The Impact of Credit Risk Management on the Performance of Private Commercial Banks in Ethiopia

Abstract

The objective of study was to assess the impact of credit risk management on the performance of private commercial banks in Ethiopia. The sample in this study consisted of six private commercial banks for a 14 period (2000 to 2013) were collected from audited financial statement of respective banks and National Bank of Ethiopia. The collected data were analyzed by using panel data regression model and the result showed that credit risk management measures: capital adequacy ratio, total loan ratio, non- performing ratio, bank size and liquidity ratio have a significant impact on the performance(ROA and ROE) of Private commercial banks.The study recommended that the banks’ credit risk management should give due attentionon capital adequacy and management of loan portfoliosin order to minimize the high incidence of non-performing loansand their negative effect on profitability of commercial banks.

Keywords: Credit Risk Management, performance, private Commercial Banks in Ethiopia.