Credit risk management and loan performance in commercial bank in Mogadishu, Somalia

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Kampala International University, College of Economics and Management
The purpose of the study was to establish the effect of risk management on Loan performance in commercial banks in Mogadishu Somalia. The objectives were to assess the effect of risk identification on Loan performance of commercial banks in Mogadishu Somalia, to determine the effect of risk assessment on Loan performance of commercial banks and to assess how risk monitoring affect Loan performance commercial banks in Mogadishu Somalia. The study was conducted in selected banks of Mogadishu Somalia, the data was collected from 131 respondents using closed ended questionnaires. The data collected reveal that risk identification had a significant effect on loan performance (Sig=0.000) while risk assessment also had significant effect on loan performance (0.008) and risk monitoring had an insignificant effect on loan performance (0.087). The study findings imply that credit risk management has an effect that is paramount on loan performance in Mogadishu Somalia. The study results regarding the first objective, the study conclude that risk analysis is fundamental in enhancing Loan performance. The study conclude that effective risk identification is necessary for Loan performance indicating that utmost work performance is fundamental for loan portfolio response. The study on the second research objective concludes that risk assessment in the banks in Mogadishu Somalia had a significant effect on Loan performance. The study concludes further that managing the state of risks concerning loans can generate the Reponses in payment for loans. The study finally on the third objective conclude that risk monitoring though occurred in the commercial banks of Mogadishu Somalia did not generate high Loan performance. The result indicates that risk monitoring didn’t lead to resonate loans recovery. The study recommend that there is need for strong cost reduction by management through credit risk analysis so as to save on the finances lost through operations for recovery of the none responding or performing Loans. There is need for the banks to conduct analysis in clear form and develop the mode for tracking risks before their actual occurrence to curb insurgencies. The management needs to institute management teams for enhancing direct operations for the organizational establishments. Thirdly, on there is need for detailed information on integrated risk management at their company and weigh these risks against those of new investments.
A thesis report presented to the College of Economics and Management in partial fulfillment of the requirements for the Award of Master’s Degree in Business Administration Banking and Finance, Kampala International University
Credit risk management, Loan performance, Commercial banks, Mogadishu, Somalia