Risk Management Strategies and Loan Default Rates in Financial Institutions in Uganda: A Case Study of DFCU Bank Mukono Branch
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Date
2024-09-02
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Uganda Christian University
Abstract
The study examined risk management strategies and loan default rates of financial institutions in Uganda a case study of DFCU Mukono branch in Mukono district and was guided by the objectives; To Evaluate how credit monitoring strategy in the reduction of loan default rates in DFCU bank. To examine how do credit risk management practices/ strategy help to control loan defaults in DFCU bank. To analyze the credit recovery strategy in the management of loan default in a bank The study adopted a descriptive survey research design which involved the use of self designed questionnaire in the collection of data. For the purpose of this study the researcher used Mukono branch as her case study which had a population of 35 as stated by DFCU bank Mukono Branch manager. The researcher used a simple random sampling technique for this study because it gave an equal chance to each individual in the population chosen to be the sample actually selected. According to the findings, this study also recommends that banks carry out the following; these are actions, some of these in combination with conventional. For instance, innovative management practices to eliminate risks in the unsecured lending business techniques which have saving deposits against the loan taken policies. Existing borrowers are rewarded for early repayments by future provision of larger loan, routine repayment of the loans in a group meeting where such payments are made. Penalties for defaults on payment by way of late fees, more repayment give rise to more borrowing or discretion periods and educating clients on the literate individuals of the clients, these include; often primarily in the range of three months to one year period gross short loan. They are able to find out on a regular basis what works for the financial institutions an what does not. Which means they are ready to put in change and improvements. Also the board of director has a possibility to hire consultants and other skilled experts in service in product development and introducing effective corporate governance minimum requirements and experience on lending as the business of the financial institution is to lend to the poor