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Risk Management Impact on Non-Performing Loans and Profitability in the Namibian Banking Sector

DOI: 10.4236/oalib.1106943, PP. 1-20

Subject Areas: Economics

Keywords: Risk Management, Credit Risk, Home Equity Loans, Non-Performing Loans

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Abstract

The Banking sector has a pivotal role in the development of an economy. It is the key driver of economic growth of the country. Various literature revealed that non-performing loans were one of the causes of the financial crisis in 2007. The rise in non-performing loans has been taken under consideration by many banks in the world, as banks look at different methods on how to reduce non-performing loans. The following study was carried out with the objective to analyze the impact of risk management on non-performing loans in the country and identifying different strategies used around the world that assists banks in battling non-performing loans. The study used the four major commercial banks in Namibia as samples. The study analyzed two theories Agency Theory and Credit default theory. The study used only secondary data to answer the research objectives. The limitations of the study were that the study only looked at non-performing loans of credit risks the banks face. The study was not able to use all the commercial banks as samples to gather data. The strategy of the study was an archival strategy and the study used a qualitative approach. The study found that the Namibian banks experienced an increase throughout the five years in both profits and non-performing loans. The year 2018 was the non-performing loans of the banks the highest. The study concluded that even though banks have all the risk management systems in place non-performing loans are still increasing.

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Maseke, B. F. and Swartz, E. M. (2021). Risk Management Impact on Non-Performing Loans and Profitability in the Namibian Banking Sector. Open Access Library Journal, 8, e6943. doi: http://dx.doi.org/10.4236/oalib.1106943.

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