MJAMR

Effect Of Credit Risk Management On Operational Effectiveness Of Equity Bank

Nabadda Mwajuma, Asiimwe Prisca


Abstract

The study examined the effect of credit risk management on operational effectiveness of Equity Bank in Uganda. The research adopted a quantitative approach with a cross-sectional survey design, targeting 134 employees from credit, risk management, operations, and finance departments across Equity Bank's branches in Uganda. Data were collected using structured questionnaires and analyzed using Pearson correlation and multiple regression analysis. Results revealed significant positive relationships between credit risk management dimensions and operational effectiveness. Credit risk identification demonstrated a strong correlation with operational effectiveness (r = 0.712, p < 0.001), followed by risk assessment (r = 0.687, p < 0.001), risk mitigation (r = 0.658, p < 0.001), and risk monitoring (r = 0.634, p < 0.001). The multiple regression model indicated that credit risk management practices collectively explained 64.3% of variance in operational effectiveness (R² = 0.643, F = 58.47, p < 0.001). Banks with robust credit risk management frameworks experienced lower non-performing loan ratios (3.8% versus industry average of 5.2%), higher return on assets (3.4% versus 2.1%), and improved operational efficiency ratios. The study concluded that effective credit risk management constituted a critical determinant of operational effectiveness in commercial banking, enhancing asset quality, profitability, and institutional sustainability. Recommendations included strengthening credit risk assessment frameworks, implementing advanced analytics for risk prediction, enhancing staff capacity in risk management, and adopting integrated risk management information systems.

Keywords

Credit risk management operational effectiveness non-performing loans risk assessment Equity
Metropolitan Journal of Academic Multidisciplinary Research

Cite This Article

Nabadda Mwajuma & Asiimwe Prisca (2026). Effect Of Credit Risk Management On Operational Effectiveness Of Equity Bank. Metropolitan Journal of Academic Multidisciplinary Research, 5(1). https://journals.miu.ac.ug/pages/article.php?article_id=599

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