Abstract: The study examined the impact of credit risk management on the performance of rural banks in Ghana. The study adopted both descriptive and quantitative research approaches. Twelve (12) rural banks in the Ashanti region were used for the study. Secondary data were obtained from the annual financial reports from 2010 to 2015 of the rural banks. Regression analysis was used to test the impact of credit management on the performance of the rural banks. Both Return on Capital Employed (ROCE) and Corporate Liquidity (cash ratio) were used as measures of performance whilst Portfolio at Risk (PAR) and Loans Recovery Rate (LRR) were used as measures of credit risk management. The result obtained showed that portfolio at risk (PAR) had a significant negative impact on both ROCE and liquidity of the rural banks. The evidence further showed that the loans recovery rate (LRR) of the rural banks had a positive and significant impact on their ROCE and liquidity. It is concluded that both PAR and LRR has an impact on the liquidity and profitability of the rural banks in the Ashanti region. It is recommended to the management of these rural banks that they should work to keep the portfolio at risk to a minimum and tolerable level of 5% as per BOG Policies.
Keywords: Credit Risk, Rural Banks, Liquidity, Profitability, Portfolio at Risk, Loan Recovery Rate.
Title: The Efficacy of Credit Risk Management on the Corporate Performance of Rural Banks in Ghana
Author: Kennedy Frimpong, Augustine Kwasi Amoateng, Eric Nsiah Gyabaah
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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