding the line on the cost of these credit risk management activities for banks seeking innovative technology to help with these critical tasks.

Sapienza (2009) observed that managers need to monitor credit risks by assessing the creditworthiness of customers using a standardized method in order to facilitate loan approvals and maintain ongoing credit compliance. In addition, monitoring credit portfolios with advanced risk analysis and stress testing helps chief credit and lending officers understand the impact of economic events and business decisions on the loan portfolio. Theil (2008) is in line with Sapienza (2009) that credit risk monitoring enables banks to achieve significant credit risk benefits. From making better lending decisions through comprehensive credit assessment, to tracking risk exposure with in depth portfolio monitoring, to improving risk adjusted performance through efficient capital management, banks can rely on Ambit’s Comprehensive solution to manage credit risk more effectively and achieve regulatory compliance more easily.

Shaffer (2009) suggests that in regards to credit monitoring within the realm of credit risk, most retail banks have numerous data sources. Information may come from one system for mortgage loans, another from credit cards and a third for general ledger information. And it gets much more complex. Many banks have grown via acquisition and have inherited multiple and very often duplicate core product and financial system across multiple business units, legal entities or geographies. Goldman (2008) observed that the cognos credit risk performance solution enables retail banks to standardize on a single credit risk reporting solution, allowing executives and risk managers to see the entire picture of the credit portfolio across products, geographies or business unit credit risk performance works with the IBM banking data warehouse or the banks existing credit risk.  However, the researcher believes that in order to point out the benefits of credit risk management, the credit risk management should be paramount hence the study to point out the effect of credit monitoring on loan portfolio performance in Finance Trust Bank Uganda, Kampala main branch.

2.3 The effect of Credit control strategies on loan portfolio performance in banks

The means for guaranteeing adequate controls over credit risk in banks lay in the establishment of different kinds of credit reviews. Regular credit reviews can verify the accordance between guaranteed credits and credit policies and an independent judgment can be provided on the asset qualities (Sapienza 2009). Different researchers have attempted to relate credit risk controls to loan portfolio performance; for instance, Winston (2009) who pointed out that credit risk is by far the most significant risk faced by banks and the success of their business depends on accurate measurement and efficient control of this risk to a greater extent than other risk. Increases in credit will raise the marginal cost of equity, which in turn increases the cost of funds for the bank (Basel Committee Report, 2009).

To measure and control credit risk, there are a number of ratio employed by researchers, the ratio of loan loss reserves to gross loan (LOSRES) is a measure of banks asset quality that indicates how much of the total portfolio has been provided for but not charged off. Indicator shows that the higher the ratio the poorer the quality and therefore the higher the risk of the loan portfolio will be (Demirgic, 2009). In credit control, relative improvements in credit risk management strategies might suggest the LTA is negatively related to bank risk measures (Atunbas, 2010). Campa & Kedia (2009) do report the effect of credit risk controls which appears clearly negative. This result may be explained by taking into account the fact that the more financial institutions are exposed to high risk loans, the higher the accumulation of unpaid loans.

Allen & Gale (2009) pointed out that in regards to credit risk control, event-based triggers and predictive technologies can be extremely effective navigational tools in the environment just described. Predictive technologies can identify such upcoming storms as bankruptcy, higher delinquencies, and losses. Predictive technologies then allow the skipper to make appropriate changes in course and then track progress towards the shore. If the portfolio begins to “take on water,” event based triggers can provide previous time to take the appropriate action. What follows is a detailed discussion of these navigational tools and the decisions that dictate their usage.

In conclusion, this review generally argues that when conducting credit risk controls portfolio managers traditionally have had to rely on dated information to make decisions about risk and risk exposure because they had access only to risk statistics from the end of the prior month or quarter. The unfortunate results are reactive management processes and supervisory approaches. Rather than a reactive approach to risk management, institutions need to rely on a proactive flow of data that quickly identifies potential problems before they appear.

CHAPTER THREE

METHODOLOGY

3.1 Introduction

This chapter covered the design, population, sampling strategies, data collection methods and instruments, data quality control, procedure and data analysis technique that will be employed in the study.

3.2. Research design

The study adopted a cross-sectional survey from a cohort of employees in Finance Trust Bank Uganda. According to Trochim (2008), this design is used when the study aims at collecting firsthand information from a sizeable number of respondents within a short period of time. The proposed study will take a quantitative approach or paradigm in that it was to be based on variables measured with numbers and analyzed with statistical procedures (Creswell, 2010). The researcher also took a qualitative approach in order to get views and opinions of the selected respondents using an interview guide.

3.3. Study population

The research was carried out within Finance Trust Bank Uganda, Kampala main branch. The population will be of respondents who include staff from credit, operations and support staff, which category affects the performance of the institutions. A study population of 101 respondents is targeted, hence affecting the quality of services in Finance Trust Bank Uganda (Human Resource Report, 2010).

3.4. The sample size and Selection Procedures

The sample size was to be determined using purposive and simple random sampling methods. A purposive sampling procedure was to be used to collect specific information from specific people. Purposive sampling is where the researcher uses his/her own judgment or common sense to select subjects from whom information will be collected (Amin, 2010). Purposive sampling was to be used because it enables the researcher to select participants who directly participate in providing the required responses and therefore have relevant information for the study. The sample size was to be determined according to Alreck & Settle (2010) who recommend a sample of 10% of the study population. This is in line with Rossettie’s (2010) rule of the thumb for estimating sample size.

Rossettie contends that a sample size between 30 and 500 are appropriate for most studies. Besides, Meredith, Gall & Borg (2010) recommend 10% sample population for descriptive research. Due to constraints of time coupled with the scattered nature of respondents, the study will adopt random sampling of respondents. Meredith et al (2010) defined a simple random sample as a group of individuals drawn by a procedure in which all the individuals in the defined population have an equal and independent chance of being selected as members of the sample.

Table 3.1: Sample Size Selection Procedure

 Source: (Human Resource Manual, 2011)

From the above table, the sample size of 46 respondent units will be selected out of the total of 101 using purposive and simple random sampling design. The simple random design will be used in order to eliminate bias and make it possible to generalize the finding, conclusions and recommendations thereof from the big employees’ population. Purposive sampling is appropriate where particular respondents are targeted to provide key information. This approach is supported by Amin (2010) and Saunders et al (2010) as being appropriate for populations with a high degree of homogeneity.

3.5. Data collection methods

The study used primary data sources, by contacting respondents for the first hand data using a self-administered questionnaire that was aimed at collecting quantitative data and an interview guide that was aimed at collecting qualitative data. The self-administered questionnaire approach will enable the researcher cover a large population quickly, and at reasonable costs. While the interview guides were used to allow the respondents to express themselves in a more detailed way and this also helped to complement the results from the self-administered questionnaires. Secondary data were collected from Finance Trust Bank Uganda’s documents and reports.

3.6. Data collection instruments

The researcher obtained a letter of introduction from Islamic University in Uganda which was presented to chief executive officer on the topic “the effect of credit risk management on the performance of loan portfolio”. After permission is granted, the researcher to gain access into the selected branch, the researcher then proceed to present copies to particular contact persons where the questionnaires will be distributed to respondents. An appointment was scheduled for the questionnaires to be picked, then after analyzed to obtain relevant data. Then the researcher came up with a detailed report.

3.6.1 Questionnaires

The researcher used self-administered questionnaires (SAQs) for soliciting respondents’ view. The SAQ l started with a main title; then an introductory or covering letter and has sections. Section A had questions to help classify respondents (e.g. by course of study). Section B in regards to the independent variable (credit risk management) and will have questions on types of risk, credit risk monitoring and credit risk controls. Section C will be on the dependent variable (loan portfolio performance) and will have questions in relation to loan repayment, proper use of borrowed money and reduced cost of debt. The researcher will use questionnaires in a survey that involves a large number of respondents (Amin, 2010) because it is cost effective and good for quantifying responses from a large number of respondents.

3.6.2. Interview guide

The researcher also used an interview guide in order to facilitate face-to-face communication between the interviewer and the interviewee. This enabled the researcher to clarify unclear questions to the administrators and observe many things directly. It also allows the respondents to express themselves in a more detailed way and this will help to complement the results from the questionnaires.

3.7. Measurement of variables

Survey questionnaire was developed on credit risk management and loan portfolio performance. Loan portfolio performance was measured on a scale of a five Likert type ranging from (1) agree to (5) strongly disagree. Questions was tailored to the loan repayment, proper use of borrowed money and reduced cost of debt collections per conceptual framework in Figure1.1 credit risk management will be measured using a five point scale ranging from (1) agree to (5) strongly disagree by examining the employees about the types of risk, credit monitoring and credit risk controls.

3.8. Validation and reliability of data

This was ensured in terms of testing validity and reliability as explained below.

3.8.1 Validity

In order to ensure validity of the instrument, the drafted questionnaire was given to the supervisors and colleagues for critical assessment of each item. In addition, they were requested to state whether each item is Relevant or Not Relevant (NR) which they did. The content validity index (CVI) was thus be computed using standardized measure and the researcher  then made appropriate adjustments until when the instruments were declared valid by the valuers.

3.8.2 Reliability

Reliability refers to the ability of an instrument to produce consistent results (Sarantakos, 2010). To ensure reliability of an instrument, a pre-test aimed at getting precisely the duration it took to complete the questionnaires, whether the instructions, questions, the layout of the questionnaires is clear and attractive shall be administered to at least 20 respondents. The reliability of the instrument was then  analyzed using Cronbach’s Alpha Co-efficient with the help of a computer programme of SPSS (Statistical Package for Social Scientists). When the reliability alpha is greater than 0.5 (Alpha * 0.5), it implies high level of reliability of the instruments (Amin, 2010).

3.9. Data Processing and analysis

The data collected from the field will be prepared or processed for analysis and then later actually analyzed. The data (SAQs) will be edited, categorized, coded and entered into a computer using the statistical package for social scientists for the generation of summary frequency tables and graphs. At multi-variate level, the Pearson linear correlation co-efficient will be used to show the relationship between (credit risk management) on loan portfolio performance. For qualitative data, the results will be categorized and interpreted basing on research themes from which generations will be drawn.

3.10 Limitations of the study

Financial limitations, the researcher may meet a lot of unforeseen expenses, which may turn up to be costly for the researcher.

Lack of co-operation, some respondents may be reluctant to reveal their views about effects of credit risk management and loan portfolio performance.

Respondents may develop a phobia of answering which may hinder the researcher from obtaining accurate information.

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SECTION A: BACKGROUND VARIABLES CLASSIFICATION OF EMPLOYEES

In this section you are required to tick the most appropriate alternative to you.

A₁    Gender

1= Male           2= Female

A₂     Marital status

1= Single           2= Married

A₃   Qualification

1= Diploma holder           2= First degree holder   3= Masters degree

A₄   Working experience

1= Less than 5 years           2= Between 6 and 10 years;   3= Over 11 years

A₅   Responsibility

1) = Teller   2) = Customer care   3) = Loans officer 4) = Supervisor

5= Others (specify)………………………………………

Section B: Measures of Independent Variable

The independent variable is conceptualized into: the different types of risk, credit monitoring and credit control. Using the key given, choose or tick the right alternative that corresponds with your opinion on the performance of loan portfolio as follows;

 1) Agree   2) Strongly agree     3) Undecided      4) Disagree         4) Strongly disagree

B1:  Credit monitoring

B2.  Credit control

B3:  Types of control

Section C: Measures of Dependent Variables

Using the key given, choose or tick the right alternative that corresponds with your opinion on the performance of loan portfolio as follows; 1) Agree   2) Strongly agree      3) Undecided  4)  Disagree  5) Strongly disagree

Thank you!