An Assessment of the Effect of COVID-19 on Credit Risk Management in Banking Industry: A Case of Selected Commercial Banks in Lusaka, Zambia
Muchemwa Sinkala *
School of Business, National Institute of Public Administration, P. O. Box 31990, Lusaka, Zambia.
Sepo Imasiku
School of Business, National Institute of Public Administration, P. O. Box 31990, Lusaka, Zambia.
George Mtayachalo
School of Business, National Institute of Public Administration, P. O. Box 31990, Lusaka, Zambia.
Mwela C. Chanda
School of Business, National Institute of Public Administration, P. O. Box 31990, Lusaka, Zambia.
*Author to whom correspondence should be addressed.
Abstract
The Corona-virus disease (covid-19) affected most of the industries in the world including the banking industry. The study sought to assess the effect of Covid- 19 on credit management by Commercial Banks. Six commercial banks were sampled out of the total 19 banks operating in Zambia. The study collected primary data using an online-administered questionnaire. The data was analyzed using descriptive statistics and factor analysis. The study found that there an increase in the non performing loans at the beginning of the pandemic. However, the restructuring of these loan by the banks helped to reduce the number of non performing loans. Commercial banks should have a strategy in place to engage with borrowers as soon as they show signs of distress, and any issues should be adequately addressed. Good strategies can only be developed if banks are able to differentiate between viable, non-viable, and viable but distressed debtors at a granular level, grouping borrowers with similar characteristics and resolving them in a comparable way.
Keywords: Corona-virus Disease 2019 (COVID 19), Commercial Banks, credit risk, debt restructuring