Loan Delinquency and Profitability of Equity Bank, Rwanda

Purpose: The general objective of the study was to examine the effect of loan delinquency on the profitability of equity bank, Rwanda. The specific objectives of the study were: to examine the effect of interest rate, loan policy, loan size and loan duration on profitability of Equity bank in Rwanda. Methodology: Both correlational and descriptive research design utilize questionnaires to collect data on a variety of subjects. The target population consisted of 175 individuals from Equity Bank Rwanda, including Senior Management, Loan Officers, Risk Management Team, Financial Analysts, and the Compliance and Regulatory Team. By applying Slovin's formula, the researcher has determined that a suitable sample size would be 122 participants. The research employed basic random sampling to guarantee that each member of the population has an equal chance of being picked. Data collection incorporated both questionnaires and document analysis to gather comprehensive information. Data for this research was analyzed using the Statistical Product and Service Solutions (SPSS) version 25. Findings: The regression coefficients reveal the significant impact of each predictor on the profitability of Equity Bank, Rwanda. The constant term (α = 0.090) indicates the expected profitability when all independent variables (Interest Rate, Loan Policy, Loan Size, and Loan Duration) are zero. The unstandardized coefficients show that a one-unit increase in Interest Rate (B = 0.197, t = 4.205, p-value = 0.000), Loan Policy (B = 0.267, t = 6.389, p-value = 0.000), Loan Size (B = 0.388, t = 7.709, p-value = 0.000), and Loan Duration (B = 0.135, t = 3.282, p-value = 0.001) results in respective increases in profitability of 0.197, 0.267, 0.388, and 0.135. All these relationships are statistically significant, with p-values well below the 0.05 threshold, highlighting the strong positive influence of these predictors on the bank’s profitability. Unique Contribution to Theory, Practice and Policy: The study recommended that Equity Bank Rwanda regularly adjust interest rates based on market trends, introduce tiered rates for varying risk profiles, and update loan policies to align with market demands and regulatory changes. For future research, academics should explore the impact of interest rates, lending rules, loan sizes, and loan terms on loan delinquency and profitability.