Factors affecting loan access in Uganda. A case study of stanbic bank, Nakivubo branch

Abstract

Bank collapses are a pressing concern worldwide, threatening lending standards and access to credit, particularly for underserved and disadvantaged communities. This contributes to social and economic disparities and worsens inequalities in financial service access. This study aims to investigate the factors affecting loan access in Uganda. Secondary data from Stanbic Bank, Nakivubo Branch was used with a sample size of 614 loan applicants. A binary logistic regression approach was used. Our results show that a loan applicant with good credit history was 50 times more likely to access the loan as opposed to one of bad credit history.(OR = 50.685, p-value = 0.000, CI = 23.759,126.250).Furthermore, a married loan applicant was 1.692 times more likely to access the loan from the bank as opposed to a single loan applicant.(OR = 1.692, p-value = 0.021, CI = 1.082,2.647). Lastly, a loan applicant holding business property in a semiurban area was 2.697 times more likely to access the loan as opposed to one with business property in rural areas.( OR = 2.697, p-value = 0.001, CI = 1.558,4.749). An applicant with business property in urban areas was 1.180 times more likely to access the loan than one operating in rural areas.(OR = 1.180, p-value = 0.5343, CI = 0.700,1.991). The conclusion drawn was that the urgency of promoting financial literacy in Uganda cannot be overstated. It is crucial to enhance the financial literacy of the population to improve their access to financial services and empower them to make informed decisions, especially regarding borrowing and effective financial management. The study's findings indicate that clients who have demonstrated reliability in repaying previous loans and making timely payments are more likely to be granted loans. Additionally, married loan applicants are considered more responsible and have a higher likelihood of loan repayment, resulting in greater acceptance of their loan applications. Based on these findings, the study recommends that the government includes financial literacy education in the formal school curriculum at various educational levels. This ensures that young individuals receive early exposure to essential financial concepts and skills, setting them on a path to make informed financial decisions in the future.