Credit Risk Management and Financial Performance: A Case of Bank of Africa (U) Limited

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DOI: 10.4236/ojbm.2020.81002    3,602 Downloads   26,146 Views  Citations

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.

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Catherine, N. (2020) Credit Risk Management and Financial Performance: A Case of Bank of Africa (U) Limited. Open Journal of Business and Management, 8, 30-38. doi: 10.4236/ojbm.2020.81002.
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