The Impact of Debt Managment on Financial Performance of Commercial Banks: A Case study of Centenary Bank, Mukono

Abstract

Effective debt management is a critical determinant of a commercial bank's financial performance and stability. This study investigates the impact of debt management on the financial performance of Centenary Bank, located in Mukono, Uganda. The research employs a mixed-methods approach, combining quantitative analysis of financial data and qualitative examination of debt management practices. The quantitative analysis utilizes financial ratios and performance indicators, including liquidity ratios, leverage ratios, profitability ratios, and asset quality indicators. Concurrently, qualitative data is gathered through interviews and surveys to gain insights into the bank's debt management strategies, policies, and practices. The findings reveal a strong correlation between debt management and financial performance. Effective debt management strategies, including prudent lending practices, robust risk assessment, and proactive non-performing loan management, contribute positively to the bank's profitability, liquidity, and overall financial health. Moreover, the study identifies challenges faced by Centenary Bank in managing debt, such as economic fluctuations and regulatory changes. This research provides valuable insights for Centenary Bank and other commercial banks in Mukono, Uganda, to enhance their debt management practices, mitigate financial risks, and optimize financial performance. It also contributes to the broader understanding of the role of debt management in sustaining the stability and growth of financial institutions, particularly in emerging markets like Uganda. The study underscores the importance of a holistic approach to debt management and suggests recommendations for improving financial performance through enhanced debt management practices.