Abstract

Non-performing loans have been an issue that has hampered the functioning of commercial banks across the world. 
Using the liability management theory to evaluate the impact of financial transparency on non-performing loans of 
commercial banks in Western Uganda. A mixed-method approach was used. A sample of 232 respondents was 
obtained from a population of 550 persons using stratified, purposive, and simple random sampling methods. There 
were 195 responses from three commercial banks, yielding an 84.1% response rate. The hypotheses were examined, 
and the results demonstrated a substantial positive association between financial transparency and non-performing 
commercial bank loans. Six participants were carefully chosen from three commercial banks and interviewed 
utilizing interview guidelines. Using Nvivo software and Miles & Huberman (1994) approaches, interview data was 
managed and analyzed, which revealed that those commercial banks are not currently under investigation for 
accounting irregularities, they were also practicing segment reporting to show the performance of different 
segments, there was also transparency in disclosing transactions in banks, there was also timely reporting, and 
finally management discussion and analysis. The conclusion was that banks had internal controls for the 
management and prevention of NPLs, and board members had put in place mechanisms and controls to manage and 
prevent non-performing loans. Still, some of the internal controls instituted were not followed by management, 
causing commercial banks to continue to have non-performing loans. Based on the study's findings and conclusions, 
the study recommends that commercial banks implement strong internal control systems to enable them to deal 
with loopholes that result in non-performing loans, as it has been discovered that having good financial disclosures 
in place, such as internal controls, reduces loan performing loans and the reverse is true.