An evaluation of risk management practices on credit quality in banking: a case study of Accord Microfinance Bank
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Background of the Study
Risk management practices are fundamental to maintaining credit quality and ensuring the long-term stability of banks. Accord Microfinance Bank has implemented comprehensive risk management frameworks aimed at assessing and mitigating credit risks associated with lending operations. Between 2023 and 2025, the bank has adopted advanced analytical tools, strict credit evaluation procedures, and continuous monitoring systems to improve its loan portfolio quality (Adeniyi, 2023; Okeke, 2024). These measures are intended to reduce the incidence of non-performing loans and enhance overall credit quality, thereby safeguarding the bank’s financial health.
Effective risk management not only protects the bank’s assets but also builds customer and investor confidence. By systematically evaluating borrower creditworthiness and monitoring market trends, Accord Microfinance Bank aims to minimize defaults and manage risks proactively. However, challenges remain in ensuring that risk management practices are both robust and adaptable to changing economic conditions (Chinwe, 2023). In particular, the integration of new analytical technologies with existing credit evaluation processes has proven to be complex, sometimes leading to delays in decision-making and inconsistencies in risk assessment. These issues can negatively impact credit quality if not addressed promptly.
Moreover, external economic factors such as market volatility and inflation can further complicate the risk management landscape, making it difficult for the bank to maintain stringent credit standards across its diverse portfolio. This study seeks to evaluate the impact of current risk management practices on credit quality at Accord Microfinance Bank. By analyzing quantitative data on loan performance and non-performing assets, along with qualitative insights from risk management personnel, the research aims to identify key areas for improvement and propose actionable recommendations to enhance credit risk management and overall portfolio quality (Ibrahim, 2025).
Statement of the Problem :
Accord Microfinance Bank’s efforts to maintain high credit quality through advanced risk management practices face several challenges. Despite the adoption of comprehensive risk evaluation systems, the bank continues to experience issues with non-performing loans, suggesting gaps in its risk assessment and monitoring processes (Okeke, 2024). Inadequate integration of new analytical tools with traditional credit evaluation methods has resulted in delays and inconsistencies in risk grading. Additionally, external economic pressures such as market volatility and inflation have exacerbated these challenges, making it difficult to uphold rigorous credit standards consistently.
These shortcomings not only threaten the bank’s asset quality but also erode investor and customer confidence. The impact of these challenges is reflected in higher default rates and diminished returns on the loan portfolio, which in turn can compromise the bank’s financial stability. Furthermore, internal communication gaps between risk management and lending departments may lead to discrepancies in risk assessments, thereby affecting the overall quality of credit decisions.
This study aims to investigate the specific weaknesses in Accord Microfinance Bank’s risk management practices and assess their impact on credit quality. By combining quantitative data analysis with qualitative feedback from risk managers and lending officers, the research will provide a comprehensive evaluation of the current risk management framework. The goal is to develop actionable strategies that enhance the integration of analytical tools, improve risk assessment accuracy, and ultimately lead to better credit quality and reduced non-performing loans (Adeniyi, 2023).
Objectives of the Study:
To evaluate the impact of risk management practices on credit quality at Accord Microfinance Bank.
To identify weaknesses in current risk assessment and monitoring systems.
To recommend strategies for improving credit risk management and reducing non-performing loans.
Research Questions:
How do current risk management practices affect credit quality at Accord Microfinance Bank?
What are the primary challenges in integrating new analytical tools with traditional credit evaluation processes?
What improvements can be made to enhance risk management and credit quality?
Research Hypotheses:
H1: Comprehensive risk management practices significantly improve credit quality.
H2: Inadequate integration of analytical tools negatively affects risk assessment accuracy.
H3: Enhanced communication between risk and lending departments reduces non-performing loans.
Scope and Limitations of the Study:
This study focuses on Accord Microfinance Bank’s risk management practices and their impact on credit quality from 2023 to 2025. Limitations include the influence of external economic factors and potential data collection challenges.
Definitions of Terms:
Risk Management Practices: Procedures and systems used to identify, assess, and mitigate credit risks.
Credit Quality: The overall performance and reliability of a bank’s loan portfolio.
Non-performing Loans: Loans that are not generating the expected income due to borrower default.
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