TY - JOUR AU - Alex Semusu AU - Benson Turyasingura PY - 2023/05/01 Y2 - 2024/03/28 TI - Nonperforming Loans and Performance of Financial Institutions in East Africa: Evidence from Kabale District, Uganda JF - International Journal of Finance and Accounting JA - IJFA VL - 2 IS - 1 SE - Articles DO - 10.37284/ijfa.2.1.1193 UR - https://journals.eanso.org/index.php/ijfa/article/view/1193 AB - This research evaluated the performance of financial institutions in the Kabale district in relation to the effect of non-performing loans. The following research goals served as the study’s direction: to evaluate the effects of nonperforming loans on financial institutions, to evaluate the credit monitoring and recovery practices employed by financial institutions, and to ascertain the connection between loan evaluation and the performance of financial institutions. The study adopted a descriptive survey design. The population of the study included 10 financial institutions. A sample size of 149 respondents was used, and the study used purposive and random sampling techniques as sampling techniques. Questionnaire survey and interview guides were used for data collection, while both quantitative and qualitative data analysis was used. It was found that individuals from all the surveyed monetary institutions’ staff generally agree that factors such as fund redirection, over or underneath funding, undermined integrity, credit operators’ capacity limitations, firm failures, deliberate default, poor portfolio diversification, and changing policy environments contribute to the occurring of nonperforming loans were the specific financial institution determinants causing the occurrence of non-performing loans. On the determinants of nonperforming loans on financial institutions, the majority of the respondents (138, 98.6%) revealed that financial institutions provide loans to customers, while only 2(1.4%) revealed that they don’t provide loans. On ways of credit assessment and loan default, it was found that the majority (69.3%) of respondents firmly concur (M =  1.33, SD =  0.516) that experiencing a know your customer policy in force results in a high loan quality, 32.8% agreed with easily admitted borrowers usually default (M = 2.791, SD =  1.090), 65.4% of the respondents agreed with poor risk assessment would lead to loan default (M =  1.4, SD =  0.682), and only 19.5% mentioned that good loan underwriting ensures loan performance was one of the ways of credit assessment and loan default (M = 2.25, SD =  0.957). There was a weakly positive association (r=0.501, p<0.05) between loan evaluation and the performance of financial institutions. There is a need for financial institutions to develop a flexible credit method that offers sufficient user choices, in-depth credit analysis, a genuine approval process, proactive monitoring, and obvious recovery strategies for subpar loans. ER -