CREDIT MANAGEMENT APPROACHES AND FINANCIAL PERFORMANCE OF INDUSTRIAL BANKS

Isse Sudi Mohamed

Abstract

The general objective of this study was to examine credit management approaches and the financial performance of industrial banks. It was based on three specific goals: (i) to investigate the connection between client evaluation and industrial financial performance, (ii) to investigate the connection between credit collection methods and industrial financial performance, and (iii) to examine the relationship between credit monitoring techniques and financial performance of industrial Banks. The study was based on a correlation research design and a quantitative approach. Data was collected using closed-ended questionnaires. Sixty-five respondents were involved in the study and were all selected by use of a census enquiry. Data collected was entered into the SPSS computer package. Using the SPSS, Pearson’s correlation analyses were carried out to establish the relationship between study variables. The findings showed that: (i) there is a statistically significant positive association between clients’ assessments and industrial banks’ financial performance. (r = .249; Sig-value = .046); (ii) there is a statistically significant positive relationship between credit collection techniques and financial performance of industrial Banks (r = .513; Sig-value = .000); and (iii) there is a statistically significant positive relationship between credit monitoring techniques and financial performance of industrial Banks (r = .255; Sig-value = .040). It was recommended that credit officers in industrial banks should start treating the issue of collateral security more seriously during appraisal of credit applicants. In this case, all credit applicants should be required to offer collateral security to the bank before their credit applications are approved. Furthermore, on top of the other credit collection techniques, industrial banks should start offering discounts to clients who clear their loan obligations in time, should start attaching collateral assets of defaulting credit customers and should even use the services of private collection agencies during credit collection.