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| The effect of loan defaults on profitability of financial institutions in Uganda: a case study of post bank, Anaka branch, Nwoya district
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Kilama Polycarp, Dr Ariyo Gracious Kazaara, Asiimwe Isaac Kazaara, Kobusigye Prudence, Kaziro Nicholas
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Abstract:
The study examined the relationship between borrower behavior and profitability in post bank limited Anaka branch, Nwoya District, established the relationship between borrowers' capacity on sales and profits of the post bank limited, Anaka branch, Nwoya District, and investigated the relationship between borrowers' capacity on cash flow of the post bank limited, Anaka branch, Nwoya District. The study's findings also showed a substantial correlation between borrower behavior and loan repayment performance at Post Bank Anaka, with a significantly higher standardised coefficient of determination of 0.604 than 0.20. This concurs with Nguyen's (2017) Behavioural Primacy Theory, which contends that interactions between an individual and their environment are the primary cause of common behavior. People frequently alter their behavior to adapt with environmental changes. Thus, economic, cultural, social, psychological, personal, and political aspects influence the behavior of bank borrowers: The ability and willingness of borrowers to repay the proposed loans must be thoroughly evaluated, assessed, and checked before borrowers are provided loans. Economics was the initial discipline to develop a specific theory of purchasing behavior. This would give the bank the opportunity to lower bad debts and enhance loan repayment efficiency. Also, Post Banking Anaka should make sure that the rate of interest on the loan is reasonable for the borrower and does not consume a large portion of the borrower's income, since this could encourage repayment avoidance.
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