| dc.description.abstract | Loan performance is a fundamental concern for banks and overall health of the economy.
Loan performance is directly linked to the profitability of banking industry and
macroeconomic indicators of GDP and employment rate. Loan nonperformance is a huge
concern and can lead to bank failure and exacerbate unemployment levels in the economy.
In Tanzania, the standard NPL ratio set by the authority is 5% however, the average NPL
ratio for 2022 was at 7.75%. Loan non-performance is often associated with borrower
factors however, this research set out to explore effect of bank’s factors on loan
performance. The purpose of this study was to explore the effect of credit management on
loan performance in Maendeleo bank. The study aimed at examining the effect of the credit
policy, credit collection policy, and credit risk control on Maendeleo bank loan
performance. Information asymmetry theory, 5C of credit model and theory of
performance guided the study. A descriptive research design approach was used. The study
population consisted of 56 banking staff of Maendeleo bank. The study sampled 33 staff
from the finance and credit department. Data was collected by use of questionnaires.
Content validity was estimated by incorporating the views of content experts consisting of
two lecturers from Africa Nazarene University. Cronbach’s alpha for internal consistency
was used to test reliability. The analysis of data was done with the use of Microsoft Excel
and SPSS. Collected data was run for statistical analysis such as frequencies and
percentages as well as regression model which was used to assess the relationship between
variables. The hypotheses were tested at 95% confidence level using regression analysis.
The findings indicate that; credit policy has a significant positive effect (β1 = 0.536, t =
3.559, p < 0.05) on loan performance, collection policy has a significant positive effect (β2
= 0.484, t = 2.758, p < 0.05) on loan performance, and credit risk control has an
insignificant negative effect (β2= -0.274, t= -0.923, p= 0.368>0.05) on loan performance.
It was concluded that credit policy and collection policy have a significant effect on loan
performance. This study recommends that bank put more emphasis on credit management
as it explains almost fifty percent of loan performance. Further, to attain good loan
performance levels, much caution should be taken during borrower onboarding as credit
risk control measures taken after onboarding a high-risk borrowers will result to a negative
but insignificant change. The findings of this study may assist banking and government
policy makers to formulate better policies concerning credit management in financial
institution across the country. | en_US |
