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Title: The relationship between Credit Lending and the profitability of commercial Banks in a Multi-Currency economy: A case of Kingdom Bank Zimbabwe Limited.
Authors: Dube, Bandile S.
Keywords: credit lending and profitability
multi-currency economy
commercial banks
Kingdom Bank Zimbabwe
Issue Date: May-2014
Publisher: Lupane State University
Abstract: The purpose of this study was to establish the causal relationship between credit lending and the profitability of commercial banks. Banks have continued to use various resources to maximize return for their shareholders. In Zimbabwe credit lending is a major source of income for commercial banks through interest income loans and advances to borrowers. However credit is associated with the risk of customers defaulting on payments resulting in loss of interest income and reduced profitability. This is as a result of loan loss provisions and non-performing loans. A case study research design of Kingdom Bank Zimbabwe was employed for this study. The Granger causality test was used on annual reports from 2009 to 2013. The study reveals that credit lending in Kingdom Bank causes the profitability of the bank. This therefore means that banks in Zimbabwe should expand the credit facility so as to further improve their profitability. However the excessive growth in nonperforming loans calls for an improvement in the credit lending procedures in order to reduce the risk of loss. Based on these findings commercial banks in Zimbabwe are recommended to institute sound credit risk management and rigorous credit appraisal before giving loans. These practices will increase the income banks can get from lending to borrowers through reduced non-performing loans or loan loss provisions.
Appears in Collections:Department of Accounting and Finance

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