RELATIONSHIP BETWEEN CREDIT RISK ASSESSMENT, MONITORING, AND PERFORMANCE OF LOANS IN SELECTED COMMERCIAL BANKS IN KAMWENGE DISTRICT. A CROSS-SECTIONAL STUDY.

Abstract

Background

Credit risk management refers to the practice of assessing and managing the potential risks associated with lending money to borrowers or extending credit to customers and clients. The purpose of the study was to determine the relationship between credit risk assessment, monitoring, and performance of loans in selected commercial banks in Kamwenge District.

Methodology

Descriptive correlational and cross-sectional study. A sample of 75 respondents was selected from a population of 94 employees of the selected banks in Kamwenge District

Results

There was a strong positive correlation of 628 between credit risk assessment and the performance of loans in selected commercial banks in Kamwenge District. The correlation is significant at the 0.01 level (2-tailed) further reinforcing the strength of the relationship between credit risk assessment and loan performance. The better the credit risk assessment practices in the banks, the better the performance of the loans they provide. The correlation between credit risk monitoring and the performance of loans is 0.622. This value indicates a strong positive correlation between credit risk monitoring and the performance of loans in the selected commercial banks. The correlation is statistically significant with a p-value of .000, indicating that the relationship between credit risk monitoring and loan performance is not due to random chance.

Conclusion

There is a strong positive correlation between credit risk assessment, credit risk monitoring, and the performance of loans in commercial banks in Kamwenge District.

Recommendation

Commercial banks should establish robust mechanisms for ongoing monitoring of credit risk exposure and borrower behavior. Regularly assess and review the credit quality of loans in the portfolio to identify early warning signals of potential defaults or credit deterioration.