Effect Of Credit Risk Management Research Articles

The Effect of Credit Risk Management on Financial Performance in the Banking Industry Listed on the Indonesia Stock Exchange

This study aims to empirically test credit risk management on financial performance measured by return on assets and return on equity at commercial banks listed on the Indonesian stock exchange in 2020-2022. The data was collected from 44 banks and examined by applying standard descriptive statistics and the random effect model for hypothesis testing. It is concluded from the regression outcomes that only loan to deposit ratio which has not a significant impact to return on asset but only loan to deposit ratio, risk asset ratio, and size are have a significant impact to return on equity. Based on these findings, it is suggested that bank companies must watch carefully the loans’ performance and analyze thoroughly the clients’ credit history an ability to pay back their debts prior to any approval of loan applications. The researchers recommend that future studies on credit risk management influence on banks’ financial performance should consider more independent variables and longer periods of study such as twenty or thirty years to have more accuracy and generalized results.

Credit Risk Management and Financial Performance of Savings and Credit Co-operative Organizations: A Case of Selected SACCOs in Makindye Division, Kampala Uganda

The purpose of this paper is to assess the effect of credit risk management on the financial performance of Savings and Credit Co-operative Organizations (SACCOs) in Makindye division, Kampala. Specifically, the paper looked at how credit risk identification, credit risk assessment and credit risk control affect the way that SACCOs perform financially. A cross-sectional field survey design that adopted both qualitative and quantitative approaches to collecting and analyzing data was adopted. Twenty (20) registered active SACCOs were purposively selected from Makindye Division for data collection using both questionnaires and interview guides. Data was collected from managers, treasurers or accountants, and secretaries of the registered SACCOs. Descriptive and inferential statistics were generated and interpreted to meet the study objectives. Findings showed that credit risk management has a positive and significant effect on the financial performance of SACCOs. This implies that the way a SACCO performs financially is influenced by the way credit risk is identified, assessed and controlled within that SACCO. SACCOs should train their members on strategies of identifying, assessing as well as controlling risks if they are to register and sustain good financial performance. This paper contributes to literature in regard to credit risk management strategies within SACCOs in Uganda.

Credit Risk Management and Market Performance of Quoted Deposit Money Banks in Nigeria

This study investigated the effect of credit risk management on market performance of deposit money banks in Nigeria. Market performance was used as dependent variable proxy as net assets per share while management quality ratio, capital adequacy ratio, sensitivity to market ratio, credit to deposit ratio and asset quality ratio were used as independent variables. A sample of 12 deposit money banks were used for the period of ten years spanning 2012 to 2021. The study employed ex-post facto and longitudinal research design. The secondary sources of data were collected from annual reports of the selected deposit money banks and five (5) specific objectives and hypotheses were subjected to some preliminary data tests like descriptive statistics, Pearson correlation analysis and Variance Inflation factor (VIF) were analyzed using panel regression analysis. Using a sample of 120 banks-year observations, the result revealed that management quality ratio, credit to deposit ratio and asset quality ratio have negative and statistically significant effect on market performance proxy as net assets per share of deposit money banks in Nigeria which was statistically significant at 5% level of significance. Conversely, Capital adequacy ratio and sensitivity to market ratio was found to have positive but non-significant effect on market performance of deposit money banks in Nigeria. Based on the findings above, the study recommends among others, that managers of Banks in Nigeria should enhance their management quality and capacity in credit analysis to reduce the risk of default in repayment as this will stem the cyclical nature of net assets per share and increase their market performance. Moreover, adequate provision against loan loss should be made and Nigeria banks should adopt an aggressive deposit mobilization to increase credit availability and develop a reliable credit risk management strategy with adequate punishment for loan payment defaults. The st

Influence of Credit Risk Management on Financial Performance of Commercial Banks in Kenya

The management of credit risk in commercial banks determines the banks' financial performance, which predominantly influences the quality of the loan portfolio and the nature of credit administration programs as a whole. By ensuring that credit risk is effectively managed, the primary objective of credit risk management is to generate a high-quality, stable, large, and growing flow of net interest income for banks. This objective is achieved by ensuring that banks can meet the needs of their customers. This study determined the effect of credit risk management on the financial performance of Kenyan commercial banks. The investigation was founded on the portfolio theory. The paradigm of Positivism served as the philosophical foundation for the investigation. The study incorporated both explanatory and longitudinal research designs into its methodology. The study's target population consisted of 32 Commercial Banks in Kenya. The study utilized panel data consisting of time series and cross-sectional data spanning a decade from 2010 to 2019. Using Eviews, descriptive and inferential statistics were used to analyze the collected data, which was then presented in tables and figures. The study found out that Credit risk management had an insignificant negative relationship with Return on Equity (ROE) (F=87.02884, p<0.05) and Return on Assets (ROA) (F=118.1208, p<0.05). Arising from the study findings, it is observed that credit risk management has a negative effect on financial performance measure either in ROA or ROE, it is recommended that commercial banks should keep this parameter as minimum as possible so as not involve in loss making undertakings.

The Effect of Credit Risk Management on Financial Institutions in Sierra Leone

The Effect of Credit Risk Management on Financial Institutions in Sierra Leone

Credit Risk Management, Capital Adequacy Ratio and the Financial Performance of Listed Deposit Money Banks in Nigeria

The effect of credit risk management and capital adequacy on the profitability of Money Deposit Bank had been a subject of hot debates among the professionals and academic scholars. This study examines the impacts of credit risk management and capital adequacy on the performance of money deposit banks in Nigeria using panel data regression analysis conducted on E-view 7 data analysis software. Secondary data in the form of time series and cross-sectional data were obtained from the bank’s reports. Credit risk variables and capital adequacy ratio were extracted from 12 banks annual reports for the period 2015 to 2021. The independent variables are credit risk and capital adequacy ratio , while the independent variable is bank performance proxied on Return on Asset (ROA) and Return on Equity(ROE).This study found that loans and advances (LA) has negative and significant relationship with return on asset (ROA) (β=0.04; t=4). Loans and advances (LA) have positive and significant relationship with banks financial performance as proxied by return on equity (ROE) (α=0.01; t=2). The study also found that capital adequacy ratio (CAR) has positive and significant relationship with banks financial performance as proxied by return on equity (ROE) (α =-0.04; t=2). Loans and advances have negative and significant relationship with return on asset (ROA) (β=-0.19; t=-2). Non-performing loan has negative and significant relationship with return on equity (ROE) (α=-0.057; t=2). It is therefore recommended that banks management should constantly review their credit policy guidelines from time to time in consonance with the dynamics of business environment. Nigerian banks must constantly enhance their capital to serve as buffer to cushion the adverse effect of loan capital erosion arising from non-performing loans. Keywords: Credit; Risk, Capital adequacy, Management, Financial performance

A Review of the Effect of Credit Risk Management on Financial Performance of JAIZ BankNigeria (2015-2020)

A Review of the Effect of Credit Risk Management on Financial Performance of JAIZ BankNigeria (2015-2020)

Impact of Credit Risk Management on Profitability of Nepalese Commercial Banks

This study examines the impact of credit risk management on profitability of Nepalese commercial banks. Default rate, cost per loan assets and capital adequacy ratio are the independent variables used in this study. The dependent variables are return on assets (ROA) and return on equity (ROE). The secondary sources of data have been used from annual reports of selected commercial banks and supervision report of Nepal Rastra Bank. The regression models are estimated to test the significance and effect of credit risk management on profitability of Nepalese commercial banks. The beta coefficient of default rate and cost per assets with profitability (ROA, ROE) has been found negative and statistically significant. The negative sign indicates that there is statistically negative relationship between default rate and cost per loan assets with profitability. Likewise, the beta coefficient of capital adequacy ratio with ROA and ROE is found to be positive and statistically significant. The positive sign of beta coefficient indicates that there is statistically positive relationship between capital adequacy ratio and profitability. The study thus recommends an effective credit risk management for commercial banks of Nepal that maintains an optimum level of capital adequacy ratio, controls and monitors cost per loan assets and balances default rate to enhance financial performance.

The Effect of Credit Risk Management on the Performance of Commercial Banks in Tanzania: Panel Data Modelling

This study has objective of determining the effect of credit risk management on financial performance of commercial banks in Tanzania. The study covered the period between year 2015 and 2020 for the sample of five (5) commercial banks. Panel regression analysis (random effect model) applied as the estimation method. The result indicates that, Capital adequacy ratio (CAR) and Asset Management (AM) has a negative statistically significant effect on Return on capital employed while Liquidity (L) has a positive impact. On the other hand, the results of CAR and Equity (E) have a significant negative relationship with Profit Margin (PM) while AM and Liquidity (L) has no relationship with PM as a bank performance in Tanzania. Meanwhile, the credit risk management still remains a major challenge for the commercial banks in Tanzania because credit risk management is an important predictor of bank financial performance. The findings help the policy makers in setting better performance strategies and enable managers of the banks to allocate resources more efficiently.

EFFECT OF CREDIT RISK MANAGEMENT ON THE PROFITABILITY OF NIGERIAN BANKS

This study investigated the effect of credit risk management on the profitability of Nigerian banks from 2006-2020. Three banks were sampled (First Bank Nig Plc (FBN), Zenith Bank Plc (ZBN) and First City Monument Bank Plc (FCMB)). The study specifically determined the effect of non-performing loan to total loan ratio (NPR), non-performing loan to total deposit ratio (NDR), capital adequacy ratio (CAR), leverage ratio (LEV) and firm size (FSZ) on profitability of banks measured by Return On Assets (ROA) and Return On Equity (ROE). The study utilized secondary data sourced from annual reports and accounts of the selected banks for the period of the research work. The study employed multiple regression of OLS (Ordinary Least Square) and estimation obtained from E-views version 9 to determine the statistical relationship between credit risk management and profitability of banks in Nigeria. The finding revealed a positive insignificant relationship between NLR and profitability of banks, CAR and FSZ showed a negative insignificant relationship with profitability, LEV revealed a positive significant relationship in only ROE of Zenith Bank and First City Monument Bank while NDR revealed a negative insignificant relationship in First Bank and Zenith Bank only. Based on the above findings, this study recommended that the Central Bank of Nigeria, for policy purposes should frequently assess the lending habit of banks in Nigeria

The Effect of Credit Risk Management on Financial Performance in Indonesian Banking

The research has done on purpose to help determining the influence of credit risk management toward financial presentation in Indonesian banking from 2017 to 2021. CAR, NPLR, LDR, NIM, and Bank Size ratios are used to measure credit risk, while ROA and also ROE ratios tend to be applied in order to help assess financial performance. The research technique and data used in this research are quantitative descriptive, including secondary data contained in the financial reports of 33 Indonesian banks registered on the Indonesia Stock Exchange from 2017 to 2021 that satisfied the sampling criteria. This rstudy findings are shown that credit risk management (as measured by CAR) has no intermediate impact on ROA and ROE, NPLR gives such a negative and also significant influence toward financial performance as assesed by ROA and ROE, LDR has no impact on financial presentation as assesed by ROA and ROE, NIM gives no influence toward financial performance as calculated by ROA and ROE, and also Bank Size (BS) gives such a positive and also significant unfluence toward financial presentation as assesed by ROA and ROE.

The Effect of Credit Risk Management on Financial Performance in Indonesian Banking

The Effect of Credit Risk Management on Financial Performance in Indonesian Banking

The Effect of Credit Risk Management on Financial Performance in Indonesian Banking

The Effect of Credit Risk Management on Financial Performance in Indonesian Banking

Effect of Credit Risk Management on Loan Performance among Microfinance Institutions. A Case of Réseau Interdiocésain De Microfinance (RIM Ltd) Kibuye Branch.

This research assessed the effect of credit risk management on loan performance among microfinance institutions using a case of RIM Ltd Kibuye Branch during past five years (2015- 2019). A sample of 97 respondents was calculated using Yamane formula and randomly selected from a total population of 4334 clients of RIM Ltd including 2777 men and 1557 women, and 9 staffs. Quantitative approach was applied using a questionnaire designed in form of five levels Likert scale and analyzed using IBM SPSS Statistics 23; Qualitative approach was applied through open questions, interview and participant observation. The main findings of the research are: (i) Client appraisal exercise high effect on loan performance of RIM Ltd (overall μ = 4.87; σ =0.325); (ii) Credit risk control exercise high effect on loan performance of RIM Ltd (overall μ = 4.74; σ = 0.381); (iii) Collection policy exercise high effect on loan performance of RIM Ltd (overall μ =5.00; σ =0.000); (iv) Terms of credit exercise high effect on loan performance of RIM Ltd (overall μ =4.65; σ =0.407). The main challenges to effective credit risk management outlined by the research include: Deviation of the projects where the loan is used for a project that it was not requested for; Fluctuation of business climate; Some clients do not want working in solidarity; Clients having loans in SACCOs and RIM Ltd at the same time; and Poor entrepreneurship skills. Overall μ = 5.00; σ =0.000). The research recommended: (i) establishing special penalties for client who deviate the project; (ii) requesting guarantee for agricultural loans; (iii) improving RIM policy imposing solidary groups for accessing the loan; (iv) provision of clearance for loan applicants; (v) developing a culture of customer care whereby planning trainings for members; but also using trainings on entrepreneurship as a marketing strategy.

Credit Risk Management and Financial Performance of Commercial in DRC

This study had two specific objectives which are: Establish the effect of credit risk management on performance of commercial banks in DRC. And to identify the most healthiness Commercial banks in DRC. In this study we have responded to two questions: Is there a relationship between the credit risk management and the performance of Commercial banks in DRC? What’s the healthiness commercial bank in DRC? After analysis we concluded that the credit risk management has not any impact with the financial performance of commercial banks in DRC and the best commercial bank in DRC was BCDC during the time covered by this study

Credit Risk Management and Financial Performance of Microfinance Banks In Nigeria (2011 - 2020)

Microfinance banks holds the key to economic growth in developing economics and their financial health is sacrosanct to achieving this role.They provide small scale finances to small business enterprises. This study examined the effect of credit risk management on the financial performance of Microfinance banks in Nigeria. Published financial reports of six purposively selected Microfinance banks, covering the period of 2010 - 2019 were used as data for the regression model. The study employs descriptive statistics, Panel least squares regressions and correlation analysis to estimate the effect of the credit risk variables proxied by Non-performing loan ratio (NPLR), Liquidity ratio (LIQR) and Capital adequacy ratio (CAR) on the financial performance measured by Return on assets (ROA). Arising from the results of the Panel regression, the study therefore concluded that credit risk management proxied by NPLR and CAR have significant effect on the financial performance of the selected Microfinance bank in Nigeria proxied by ROA. Hence, Central bank of Nigeria should regularly monitor Microfinance bank’s compliance to relevant provisions of the law as it concerns debt accumulation.

Effect of Credit Risk Management on Business Performance of Banks Operating in Ethiopia

The main aim of this study was to identify the effect of credit risk management on profitability (business performance) of selected commercial banks of Ethiopia based on secondary data sources over the period of 2010-2021 G.C. The study employed a quantitative research approach with an explanatory research design. The result of regression analysis of the random effect model was applied to investigate the effect of explanatory variables on profitability.The finding of this study showed that capital adequacy has a positive and statistically significant effect on the financial performance of commercial banks in Ethiopia. Besides, variables like a loan to deposit ratio and loan provision ratio have a positive and statistically significant effect on the profitability of commercial banks. In opposite direction, non-performing loans, loan to total asset ratio, and cost per loan have a negative and statistically significant effect on ROA respectively.Apart from contributing to the body of existing literature on the effect of credit risk management on the financial performance of the banking sector, the study gives a guideline to both public and private banks in the world in general and Ethiopia in particular. It indicated that the financial performance of commercial banks can be improved by improving the credit risk management system.This study contributes by supporting that credit risk parameters such as loan to deposit ratio, loan provision, non-performing loan, loan to total asset ratio and cost per loan have a statistically significant effect on ROA respectively. Keywords: Credit Risk, Risk Management, Commercial Banks, Sidama ,Furra college DOI: 10.7176/RJFA/13-9-02 Publication date: May 31 st 2022

Effect of Credit Risk Management on Financial Performance Of Nepalese Commercial Banks

The main purpose of this study is to investigate the effect of credit risk on the financial performance of commercial banks in Nepal. The panel data of seventeen commercial banks with 85 observations for the period of 2015 to 2020 have been analyzed. The regression model revealed that non – performing loan (NPLR) has negative and statistically significant impact on financial performance (ROA).Capital adequacy ratio (CAR) and bank size (BS) have negative and statistically no significant impact on financial performance (ROA). Credit to deposit (CDR) has positive but no significant relationship with the financial performance (ROA) and the study concluded that the management quality ratio (MQR) has positive and significant relationship with the financial performance (ROA) of the commercial banks in Nepal. The study recommends that, it is fundamental for Nepalese commercial banks to practice scientific credit risk management, improve their efficacy in credit analysis and loan management to secure as much as possible their assets, and minimize the high incidence of non-performing loans and their negative effects on financial performance.

Credit Risk Management and Sub-Standard Loans of Commercial Banks in Nigeria: A Panel Data Analysis

This study examined the effect of credit risk management on sub-standard loan portfolio of quoted commercial banks in Nigeria. Cross sectional data was sourced from financial statement of commercial banks and Central Bank of Nigeria Statistical bulletin from 2009-2018. Sub-standard portfolio was used as dependent variable while bank risk diversification, Basel risk compliance, risk transfer were used as independent variables. Panel data methodology was employed while the fixed effects model was used as estimation technique at 5% level of significance. Fixed effects, random effects and pooled estimates were tested while the Hausman test was used to determine the best fit. Panel unit roots and panel cointegration analysis were conducted on the study. The empirical results proved that 41.7 per cent variations in the sub-sub-standard loans’ portfolio was explained by credit risk management. From the random effect results, bank risk transfer and Basel compliance have positive relationship with sub-standard loan portfolio while risk bank risk diversification have negative relationship with sub-stand ad loan portfolio of the commercial banks. We recommend that management of the commercial banks should be pro-active and devise effective measures of managing credit risk to reduce the incidence of sub-standard loans. The monetary authority should monitor the Basel compliance rate and policies of the commercial banks to credit risk management

The effect of credit risk management and bank-specific factors on the financial performance of the South Asian commercial banks

PurposeAmong all of the world's continents, Asia is the most important continent and contributes 60% of world growth but facing the serving issue of high nonperforming loans (NPLs). Therefore, the current study aims to capture the effect of credit risk management and bank-specific factors on South Asian commercial banks' financial performance (FP). The credit risk measures used in this study were NPLs and capital adequacy ratio (CAR), while cost-efficiency ratio (CER), average lending rate (ALR) and liquidity ratio (LR) were used as bank-specific factors. On the other hand, return on equity (ROE) and return on the asset (ROA) were taken as a measure of FP.Design/methodology/approachSecondary data were collected from 19 commercial banks (10 commercial banks from Pakistan and 9 commercial banks from India) in the country for a period of 10 years from 2009 to 2018. The generalized method of moment (GMM) is used for the coefficient estimation to overcome the effects of some endogenous variables.FindingsThe results indicated that NPLs, CER and LR have significantly negatively related to FP (ROA and ROE), while CAR and ALR have significantly positively related to the FP of the Asian commercial banks.Practical implicationsThe current study result recommends that policymakers of Asian countries should create a strong financial environment by implementing that monetary policy that stimulates interest rates in this way that automatically helps to lower down the high ratio of NPLs (tied monitoring system). Liquidity position should be well maintained so that even in a high competition environment, the commercial is able to survive in that environment.Originality/valueThe present paper contributes to the prevailing literature that this is a comparison study between developed and developing countries of Asia that is a unique comparison because the study targets only one region and then on the basis of income, the results of this study are compared. Moreover, the contribution of the study is to include some accounting-based measures and market-based measures of the FP of commercial banks at a time.