dc.description.abstract | Effective credit risk management has gained increased locus in the reccnt years, largely
ilnc to the fact that inadequate credit risk policies are still the main source of serious
problems within the hanking industry.
Managing credit risk thus remains an essential and challenging corporate function. I he
chief goal of an effective credit risk management policy must be to maximize a banks
risk adjusted rate of return by maintaining credit risk exposure within acceptable limits.
Moreover, banks need to manage credit risk in the entire portfolio us well as the risk in
individual credit or transactions.
The research seeks to determine the credit risk management practices among commercial
banks in Kenya. The specific areas of research were geared towards identifying the
sources of credit risk exposures in banks and identifying the measures and strategics that
the banks in Kenya have adopted to monitor and mitigate against the credit risk exposures
inherent in the operations of their business.
To facilitate the attainment of the objectives of this study, questionnaires were
administered to the credit risk managers and credit managers of the respondent banks.
I he response rate was thirty two (32%) per cent. Research findings were further
presented and discussed using tables and bar graphs.
From the study, it was found that in most banks credit risk management was organized in
units within the credit management department with persons responsible lor credit risk
management reporting to the credit manager. Most banks did not have an autonomous
credit risk management department. Qualitative loan assessment methods were found to
be the most prevalent methods in making crcdit granting decisions while liquidity run on
the borrower, credit concentration and adverse trading by the borrower were the main
sources of credit risk among the banks in Kenya In addition, most banks were found to
use loan diversification, bank guarantees and bank covenants to mitigate against credit
risk
The main challenges and limitations encountered during the research were lack of
adequate time to follow up potential respondents, suspicion from some respondents over
the confidentiality of data disclosed and the lack of adequate local literature and research
materials on the subject of credit risk management | en_US |