| dc.description.abstract | In today's environment of intense competition, volatile economic conditions, rising default rates
and increasing levels of consumer and commercial debt, an organizations ability to effectively
monitor and manage its credit risk could mean the difference between success and failure.
Consistent stream of failures and scandals in the banking and financial services industry have
served as a catalyst for anxiety about risk. The risk anxiety generated by these events has led to
the proliferation of new categories of risk and new models for managing these risks. The general
objective of this study was to establish the influence of credit risk management practices on
financial performance of commercial banks in Meru Town. The study covered all commercial
banks which had been registered by the Meru County Government to operate in Meru Town by
January 2018. Meru Town is the commercial hub for Meru County and all banks in the county
have a presence in the town. The study concentrated on credit staff alone since they are the drivers
of credit lending in banking industry. The study adopted a descriptive research design, which
involves fact finding and enquiries of different types. The total population was 60 credit staff
drawn from respective commercial banks. The study adopted a census because the population was
not large, and there were well-organized structures where the respondents could be easily reached.
A pilot study was carried out to ascertain validity and reliability of the data collection instrument
- questionnaire. It Six credit managers from commercial banks in the neighbouring Nkubu Town,
also located in Meru County, were issued with questionnaires through the test-retest approach. In
the actual data collection, drop- and-pick method was used, after appointments had been booked
with the respondents. Frequencies and percentages were used to analyse data and hypotheses were
tested using Chi-Square. The analysed data was presented using frequency tables. The study
established a relationship between financial performance and three of the variables namely, credit
risk identification, measurement and monitoring. However, there was no adequate evidence to
establish such a relationship with credit risk control as indicated by the chi-square test. It was
concluded that credit management should focus more on credit risk identification, measurement
and monitoring. The study recommended that commercial banks should continuously review and
update their credit risk identification systems and strategies; that these financial institutions should
invent models that measure credit risk accurately; that credit staff should undergo regular trainings
on credit monitoring, and that terms and conditions of borrowing should be simplified to encourage
uptake of credit. The findings of this study are likely to be of immense benefit to various
stakeholders in the banking industry, including shareholders, managers, credit staff, borrowers, the
government and the academic community | en_US |
