The contribution of loans management to the performance of financial institutions in Rwanda; case study of Equity Bank Rwanda between 2023-2025

Abstract

This study examined the contribution of loan management to the performance of financial institutions in Rwanda, using Equity Bank PLC as a case study over the period 2023–2025. The study specifically assessed the effectiveness of loan management practices and their influence on the bank’s financial performance. Findings indicate that Equity Bank PLC applied effective loan management strategies during the study period. Loan recovery performance remained high, with recovery rates of 97.4% in 2023, 95.5% in 2024, and 96.8% in 2025. Although loans classified under categories 1 and 2 are generally considered performing and may not require specific provisions under National Bank of Rwanda guidelines, Equity Bank PLC applied precautionary provisioning from the second classification level to strengthen credit risk management. This conservative approach to provisioning contributed to improved credit quality and supported the bank’s financial stability. As a result, the study confirms the hypothesis that loan management at Equity Bank PLC is effective. In terms of financial performance, the bank recorded strong profitability over the study period. Net profit margin stood at 33.14% in 2023, 32.45% in 2024, and 35.19% in 2025. Return on Assets increased from 3.22% in 2023 to 3.54% in 2024 and 3.61% in 2025. Return on Equity also improved from 18.72% in 2023 to 20.42% in 2024 and 20.76% in 2025. These indicators demonstrate sustained financial performance during the period under review. Overall, the study concludes that effective loan management practices significantly contributed to the improved financial performance of Equity Bank PLC during the period 2023–2025.