An assessment of credit risk management in commercial banks in Uganda: A case study of Centenary Bank
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The purpose of the study was to assess credit risk management practices in commercial banks with particular focus on Centenary Bank. The study specifically examined the credit risk management practices in Centenary Bank, identified challenges faced in the process of credit risk management at Centenary Bank and established strategies that can be used in credit risk management practices in Centenary Bank. The study used cross sectional survey design with quantitative approaches. The study population involved loans officers, loan managers and branch managers. Data was analyzed to obtain means and standard deviations, frequencies and percentages. It was revealed that the bank has different risk management practices in place and ensures that key risk factors are identified and measured and that it has a strict and standard loan approval and disbursement processes with decentralized limits across its branch network. It was further revealed that there are many challenges faced in risk management as the bank sometimes fails to analyze fair value of credit risk, there is inefficient market systems, there is inadequate appraisal of borrowers due to concealment of relevant information by clients, forgeries and poor monitoring of loans by some credit staff members, there are some times inconsistencies in risk-rating approaches in the bank. There are different strategies that can be used in credit risk management as it was revealed that bank should ensure an appropriate credit granting process, there should be an appropriate credit administration, the bank should have a proper loan monitoring process to avoid credit risk and have adequate controls in place to manage risk. It was therefore concluded that stiff competition compromises strict approval process to match with the market competitive environment, inadequate appraisal of borrowers and the bank should ensure an appropriate credit granting process and it was therefore recommended that to identify the most crucial sources of credit risk in the bank and identify best practices on how to deal with them, the bank needs to list all the challenges that faced in its credit management process and then get customized ways of dealing with such challenges with an effective implementation mechanism of all its suggested strategies to improve on credit risk management.