Impact of Risk Management on Profitability of Commercial Banks: A Case of Nyamagana District, Mwanza-Tanzania
The contribution of financial institutions is crucial to the expansion of every nation’s economy. The ability of financial organizations to manage several kinds of risks, such as trading, credit, and liquidity hazards, among others, is essential to their existence. This study’s primary goal was to investigate how risk management affected the Nyamagana district’s commercial banks’ profitability. The particular goals of the study are (i) to investigate how credit risk management affects commercial banks’ profitability and (ii) to investigate how liquidity risk management affects commercial banks’ profitability. The study employed a cross-sectional research design and a quantitative approach to collect and analyze data. Twenty percent of the 18 commercial bank employees who were the study’s target group were chosen as a sample. Four banks were chosen using the criterion sampling technique. Data was taken from annual reports of selected banks from 2019 to 2023. The results were presented using both descriptive and inferential statistics. The results of the study demonstrate that both operation risk and credit risk have a detrimental effect on commercial banks’ profitability. The expansion of a bank is positively impacted by both capital sufficiency and deposit growth. Commercial banks are more profitable when they have adequate capital and customer deposits. According to the survey, banks should keep enhancing their risk management procedures in order to continue functioning efficiently.
