The Impact of Credit Risk Management on Commercial Banks Performance in Democratic Republic of the Congo (Published)
The main objective of this study was to find the impact of credit risk management on the financial profitability of the Congo’s commercial banks. The specific objectives were to find the effects of CAR and NPLR considered as independent variables on the performance of commercial banks while the dependent variables were ROE and ROA. We used commercial banks in the Democratic Republic of the Congo as a study population, and as a sample the four largest banks from 2009 to 2016. Using a fixed effects model specification a panel Estimate Generalized Least Squares regression was done on the data using E views software. Adopting a 5% non- directional test of hypothesis, the study found a capital adequacy ratio has statistically significant effect on commercial banks performance in Democratic Republic of Congo. For the second objective which was to determine the relationship between non-performing loans ratio and performance of banks, the study also concluded that NPLR has statistically significant effect on commercial banks. But we have remarked that there is a negative relationship between NPLR and ROE and ROA; and there is a positive relationship between the car and ROE and ROA. The results of the study reveal that banks with high capital adequacy ratios can better advance more loans and absorb credit losses each time they face it, especially in the context of Congolese banks where the uncertainty of reimbursement is high and thus record a better profitability.
Keywords: CAR, Commercial Banks, Credit Risk Management, NPLR, Profitability, ROA, ROE