An Assessment of Credit Risk Management in Business Banking: A Case Study of United Bank for Africa, Kaduna
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Background of the Study:
Credit risk management is critical for business banking, where large-scale lending decisions significantly affect a bank’s financial stability. United Bank for Africa (UBA) in Kaduna employs rigorous credit risk management practices to evaluate borrower creditworthiness, mitigate potential losses, and ensure sustainable lending practices. These practices include comprehensive credit scoring models, collateral assessments, and continuous monitoring of repayment behavior (Ibrahim, 2024). Effective credit risk management not only minimizes the incidence of non-performing loans but also builds trust among corporate clients and investors. However, the dynamic nature of the business environment and external economic pressures often challenge the accuracy and responsiveness of these risk management systems. This study examines UBA’s credit risk management strategies in business banking, evaluating their effectiveness in reducing defaults and optimizing loan performance. By analyzing internal credit risk data and feedback from business clients, the research aims to identify gaps in current practices and propose improvements that enhance risk mitigation and overall performance in business banking (Okafor, 2023).
Statement of the Problem:
Despite robust credit risk management frameworks, UBA in Kaduna faces challenges in accurately assessing risk and preventing defaults in business banking. Inconsistencies in credit evaluation and external economic volatility contribute to higher non-performing loans, impacting profitability and customer confidence.
Objectives of the Study:
• To evaluate the effectiveness of credit risk management practices in UBA’s business banking division.
• To identify gaps and challenges in the current risk assessment processes.
• To recommend strategies for improving credit risk management and reducing defaults.
Research Questions:
• How effective are UBA’s credit risk management practices in business banking?
• What challenges hinder accurate credit risk assessment?
• What measures can enhance risk management and reduce default rates?
Research Hypotheses:
• H₁: Effective credit risk management significantly reduces non-performing loans in business banking.
• H₂: External economic volatility and evaluation inconsistencies negatively impact credit risk assessment.
• H₃: Improved risk assessment models and monitoring systems enhance overall credit risk management.
Scope and Limitations of the Study:
The study focuses on UBA’s business banking operations in Kaduna, using internal risk data and client feedback. Limitations include external economic influences and potential data reporting constraints.
Definitions of Terms:
• Credit Risk Management: Processes to identify, assess, and mitigate credit risk.
• Business Banking: Banking services provided to corporate clients and businesses.
• Non-Performing Loans: Loans in default or close to default.
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