Loan Default on Financial Performance of Kakum Rural Bank

Abstract

ABSTRACT When repaid with interest, credit is a main operation of banks that produces a significant percentage of their revenue. However, when the majority of the loans disbursed are non-performing, this poses a substantial danger to the bank's viability. The study's major goal is to look at the influence of nonperforming loans on Kakum Rural Bank's financial performance. The study's specific objectives were looking at the trajectory of non-performing loans from 2015 to 2019, determining the reasons of non-performing loans at Kakum Rural Bank, and studying the increase and impact of bad loans on general operations. The research used a descriptive and explanatory technique in its research design. A total of 76 people were chosen from the Bank's credit officers, branch managers, operations staffs, management staff, and clients, and information was gathered using questionnaire and interview guide. The researcher used panel regression or the longitudinal model. According to the research, the bank's non-performing loans increased from 2016 to 2019. Again, the analysis found that inadequate monitoring and a lack of credit officer logistics were the root reasons of non-performing loans. The research also shows that debt and ROA have a strong and favorable relationship. Non-performing loans have a positive and significant impact on a bank's financial performance, according to the study. According to the research, banks should develop a credit monitoring team that would regularly monitor borrowers' behavior, and bank management should get the technical and expertise necessary to analyze the trend and bad loans cases in order to take the necessary measures