Influence of Credit Risk Management Practices on Loan Performance of Assinman Rural Bank, Central Region of Ghana

Abstract

The purpose of the study was to analyse the influence of credit risk management practices on loan performance of Assinman Rural Bank (ARB), Central Region of Ghana. The design adopted for the study was descriptive survey design. In relation to the accessible population, the study considered all the 59 permanent staff within the six branches of the ARB. The census method was used to capture all the permanent staff within the institution. Questionnaire was the data collection instrument used for this study. The reliability coefficient of the instrument was 0.87, which was deemed appropriate and significant. Both descriptive and inferential statistics were used to analyse the data. The key findings that emerged from the study were that credit risk management practices of ARB have a significant and positive relationship to the bank’s loan performance. Furthermore, the bank’s credit risk management practices influence its loan performance significantly. Credit risk management practices within the various banking system has become a universal phenomenon, but when appropriate techniques and strategies are adapted the banks become more effective and efficient in dealing with credit which in the long run help enhance the banks’ loan performance. In view of the discoveries and conclusions of the study, it was recommended that management of the bank should enhance the bank’s appraisal of client process through formulation of policies that details ways of capturing all the credit risk. This will create room for the bank to have credit appraisal process that allows the bank to identify all loss exposures.