NON-PERFORMING LOANS AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN RWANDA CASE STUDY OF I&M BANK Period: 2019-2022

Abstract

This research entitles the Non-Performing Loans and Financial Performance of commercial banks in Rwanda and was guided by the following objectives: to examine the negative effects of NPLs on financial performance of I&M bank, to establish the relationship between NPLs and financial performance of I&M bank. The study adopted a descriptive research design. From the results, the study indicated NPLs had a negative and non-significant relationship with both Return on Equity (ROE) and Return on Asset (ROA). Data was collected from secondary sources mainly published reports of the three years of I&M bank. The study found out that the ratio of nonperforming loans has been increased from 3.51in 2020 to 4.20 in 2022. It was found out that return on asset has not been high for the first three years. In 2020 it was 1.39 and gradually increased to 2.06 by the year 2021 and in 2022 it was 1.92. The return on equity has gradually increased from 10.9 in 2020 to 13.92 by the year 2022. Therefore, a decision was made to accept the null hypothesis and a conclusion was made that there was a relationship between non-performing loans and financial performance. This means that I&M banks, the increase non-performing loans had a negative influence on return on equity and return on asset. This implies that if non-performing loans continues to increase, the return on equity and return on assets will also decrease.