The Effect of Credit Risk Management on the Financial Performance of Commercial Banks in Senegal

Abstract

Credit is necessarily connected to a notion of profitability and risk. These two elements remain inseparable within the framework of the banking activity. Loan schemes need to be professionally managed so as to influence positively the bank’s performance because without good credit risk management, numerous institutions encounter liquidity and inadequate working capital issues. The studyaim was to analyze the impacts of CRM on the performance financially of the banking institutes in Senegal. The design employed inresearch was the descriptive research design. Secondary data acquired from the BCEAO publications of banks financial statements was used by the researcher. The information collected usedmultiple regression and descriptive statistics analysis in analysis to come up with therelationship in regard to the direction, magnitude and nature between the variables ofstudy. Multiple regression model was adopted to ascertain the relationship of the dependent variable to multiple independent variables. The research findings established that the association between ROA and asset quality was statistically noteworthy and positive while the relationship between capital adequacy and ROA was negative and statistically significant respectively. The researchalso found that the relation between liquidity and ROA was positive and insignificant whereas the relationship between management efficiency and ROA was negative and statistically insignificant respectively. The research came to a conclusion that capital adequacy and CRMconsiderably affects commercial banks financial performance in Senegal and suggested that the commercial banks management in Senegal should come up with effective strategies of management of credit risk to mitigate the impact of credit risk on banks’ financial performance