RELATIONSHIP BETWEEN CREDIT HISTORY AND LOAN REPAYMENT TO ASSESS CREDIT WORTHNESS IN COMMERCIAL BANKS IN TORORO DISTRICT, UGANDA; A CROSS SECTIONAL STUDY.

Abstract

Introduction

The study aimed to assess the influence of credit worthiness of customers on loan repayment in commercial banks in Tororo District. The specific objectives were to examine the relationship between credit history and loan repayment.

Methods

The study used a descriptive, correlational, and cross-sectional case study survey design. A mixed research approach was used to collect data from 174 bank customers and 14 bank staff. Data was collected using self-administered questionnaires, interviews, and documentary reviews.

 Findings

Out of the total 170 respondents, 65.9% were male and 34.1% were female. This indicates that a higher proportion of the respondents were male.

The findings showed a strong positive correlation between credit history and loan repayment. credit history indicated that the unstandardized coefficient (B) for credit history was 4.636, suggesting that for every unit increase in credit history, loan repayment increases by 4.636 units. The standardized coefficient (Beta) for credit history is 0.537, indicating that credit history has a moderate positive impact on loan repayment. The t-value is 3.152, and the corresponding p-value is 0.001, which indicates that the relationship between credit history and loan repayment is statistically significant. The R-squared value is 0.642, meaning that 64.2% of the variance in loan repayment can be explained by credit history.

 Conclusion

Credit history was found to have a positive impact on loan repayment.

 Recommendations

These include; prioritizing the use of credit history tables, considering customer character in the loan approval process, and giving due consideration to collateral security. Banks should also review their interest rate policies and provide customer education programs.