Browsing by Author "Agyekum, Gloria Takyia"

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    Non–performing loans and performance of rural banks - A case study of Bosomtwe Rural Bank Limited
    (NOVEMBER, 2015) Agyekum, Gloria Takyia
    Financial intermediation remains a major part of the traditional roles played by banks. As part of this, banks acquire money through deposits and further extend them as loans to interested customers. Granting of loans is a major activity of rural banks which contributes a greater portion of their income when repaid with interest. However, this poses serious threat to the survival of the bank when most of the loans disbursed tends to be non-performing. This study aimed at evaluating the effect of Non –Performing Loans on performance of Bosomtwe Rural Bank Limited from 2009 to 2013. Questionnaires and interview guide were used to collect data from 30 bank officials. Performance indicators used were profitability, liquidity and asset quality. The study showed that NPL ratio of the bank over the period was inconsistent though there was a steady rise from 2009 to 2011. The bank recorded the highest credit impairment loss of (GH¢218,804.82) in 2012. The major causes of NPL in the bank were loan diversion, willful default, and poor credit appraisal among others. The bank lost huge portions of its profit to NPL in each year with the highest in 2012 (19.39%). Despite the credit impairment losses the bank managed to maintain its Return on Asset ratio below the industry benchmark. However, it failed to satisfy the requirement for Return on Equity ratio for 2009 and 2010. The bank kept its asset quality below the industry maximum of 10% from 2009 to 2013. The study revealed that NPL generally affected the profitability of the bank hence pragmatic measures were proposed to minimize the incidence of loan default.