The Mediating role of Loan Portfolio Management on the relationship between Loan assessment and Performance: The Case of Village Savings & Loan Associations in Uganda

Abstract

This study examined the mediating role of loan portfolio management in the relationship between loan assessment and VSLA’s performance. The study draws on the Resource Based View (RBV) to understand how tangible and intangible resources, when effectively deployed, connect to the performance and sustainability of VSLAs. The study targeted a population of 450 VSLAs (District
Commercial Development Report, 2024; NDP, 2023), selecting a sample of 208 using the Krejcie and Morgan (1970) formula. Data was collected through structured questionnaires and analyzed using PLS-SEM to examine the relationships among loan assessment, loan portfolio management, and VSLA performance. Results indicate that loan assessment capabilities significantly enhance loan portfolio management, which in turn partially mediates the relationship between loan assessments on VSLA performance. While prior research has explored VSLA performance, few studies have examined the internal managerial and behavioral mechanisms through which resources and capabilities are deployed to enhance effectiveness. By demonstrating the mediating role of loan portfolio management through the RBV lens, this study provides new insights into how grassroots financial institutions in emerging
economies can leverage internal capabilities to support sustainable VSLAs.

Keywords: Loan assessment, Loan portfolio management, VSLA performance, Uganda