IMPACT OF CREDIT RISK MANAGEMENT ON THE FINANCIAL PERFORMANCE OF COMMERCIAL BANK IN RWANDA A CASE STUDY OF BANK OF KIGALI PLC (2018-2022)

Abstract

The research purpose of this study was to assess the ‘‘impact of credit risk management on the financial performance of commercial bank in Rwanda, a case study of Bank of Kigali PLC (2018-2022)’’; This research has the statement stated that the higher the risk, the higher was the interest rate that the debtor was asked to pay on the debt. Credit & risk management risk mainly arises when borrowers are unable to pay due willingly or unwillingly. The main challenges faced by Bank of Kigali PLC are the problems where the borrowers fail to pay back their long run credits; another problem is of poor techniques and poor management systems used by borrowers. However, there is evidence that the growing number of commercial banks were leading them to a competitive environment that was raised credit extension. In a heightened competition more money was lent with a moderate effect on financial credit policies. The specific objectives of the study are to analyze of credit risk management in Bank of Kigali PLC, to assess the contribution of credit risk management on financial performance of Bank of Kigali PLC and to analyze the relationship between credit risk management and financial performance at Bank of Kigali PLC. The study used the researcher will distribute the questionnaires by using self-administered structured questionnaires and the data collected for this study were coded and analyzed using Microsoft Excel. The population which involved in this research consists of 96 staff of Bank of Kigali PLC by using convenience sampling and Sample size was 96 employees of Bank of Kigali PLC working in different department. The findings of the study shows risk analysis on financial performance of Bank of Kigali PLC as indicated that the majority of respondents strongly agreed the bank operates within a sound, well-defined credit grating criteria for assessing credibility of each credit applicants with a mean of 3.8876 and standard deviation of 1.40969, the majority of respondents strongly agreed the bank has established appropriate internal credit risk assessment practices and developed credit scoring analysis tools for preliminary analysis and pricing (rate) with a mean of 3.8427 and standard deviation of 1.43732, the majority of respondents strongly agreed the bank has clearly established process for approving credits facilities including new credits and renewal of existing credits facilities with a mean of 3.7528 and standard deviation of 1.53209, the majority of respondents strongly agreed the bank undertakes a credit worthiness analysis for credit request, reviews financial statements and future cash flows projections of borrowers business before grating credit with a mean of 3.5393 and standard deviation of 1.67234.