EFFECT OF CREDIT RISK MANAGEMENT ON THE FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN JUBA CITY, SOUTH SUDAN
Mogga James Paulino - Masters Degree in Business Administration (Finance), Kenya Methodist University, Kenya
Prof. Felix Mwambia - Kenya Methodist University, Kenya
Moses Muruiki Kithinji - Kenya Methodist University, Kenya
ABSTRACT
The purpose of this study was to analyze the effect of credit risk management procedures adopted by commercial banks on their performance in South Sudan. Specifically, the study sought to determine the extent to which risk identification, risks monitoring procedures, and risk analysis and assessment procedures are applied in credit risk management by commercial banks in South Sudan and their overall effect on the performance of the commercial banks. The study was carried out in Juba city in South Sudan with six commercial banks namely; KCB, Equity, Cooperative, ECO bank, agricultural bank, and Eden commercial banks being the target institutions. The information was obtained from employees of these commercial banks who had various levels of experience in the banking sector. The study mainly analyzed the effects that are associated with credit risk mitigation to the performance of commercial banks. The target population of study was 80 bank employees in the credit department of commercial banks found in Juba city in South Sudan. The researcher used questionnaires in data collection. It consisted of structured questions. Before the research tool was administered to participants, pre-testing was carried out to ensure that the questions were relevant and, clearly understandable. Data that was collected was analyzed quantitatively using the Statistical Package for Social Science (SPSS). The computed data was analyzed using descriptive statistics including frequencies, means, and percentages. Interpretation of the data was done within the frame of reference of the research problem. Linear regression analysis was used to analyze the data and it expressed the analysis as well as determined the relationship between the dependent and independent variables. The study established that respondents of the study agreed that risk identification was well coordinated in their Bank (mean 4.26, standard deviation 0.44), all employees in the bank had been trained on risk identification (mean 3.76, standard deviation 0.89), well defined procedures on classifications of risk (mean 4.23, standard deviation 0.72), had well set out procedures for appraising risk (mean 4.16, standard deviation=0.83), had formulated appropriate risk monitoring practices (mean 4.23, standard deviation 1.10), had employed adequate managers to monitor the Bank’s exposure to risk ( mean 4.00, standard deviation 0.52), the bank had put in place written guidelines on the credit approval process (mean 4.13, standard deviation 0.73), persons empowered with the credit approval authority did not have customer relationship responsibility in the bank (mean 3.83, standard deviation 0.64). The study concludes that most of the banks considered risk identification as a process in credit risk management which affected performance, risk identification has insignificant effect on financial performance of banks, risk analysis and appraisal insignificantly affected financial performance of commercial banks, risk monitoring significantly affected financial performance, credit approval was a significant factor affecting financial performance of commercial banks. The study recommends that all banks operating across east Africa should have in place clearly defined policies on risk identification, the top management of all commercial banks should strive to improve efficiency with which staffs are able to analyze risks, the management of banks should set up a risk management committees report any incidences of risk exposure in a timely manner, banks should put in place credit approval authorities and all approvals made should be sanctioned by the board of directors.
