Credit Risk Management in Banks of a Developing Economy: The Case of Cameroon

Chi, Marcus (2007) Credit Risk Management in Banks of a Developing Economy: The Case of Cameroon. [Dissertation (University of Nottingham only)] (Unpublished)

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Credit is the largest element of risk in the books of most banks and failure in the management of credit risk weakens individual banks and in some cases the banking system as a whole, thereby contributing to many episodes of financial instability and distress (see Jackson & Perraudin, 1999).

'Credit Risk Management in Banks of a Developing Economy: the Case of Cameroon' seeks to find out the techniques used in managing credit risk by four banks in a developing economy (Cameroon) found in Central Africa.

To attain this objective, a review is made of the techniques employed generally in managing credit risk by banks as well as credit risk management problems specifically faced by banks in developing economies. This serves as a theoretical and conceptual framework for the study.

Following this review, an analysis of the Cameroonian banking industry is carried out with focus on the key players in the industry, the banks constituting the basis of the study and a synopsis of their lending strategies.

To establish a balanced argument between theory and practice, qualitative interviews are adopted as a principal means of collecting primary data. Findings indicate that; (i) banks in the Cameroonian banking industry use a number of qualitative (and in some cases both qualitative and quantitative) techniques in managing credit risk, (ii) there is a correlation between the rate of implementation of credit risk management principles and techniques and the rate of default on the overall loan portfolio, and (iii) Information technology plays a significant role in the lending processes of the selected banks.

The conclusions necessitate a number of corrective measures to be undertaken by the banks concerned in the study such as; (i) embarking on a more rigorous implementation of credit risk management principles , (ii) diversifying their loan portfolios, (iii) embarking on continuous updating of their IT infrastructures and, (iv) managing credit risk in conjunction with other operational aspects.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 20 Nov 2007
Last Modified: 21 Mar 2022 16:04

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