Evaluation of Suma rural bank’s credit policy and its effects on loan repayment

Abstract

The study was conducted to examine Suma Rural Bank’s credit policy and its effects on loan repayment. The study specifically ascertained the effectiveness of credit policies in Suma Rural Bank Limited, examined how loans were recovered and the relationship between credit policy and loans repayment at the bank. The target population comprised client and staff of Suma Rural Bank. Thirty-five respondents selected through random sampling technique answered the questionnaire and 15 officials were also interviewed. The quantitative data was processed using the IBM SPSS Statistics version 24. The data was then analysed using both descriptive statistics and inferential statistical tools. The study found that the credit policies in Suma Rural Bank were effective. There was also a strong positive relationship between credit policy and loan recovery. The bank uses penalties, legal proceedings, collaterals in order to check on loan default or late repayment. The study recommended that management of Suma Rural Bank need to educate their clients and also listen to their grievances, in order to make clients appreciate the credit and loan recovery processes. The bank should also implement loan differentiation strategies by segmenting clients based on their needs, size and type of business. Management should also design products that meet the unique needs of their segmented clients at the most competitive price for each segment.