Abstract:
The purpose of the study is to analyse the impact of loans management on performance of
financial institutions in Rwanda with a case study of Equity Bank Rwanda Plc (2020-2022).
Where the main objective of this research is to found out the impact of loans management on
performance of financial institutions in Rwanda with a case study of Equity Bank Rwanda
Plc (2020-2022) and the specific objective of the study is to evaluate the effectiveness of loan
management in EQUITY BANK RWANDA PLC and to assess the contribution of loan
management to the financial performance of Equity Bank Rwanda Plc. The data collection
techniques are document technique and the methods of data analysis are analythical
statistical, synthetic and comparative methods. The results of the findings shows that the
bank's success in loan recovery, maintaining a recovery rate of around 95%, which aligns
with NBR standards. Moreover, the management of Non-Performing Loans (NPL) has
remained compliant with NBR regulations, staying below the threshold of 7% with a stable
ratio around 5% from 2022 onward. The analysis shows that Equity Bank Rwanda Plc has
demonstrated effective loan management practices through its loan issuance, recovery
strategies, and adherence to regulatory requirements, positioning itself favorably for
sustainable growth in the banking sector. This shows that first hypothesis has been verified
and confirmed. Based on annual reports and interviews, highlights significant growth in
customer deposits, with an increase from RWF 215.9 billion in 2020 to RWF 742.6 billion in
2023, indicating effective credit management strategies that attracted customers. The net
income trend reflects a robust financial position, with profits rising from RWF 10.3 billion in
2020 to RWF 36.4 billion in 2023. This increase showcases the bank's operational efficiency
and effective cost management, primarily driven by favorable credit management practices.
Liquidity ratios, including the current ratio, demonstrate the bank‟s ability to meet short-term
obligations, remaining above the Central Bank's standards. The return on equity (ROE) and
return on assets (ROA) ratios indicate a positive trajectory in profitability, underscoring the
bank's effective use of loans to enhance shareholder value. Overall, the analysis confirms that
loan management has significantly contributed to the financial performance of Equity Bank
Rwanda Plc, enhancing both profitability and liquidity. The researcher recommended that
Equity Bank Rwanda Plc should enhance their collection policy by adapting a more stringent
policy to a lenient policy for effective debt recovery.
