CREDIT RISK MANAGEMENT PRACTICES AND THEIR IMPACT ON THE PROFITABILITY OF DEPOSIT MONEY BANKS IN NIGERIA

Abstract

This study examined credit risk management practices and their impact on the profitability of Deposit Money Banks in Nigeria. The study specifically investigated the effect of credit appraisal practices, loan monitoring practices, and collateral management practices on profitability. The study adopted the survey research design, while primary data were collected through structured questionnaires administered to employees of selected Deposit Money Banks in Nigeria. The population of the study consisted of 615 employees, while a sample size of 237 respondents was determined using the Krejcie and Morgan formula. Data were analyzed using percentages, mean scores, and standard deviation. The findings revealed that credit appraisal practices significantly improve profitability by reducing loan defaults and enhancing borrower assessment procedures. The study also found that loan monitoring practices positively influence profitability through regular supervision and improved repayment performance. Furthermore, collateral management practices were found to significantly enhance profitability by reducing financial losses associated with borrower default. The study concluded that effective credit risk management practices are essential for improving profitability, operational efficiency, and financial stability among Deposit Money Banks in Nigeria. The study recommended that banks should strengthen credit appraisal systems, improve loan monitoring mechanisms, enforce proper collateral management procedures, and provide regular training for credit management personnel.