Abstract:
Sound credit management is a prerequisite for a financial institutions stability and
continuing profitability, while deteriorating credit quality is the most frequent cause of
poor financial performance. The main objective of this study was to assess credit risk
management system and practices in selected branches of United bank of Southwest
district. Selection of branches for the study was done based on mainly amount of
deposits, foreign exchange and loan performance made by the banks. Five branches out
of thirty-three were selected based on their performances as of the financial year
2021/2022. In this study, census survey was used in order to target participants of the
study. For the purpose of this study, both primary and secondary data were used.
Primary data were collected through questionnaires distributed to respondents that
involved professional working in the banks such as managers and officers working on
loan processing. The data were analyzed using descriptive and regression statistics by
using SPSS software version 21. The finding of the study showed that the current level of
credit risk management of the bank is moderate. The results also indicated that credit
risk environment (CRE), credit granting process (CGP), credit administration,
measurement and monitoring process (CAMMP), and control over credit risk (CCR)
were statistically significant in predicting effectiveness of credit risk management
practices of the bank. The results additionally indicate that the bank has been exposed to
credit risk which directly contributes to the increment of NPL. Thus, it is recommended
that the bank should develop independent risk management policy and procedure from
credit policy and procedure to overcome those problems and to take measures on the
spot
