Abstract: The success of a lending firm is mainly determined by the financial performance in place, governance, professionalism and procedures. Especially to lenders, the minimization of bad loans is beneficial to the entire parties in the loan process. Commercial banks adopt different credit risk management process on financial performance majorly determined by credit scoring systems, banks’ ownership of credit policies, caliber of management and banks regulatory environment. Based on the report of the Central Bank of Kenya, there has been a declining performance Kenya’s banks between 2012 and 2016. The declining performance has been attributed to credit risk management ineffectiveness in Kenya. Prescriptive initiatives have been placed in position, like guaranteeing that bad loans financing are adequately prepared for, and the least restrictions laid for capital requirements and liquidity appropriateness are adhered to, and yet profit growth has remained low. Therefore, this study sought to investigate the effect of risk analysis on financial performance of commercial banks in Kisii County, Kenya. This study collected data using a descriptive research design while also seeking to derive useful conclusions regarding the report's target population within a specific time frame. The respondents for the study were personnel of commercial banks, specifically those involved in credit allocation. There were 11 executives, one for each of the 11 banking sectors, and 100 credit personnel. The study used a census for management teams and a stratified sampling method for credit staff. In this method, the number of strata in each population is proportional to the total population stratification that was determined from the demographic data. The sample consists of 80 credit department employees from commercial banks. For the primary purpose of this study, closed-ended questionnaires were used. Descriptive statistics included the average and standard deviation. Linear regression was used to examine the relationship between the dependent parameter and the derived explanatory parameters. According to the findings, Commercial banks in Kisii County, Kenya, benefited significantly and positively from risk analysis. The study concluded that errors that are inevitable during the early stages of a commercial bank's financial operations are discovered through the analysis of credit risk. In commercial banks, this creates a level playing field for management goals to be achieved. In the interest of the banks' financial performance, particularly at the branch levels, the study recommends that management of commercial banks optimize the best credit risk identification methods. The banks would be able to reduce the negative impact of credit losses in this way.
Keywords: Risk Analysis, Financial Performance.
Title: EFFECT OF RISK ANALYSIS ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KISII COUNTY, KENYA
Author: Nyambane Cliff Nyandemo, Dr. Vincent Shiundu
International Journal of Social Science and Humanities Research
ISSN 2348-3156 (Print), ISSN 2348-3164 (online)
Vol. 11, Issue 1, January 2023 - March 2023
Page No: 183-189
Research Publish Journals
Website: www.researchpublish.com
Published Date: 03-March-2023
