scholarly journals AN ANALYSIS OF THE EFFECT OF CREDIT RISK MANAGEMENT ON PROFITABILITY OF COMMERCIAL BANKS IN KENYA

2016 ◽  
Vol 1 (3) ◽  
pp. 38
Author(s):  
ANTHONY WANJOHI ◽  
MR. BERNARD BAIMWERA
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Secondary Data ◽  
Risk Governance ◽  
Credit Risk Management ◽  
Governance Practices ◽  
Collection Practices ◽  
Debt Collection ◽  
Finance Department

Purpose: The purpose of this study was to analyse the effect of credit risk management on profitability of commercial banks in Kenya.Methodology: This study adopted a descriptive design. The study targeted a population of all the 44 commercial banks with the exception of Charterhouse bank which is under statutory management. The sample of this study was 86 employees out of a possible 30,056 employees from the 43 commercial banks. The sample of 86 was generated by purposively sampling two employees from each bank.  One employee was a manager from the finance department while the other employee was a manager from the credit risk department. The questionnaire comprised of closed ended questions. Secondary data for ROA was identified. SPSS was used to produce frequencies, descriptive and inferential statistics which was used to derive conclusions and generalizations regarding the population. Regression analysis was also used to show the sensitivity of profitability, ROA to various independent variables.Results: The study findings indicated that credit department had various checks during loan credit review. The credit department always checked at the character of the borrower, collateral of the borrower, capacity of the borrower, capital of the borrower, conditions and controls during credit review. Results indicated that the banks had credit appraisal practices, credit monitoring practices, debt collection practices and credit risk governance practices in place. Regression results indicated that there was a positive and significant relationship between credit appraisal, credit monitoring, debt collection and credit risk governance practices and profitability of commercial banks.Unique contribution to theory, practice and policy: The study concluded that credit appraisal, credit monitoring, debt collection and credit risk governance practices had a positive effect on the profitability of commercial banks. The study recommends that the banks should continue emphasizing on the effective credit appraisal, credit monitoring, debt collection and credit risk governance practices so as to enhance maximum profits in banks.

scholarly journals AN ANALYSIS OF THE EFFECT OF CREDIT RISK MANAGEMENT ON PROFITABILITY OF COMMERCIAL BANKS IN KENYA

2016 ◽  
Vol 1 (2) ◽  
pp. 95
Author(s):  
ANTHONY WANJOHI ◽  
MR. BERNARD BAIMWERA
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Secondary Data ◽  
Risk Governance ◽  
Credit Risk Management ◽  
Governance Practices ◽  
Collection Practices ◽  
Debt Collection ◽  
Finance Department

Purpose: The purpose of this study was to analyse the effect of credit risk management on profitability of commercial banks in Kenya.Methodology: This study adopted a descriptive design. The study targeted a population of all the 44 commercial banks with the exception of Charterhouse bank which is under statutory management. The sample of this study was 86 employees out of a possible 30,056 employees from the 43 commercial banks. The sample of 86 was generated by purposively sampling two employees from each bank.  One employee was a manager from the finance department while the other employee was a manager from the credit risk department. The questionnaire comprised of closed ended questions. Secondary data for ROA was identified. SPSS was used to produce frequencies, descriptive and inferential statistics which was used to derive conclusions and generalizations regarding the population. Regression analysis was also used to show the sensitivity of profitability, ROA to various independent variables.Results: The study findings indicated that credit department had various checks during loan credit review. The credit department always checked at the character of the borrower, collateral of the borrower, capacity of the borrower, capital of the borrower, conditions and controls during credit review. Results indicated that the banks had credit appraisal practices, credit monitoring practices, debt collection practices and credit risk governance practices in place. Regression results indicated that there was a positive and significant relationship between credit appraisal, credit monitoring, debt collection and credit risk governance practices and profitability of commercial banks.Unique contribution to theory, practice and policy: The study concluded that credit appraisal, credit monitoring, debt collection and credit risk governance practices had a positive effect on the profitability of commercial banks. The study recommends that the banks should continue emphasizing on the effective credit appraisal, credit monitoring, debt collection and credit risk governance practices so as to enhance maximum profits in banks.

Prediction of Return on Equity Using Capital Adequacy Ratio in Commercial Banks: An ANOVA Table Analysis

2014 ◽  
Vol 4 (2) ◽  
Author(s):  
Meenakshi Chaturvedi
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
News Media ◽  
Commercial Banks ◽  
Banking Sector ◽  
Secondary Data ◽  
Capital Adequacy ◽  
Credit Risk Management ◽  
Return On Equity ◽  
The Impact

The purpose of this study is to predict the impact of Credit Risk Management on Profitability of Commercial Banks in India. Data is obtained from different news media, publication and sample banks to describe present scenario of banking sector in India. To analyze the profitability and credit risk management of banks after implementing the Basel II standard, we collected secondary data of ten years (2003 to 2013) from the annual report of banks. Few bar-diagrams have been drawn to compare the performance among six banks. While, to fulfill the research objective, ROE, and CAR is calculated to evaluate the Credit Risk of the Banks. Using these two ratios, researcher constructed the regression model statistics.

scholarly journals Impact of Credit Risk Management Systems on the Financial Performance of Commercial Banks in Uganda

2018 ◽  
Vol 66 (6) ◽  
pp. 1627-1635
Author(s):  
Isah Serwadda
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Performance ◽  
Commercial Banks ◽  
Risk Measures ◽  
Secondary Data ◽  
Credit Risk Management ◽  
Loan Loss ◽  
Loan Loss Provisions ◽  
The Impact

The paper is set to analyse the impact of credit risk management on the financial performance of commercial banks in Uganda for a period of 2006–2015 using panel data for a sample of 20 commercial banks. The study employs return on assets as a dependent variable and non‑performing loans, growth in interest earnings and loan loss provisions to total loans as credit risk measures. Secondary data is sourced from the Bank scope database, African development bank and the central bank of Uganda. The study employs descriptive statistics, regressions and correlation analysis. Regression models are to estimate the magnitude of significance of credit risk management on the performance of commercial banks in Uganda. The study revealed that credit risk management impacts on the performance of Ugandan commercial banks. The results portrayed that banks’ performance was inversely influenced by non‑performing loans which may expose them to large magnitudes of illiquidity and financial crisis. Thus given such results, the researcher recommends that banks need to enhance their credit risk management techniques not only to earn more profits but also to maintain a qualitative asset portfolio and attention be given to non‑performing loans, loan loss provision to total loans and growth in interest earnings that were found to be significant. Banks need to design appropriate credit policies that must handle all necessary conditions before advancing credit to their customers and also develop strong credit administration committees and teams that must conduct appropriate and sound loan appraisal evaluations and which must also monitor the loans throughout the required processes right from extending a loan to a customer up to the completion of loan repayments so as to mitigate credit risks.

An Investigation of Credit Risk Management Strategies of Private Commercial Banks of Bangladesh

2014 ◽  
Vol 2 (2) ◽  
pp. 77-87
Author(s):  
Abu Hanifa Md. Noman ◽  
Md. Amzad Hossain ◽  
Sajeda Pervin
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Management Practices ◽  
Management Practice ◽  
Management Strategies ◽  
Third Party ◽  
Primary Data ◽  
Credit Risk Management ◽  
Risk Management Strategies

Objective - The study aims to investigate credit risk management practices and credit risk management strategies of the local private commercial banks in Bangladesh. Methodology -The investigation is conducted based on primary data collected from a set of both closed end and open end questionnaire from 23 out of 39 local private commercial banks in Bangladesh. Descriptive statistics has been used in processing the data and interpreting the results. Findings - The results reveal that credit risk management practice of the sample banks is sound which is attributed to the appropriate implementation of Basel II and credit risk management guidelines the country's central bank. The findings further show that use of Credit risk grading is most popular and effective criteria for measuring the borrowing capacity of the borrowers. In order to control credit risk and preventing losses from credit exposure banks give more focus on collateralization, accurate loan pricing and third party guarantee. Loan is monitored properly and credit reminder is given to the client if principal and interest remain outstanding for three months. The study further reveals that lack of experienced and trained credit officers, lack of genuine market information and Lack of awareness regarding non-genuine borrower are the most important problems of current credit risk management practices in Bangladesh. Novelty - To the best of the knowledge of the authors the study is the first that investigates credit risk management strategies of private commercial banks, especially on Bangladesh. Type of Paper - Empirical Keyword : Bangladesh; Commercial Bank; Credit risk; Credit risk management; Credit risk management strategies.

scholarly journals Credit Management and Issues of Bad Debts: An Empirical Study of Listed Deposit Banks in Nigeria

2020 ◽  
pp. 32-49
Author(s):  
Peter E. Ayunku ◽  
Akwarandu Uzochukwu
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Random Effect ◽  
Credit Risk Management ◽  
Loan Loss ◽  
Data Set ◽  
Credit Management ◽  
Loan Loss Provision ◽  
The Impact

This study examines the impact of credit management on firm performance amidst bad debts, among Nigerian deposit banks. Five hypotheses were formulated following the dependent variables of Return on Asset and Tobin Q. The independent variables employed for this study include: Loan Loss Provision, Loan to Deposit Ratio, Equity to Asset Ratio, and Loan Write off. This study is based on ex-post facto research design and employed a panel data set collected from fourteen (14) commercial banks over six years ranging from 2014 to 2019 financial year. We analyzed the data set using descriptive statistics, correlation and Ordinary Least Square Regression Technique. The random effect models established that non-performing loan, loan loss provision and equity to asset impact significantly on banks’ performance in both Return on Asset and Tobin-Q models. This suggests that the sampled banks need to establish efficient arrangements to deal with credit risk management. In all, credit risk management indicators considered in this research are important variables in explaining the profitability of Nigerian commercial banks. However, based on the outcome from the empirical analysis, the study carefully recommends that investors and shareholders in these banks should be aware of the possible use of provisions for losses on non-performing loans by managers for smoothening of profits. The shareholders specifically should be ready to meet optimal agency costs to reduce the manager's information asymmetry by hiring competent internal and external auditors.

scholarly journals Effects of Basel III Framework on Capital Adequacy of Commercial Banks in Kenya

2016 ◽  
Vol 1 (1) ◽  
pp. 61
Author(s):  
Kevin Kombo ◽  
Dr. Amos Njuguna
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Financial Stability ◽  
Safety Net ◽  
Capital Requirements ◽  
Capital Adequacy ◽  
Basel Iii ◽  
Credit Risk Management ◽  
Management Staff

Purpose:The purpose of the study was toassess the effects of Basel III framework on capital adequacy requirement in commercial banks in Kenya. The study sought to address the following research questions: why are capital adequacy regulations important in commercial banks in Kenya? What challenges are commercial banks facing in the implementation of capital adequacy requirement? What measures have commercial banks taken to ensure compliance with the capital adequacy requirement?Methodology:A descriptive survey design was applied to a population of 43 commercial banks operating in Kenya. The target population composed of the 159 management staff currently employed at the head offices of the various commercial banks in Kenya. The population was composed of Senior, Middle and Junior or Entry level Management staff. A sample of 30% was selected from within each group.Primary data was gathered using questionnaires which were dropped off at the bank’s head offices and picked up later when the respondents had filled the questionnaires. Descriptive analysis was used to analyze quantitative data while content analysis was used to analyze qualitative data.Results:The findings show that capital adequacy requirement is important in commercial banks because it leads financial stability in the Kenyan economy, improves credit risk management techniques as poor credit risk management requires more capital and leads to reduced vulnerability to liquidity shocks due to the sound capitalization policies being implemented under the Basel III framework. Findings also revealed that capital adequacy affected the balance sheet structure of the commercial banks in Kenya.Unique contribution to theory, practice and policy: The study recommends that banks should continue the pursuit of various strategies to ensure that they are in compliance with Basel III requirements and the Central Bank of Kenya’s Prudential Guidelines. The staff of this committee should be drawn from mainly the finance, legal, compliance and treasury departments. Compliance with the capital requirements will lead to a safety net for all commercial banks as the additional capital will act as a cushion that absorbs losses in case of distress in the commercial banking sector.

Credit Risk Management of Commercial Banks in Nepal

2019 ◽  
Vol 4 (1) ◽  
pp. 27-37
Author(s):  
Shreya Pradhan ◽  
Ajay K. Shah
Keyword(s):  
Risk Assessment ◽  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Management Practices ◽  
Risk Mitigation ◽  
Mitigation Measures ◽  
Credit Risk Management ◽  
Loan Repayment ◽  
Credit Risk Assessment

The study is primarily focused on credit risk assessment practices in commercial banks on the basis of their internal efficiency, assessment of assets and borrower. The model of the study is based on the analysis of relationship between credit risk management practices, credit risk mitigation measures and obstacles and loan repayment. Based on a descriptive research approach the study has used survey-based primary data and performed a correlation analysis on them. It discovered that credit risk management practices and credit risk mitigation measures have a positive relationship with loan repayment, while obstacles faced by borrowers have no significant relationship with loan repayment. The study findings can provide good insights to commercial bank managers in analysing their model of credit risk management system, policies and practices, and in establishing a profitable and sustainable model for credit risk assessment, by setting a risk tolerance level and managing credit risks vis-a-vis the prevailing market competition.

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