Effects of Credit Risk Management on Financial performance of Commercial Banks in Mombasa County

Abstract

The objective of this study was to establish the effect of credit risk management on Financial Performance of commercial banks in Mombasa County. The study had three specific objectives of establishing the effect of liquidity risk management, determine the effect of market risk management and determine the effect of default risk management on credit risk management.Credit risk management is vital. The study thus utilized descriptive survey research design. Questionnaires were used to collect data. The banks that contributed to the study were 44 banks and were selected through simple random sampling. The sample size of the study was 50 credit managers of Commercial Banks. The list was obtained from 2014 central Bank of Kenya. Sampling involves a assortment of a number of individuals or objects from a population such that the selected group contained elements representatives of characteristics found in the entire group .Mugenda and Mugenda, (2003) recommends a representative sample of 10%-30% for descriptive survey research. The study found that there is a correlation between liquidity risk management, default risk management and market risk management with performance of the banks. It however found that the banks do not involve experts and consultants in market risk management thus recommendations were made for the banks to revise their credit risk management policies, open up and share information with other players on market risk thus involve consultants more in their market risk management and to be more proactive than reactive in risk management.

Keywords: Commercial banks, risk, Credit risk, Credit risk management, Market risk.