The Impact of Effective Credit Risk Management on Bank Survival

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Annals of the University of Petroşani, Economics, 9(2), 2009, 173-184




ABSTRACT: A number of financial institutions have collapsed or experienced financial problems due to inefficient credit risk management systems. The study seeks to evaluate the extent to which failure to effectively manage credit risk led to Zimbabwe’s banks’ demise in 2003/2004 bank crisis. It also seeks to establish other factors that led to the banking crisis and to outline the components of an effective credit risk management system. The study found that the failure to effectively manage credit risk contributed to a greater extent to the banking crisis. The research also
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The research data was collected over six months to June 2009. The researcher chose the survey as the appropriate research design for the study, and as such, questionnaires and interviews were used as research instruments. Some unclear or hanging issues in the questionnaires were clarified in interviews. A sample of 10 commercial banks randomly chosen was used in this analysis. Twenty questionnaires were used to gather data with two for each commercial bank chosen. A total of 10 interviews were held with the heads of credit or senior managers from those banks. The questionnaire had 12 short questions designed for the bankers and or senior managers from those banks so that they would not have a difficulty in answering questions. The first two questions constituted the respondent profile. The two questions that followed formed the administrative section where the research was obtaining information about the financial institution. Question five up to the end of the questionnaire formed the main body from which the crucial data for the research was

The Impact of Effective Credit Risk Management on Bank Survival


obtained. Document review was also used to obtain as much data as possible for a comprehensive, detailed and informed analysis of the study. 4. LITERATURE REVIEW According to the Reserve bank of Zimbabwe (RBZ) risk management operating document
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