The relationship between credit risk management and financial performance of Salaam Somali bank in Mogadishu- Somalia

Abstract

The study sought to determine the relationship between credit risk management and the financial performance of salaam Somali bank Mogadishu-Somalia. And the study was conducted under three specific objectives which are; to know the relationship between client appraisal and financial performance in SSB, to evaluate the relationship between credit risk control and financial performance in SSB, to establish the relationship between credit collection practices and financial performance in SSB. The study adopted a correlational research design. The target population of study contained 113 staffs of Salaam Somali bank in different departments. And the sample size was 98 respondents. And Stratified sampling technique was used and Primary data was collected using questionnaires which were administered to the respondents by the researcher. And the data was analyzed by the means of descriptive statistics such as frequency and percentages and Pearson correlation was used to establish the relationship among the study variables. The correlations revealed that there is a moderate positive relationship between client appraisal and financial performance of Salaam Somali Bank(r= .431, P< 0.05). And there is a strong positive relationship between credit risk control and financial performance of Salaam Somali Bank (r= .641, P< 0.05). And a strong positive relationship between credit collection practices and financial performance of Salaam Somali Bank (r= .757, P< 0.05). And the study recommends that there is need for Salaam Somali Bank to enhance its client appraisal, credit risk control and credit collection practices so as to improve its financial performance. Through client appraisal, credit risk control and credit collection practices the Salaam Somali bank managers may be able to know credit worth clients and thus reduce their non-performing loans and improve financial performance of the Bank. Further research is recommended on the effect of Credit policy on loan performance of salaam Somali bank. To see how the elements of credit policy influences and explains the loan performance of salaam Somali bank.