TITLE:
Credit Risk Management and Financial Performance: A Case of Bank of Africa (U) Limited
AUTHORS:
Ndyagyenda Catherine
KEYWORDS:
Credit Risk, Banks, Financial Performance
JOURNAL NAME:
Open Journal of Business and Management,
Vol.8 No.1,
November
25,
2019
ABSTRACT: The study was meant to establish the relationship between credit risk management
and financial performance of Bank of Africa
(U) Ltd. The study adopted a case study approach and adopted both quantitative and
qualitative approaches. The study established that the Bank has tried to diversify
geographically not only within the country even though the majority of loans are
granted to different regions within the country but also into neighboring countries
like Tanzania. The bank has over 35 branches within the country among which 21 branches
are in the central and 14 branches up country.
Strong Credit Appraisal puts the milestones for an
effective management of credit risk and gives the firms a competitive advantage
in the market place. Hence it can be concluded that credit appraisal defines a bank’s
survival and profitability. The value of adjusted R Square was 0.978, an indication
that there was a variation of 97.8% on performance of the bank due to changes in
client appraisal, credit risk control, and risk diversification at 95% confidence
interval. The study recommends that the management of the Bank should continuously
assess their risk management practices to see if they are still practical in the
face of a continuously changing operating environment, for instance the new regulatory
regimes. The products should be tailored towards the local language for easy understanding
of the products. The study makes the original contribution by suggesting that there
is a positive relationship between credit risk management and performance of the
bank. These insights are useful for academic understanding and policy formulation
by the decision makers of the bank.