IDEAS home Printed from https://ideas.repec.org/a/eco/journ1/2015-02-30.html
   My bibliography  Save this article

Credit Risk Management and Loan Performance: Empirical Investigation of Micro Finance Banks of Pakistan

Author

Listed:
  • Sufi Faizan Ahmed

    (Department of Business & Economics, Foundation University Rawalpindi Campus, Pakistan.)

  • Qaisar Ali Malik

    (Department of Business & Economics, Foundation University Rawalpindi Campus, Pakistan.)

Abstract

The main aim of the paper is to evaluate the influence of credit risk management practices on loan performance (LP) while taking the credit terms and policy (CTP), client appraisal, collection policy (CP) and credit risk control (CRC) as the dimensions of the credit risk management practices. For statistical evaluation, the primary data in cross sectional form has been taken into consideration. The data is collected from the managerial level credit risk management staff of microfinance banking sector. Multiple regression analysis has been used for empirical relationship evaluation of the credit risk management practices on the performance of loan. The results of the analysis are showing that the credit terms and client appraisal have positive and significant impact on the LP, while the CP and CRC have positive but insignificant impact on LP. The study is helpful for the management to enhance the LP by focusing on the dimension of the credit risk management practices used in the study. Future aspects of the research have also been taken into account and elaborated.

Suggested Citation

  • Sufi Faizan Ahmed & Qaisar Ali Malik, 2015. "Credit Risk Management and Loan Performance: Empirical Investigation of Micro Finance Banks of Pakistan," International Journal of Economics and Financial Issues, Econjournals, vol. 5(2), pages 574-579.
    • Handle: RePEc:eco:journ1:2015-02-30
    as

    Download full text from publisher

    File URL: http://www.econjournals.com/index.php/ijefi/article/download/1045/pdf
    Download Restriction: no
    File URL: http://www.econjournals.com/index.php/ijefi/article/view/1045/pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Anju Arora & Muneesh Kumar, 2014. "Credit Risk Management Index Score for Indian Banking Sector: An In-Depth Analysis," The IUP Journal of Bank Management, IUP Publications, vol. 0(1), pages 19-28, February.
    2. Hennie Van Greuning & Sonja Brajovic Bratanovic, 2003. "Analyzing and Managing Banking Risk : A Framework for Assessing Corporate Governance and Financial Risk Management, Second Edition," World Bank Publications - Books, The World Bank Group, number 14949, December.
    3. Barth, James R. & Caprio, Gerard Jr. & Levine, Ross, 2004. "Bank regulation and supervision: what works best?," Journal of Financial Intermediation, Elsevier, vol. 13(2), pages 205-248, April.
    4. Cooper, Michael J. & Jackson, William III & Patterson, Gary A., 2003. "Evidence of predictability in the cross-section of bank stock returns," Journal of Banking & Finance, Elsevier, vol. 27(5), pages 817-850, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kah Chon, Ooi, 2019. "Impacts Of Firm-Specific Factors And Macroeconomic Factors Against Microsoft’S Performance," MPRA Paper 97254, University Library of Munich, Germany, revised 15 Nov 2019.
    2. Catherine Karimi & Dr. Paul Gesimba & Dr. Peter Koome, 2023. "Effects of Loan Repayment Mechanism on Clients’ Livelihoods Sustainability: A Case of Deposit Taking Microfinance Institutions in Nakuru County, Kenya," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(10), pages 1956-1971, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Maria-Eleni K. Agoraki & Manthos D. Delis & Panagiotis K. Staikouras, 2010. "The effect of board size and composition on bank efficiency," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 2(4), pages 357-386.
    2. Mehmood, Asad & De Luca, Francesco, 2023. "How does non-interest income affect bank credit risk? Evidence before and during the COVID-19 pandemic," Finance Research Letters, Elsevier, vol. 53(C).
    3. Maria Eleni Agoraki & Anastasios Tsamis, 2017. "Bank Profitability and Regulation in Emerging European Markets," Multinational Finance Journal, Multinational Finance Journal, vol. 21(3), pages 177-210, September.
    4. Roger Owusu-Boafo & Ernest Obeng & Jone Yeobah Addo, 2020. "The Relationship Between Credit Risk Management and the Profitability of Banks in Ghana," ACTA VSFS, University of Finance and Administration, vol. 14(2), pages 92-114.
    5. Manthos D. Delis & Sotirios Kokas & Steven Ongena, 2016. "Foreign Ownership and Market Power in Banking: Evidence from a World Sample," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(2-3), pages 449-483, March.
    6. Boulanouar, Zakaria & Alqahtani, Faisal & Hamdi, Besma, 2021. "Bank ownership, institutional quality and financial stability: evidence from the GCC region," Pacific-Basin Finance Journal, Elsevier, vol. 66(C).
    7. Kleimeier - Ros, Stefanie & Qi, Shusen & Sander, H., 2016. "Deposit Insurance in Times of Crises: Safe Haven or Regulatory Arbitrage? (RM/15/026-revised-)," Research Memorandum 026, Maastricht University, Graduate School of Business and Economics (GSBE).
    8. Vashishtha, Ashutosh & Sharma, Anil K., 2012. "Indian financial market regulation: A dialectic model," Journal of Economics and Business, Elsevier, vol. 64(1), pages 77-89.
    9. James R. Barth, 2019. "Regulatory Responses by Countries to Banking/Financial Crises," JRFM, MDPI, vol. 13(1), pages 1-6, December.
    10. Michael Wosser, 2015. "The Determinants of Systemic Banking Crises A Regulatory Perspective," Economics Department Working Paper Series n265-15.pdf, Department of Economics, National University of Ireland - Maynooth.
    11. Thanh C. Nguyen & Vítor Castro & Justine Wood, 2022. "Political environment and financial crises," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 417-438, January.
    12. Massimiliano Affinito, 2011. "Convergence clubs, the euro-area rank and the relationship between banking and real convergence," Temi di discussione (Economic working papers) 809, Bank of Italy, Economic Research and International Relations Area.
    13. Alexander, Gordon J. & Baptista, Alexandre M. & Yan, Shu, 2013. "A comparison of the original and revised Basel market risk frameworks for regulating bank capital," Journal of Economic Behavior & Organization, Elsevier, vol. 85(C), pages 249-268.
    14. Ramon Moreno & Agustin Villar, 2005. "The increased role of foreign bank entry in emerging markets," BIS Papers chapters, in: Bank for International Settlements (ed.), Globalisation and monetary policy in emerging markets, volume 23, pages 9-16, Bank for International Settlements.
    15. Mitchener, Kris James & Wheelock, David C., 2013. "Does the structure of banking markets affect economic growth? Evidence from U.S. state banking markets," Explorations in Economic History, Elsevier, vol. 50(2), pages 161-178.
    16. Ayadi, Rym & Arbak, Emrah & Ben-Naceur, Sami & De Groen, Willem Pieter, 2013. "Determinants of Financial Development across the Mediterranean," CEPS Papers 7770, Centre for European Policy Studies.
    17. Frame, W. Scott & Mihov, Atanas & Sanz, Leandro, 2020. "Foreign Investment, Regulatory Arbitrage, and the Risk of U.S. Banking Organizations," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 55(3), pages 955-988, May.
    18. Ricci, Ornella, 2015. "The impact of monetary policy announcements on the stock price of large European banks during the financial crisis," Journal of Banking & Finance, Elsevier, vol. 52(C), pages 245-255.
    19. James R. Barth & Gerard Caprio & Ross Levine, 2013. "Bank regulation and supervision in 180 countries from 1999 to 2011," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 5(2), pages 111-219, May.
    20. Wu, Ji & Guo, Mengmeng & Chen, Minghua & Jeon, Bang Nam, 2019. "Market power and risk-taking of banks: Some semiparametric evidence from emerging economies," Emerging Markets Review, Elsevier, vol. 41(C).

    More about this item

    Keywords

    Loan Performance; Credit Risk Management; Credit Terms; Credit Policy; Credit Risk Control; Loan Appraisal; Micro Finance;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2015-02-30. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.