Effect of Credit Management System on Financial Performance of Development Bank in Rwanda: Case Study of Development Bank of Rwanda

Abstract

The overall objective of this study is to determine the effect of credit management system on the financial performance of the development bank in Rwanda because most development banks have failed to meet their target because of poor credit management system in place hence affecting their profitability, return on asset, equity and capital as well as liquidity.

This research was achieved by use of three specific objectives namely; To analyze the effects of credit policy on financial performance of development banks in Rwanda; to examine the effects of credit appraisal on financial performance of development banks in Rwanda and to assess the effects of credit customer relationship on financial performance of development banks in Rwanda.

The study is significant to the researcher; development bank of Rwanda and JKUAT Literature by different scholars were reviewed on credit management system on the financial performance. Different theoretical and empirical literature by different scholars was reviewed on the effect credit management system on the financial performance. The target population of the study was 134 staffs of BRD and a sample of 57 staff were purposively sampled. The research used the descriptive case study design based on both qualitative and quantitative approaches. Both primary and secondary sources of data source were consulted by used of questionnaire and documentary analysis as a recommended data collection tools. Data was processed by use of SPSS program and analyzed by use of frequency, mean and standard deviation, and the results represented in table.

In the finding it was established that credit management system which consist of credit policy, credit appraisal and credit customer relationship improved the bank return capital, asset of quality and bank management quality. Credit policy has promoted bank earnings and profit and bank liquidity. Table 4.16 gave the relationship between of Credit Management System and financial performance of Development Bank of Rwanda using Pearson whereby the respondents N is 75 and the significant level is 0.01, the results indicate that independent variable has positive high correlation to dependent variable equal to .710^** and the p-value is .000 which is less than 0.01. When p-value is less than significant level, therefore researchers conclude that variables are correlated and null hypothesis is rejected and remains with alternative hypothesis. This means that there is a significant relationship between of Credit Management System and financial performance of Development Bank of Rwanda. In conclusion Credit Management System of contributes to positive to financial performance of Development Bank of Rwanda.