Assessment of credit risk management practices in commercial banks in Uganda: a case of Stanbic Bank Uganda Limited
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This study aimed to evaluate credit risk management practices used in Stanbic Bank Uganda Limited. The study was guided by specific objectives, such as to examine the different credit risk management practices and measures used by Stanbic Bank Uganda Limited, to identify challenges faced in the process of credit risk management at Stanbic Bank Uganda Limited.to establish strategies that can be used in credit risk management practices in Stanbic Bank Uganda. The study was guided with the theory of asymmetric information when evaluating potential bank applicants. Furthermore the 5 C's Model for Credit was introduced as a framework through which financial institutions can develop their credit transaction policies. The study employed the descriptive design and a sample of 63 respondents was selected using a simple random sampling to select the staff in the credit departments at Stanbic bank. The study revealed that 73% participants actively responded to the survey and this was sufficient for the study to take place. The study revealed that robust practices, including the credit monitoring system, loan term monitoring, credit quality review, and credit file organization, received strong endorsement, aligning with established risk management principles. The Challenges identified included inadequate staff training, lack of credit risk prediction experts, compliance with stringent regulatory requirements, inconsistent risk-rating approaches, self-employed client risk management, and issues related to interdepartmental communication and transparency. These challenges highlighted the need for specialized expertise and efforts to align the bank's practices with regulatory requirements and industry standards. Respondents supported the implementation of diversification strategies, regular updates of credit risk policies, utilization of advanced technology, comprehensive training programs, continuous monitoring, collaboration with regulatory authorities and industry peers, and fostering a culture of risk awareness and accountability. These strategies were crucial for improving the bank's credit risk management framework. Recommendations included maintaining effective practices, enhancing the integration of the internal risk rating system with Management Information Systems, prioritizing efficient risk data communication and reporting, investing in comprehensive staff training, and fostering interdepartmental communication and transparency. Future research opportunities included comparative analyses among different banks in Uganda and longitudinal studies to track the evolution of credit risk management practices over time. KEY WORDS: credit risk management practices, risk mitigation strategies, banking regulations compliance.