Efficient Risk Management and the Bank Performance

Abstract

The recent financial crisis and scandal such as Enron have raised several questions with respect to the growing awareness and the need for appropriate Risk Management of financial institutions. The risk management issues in the banking sector have greater impact not only on bank performance but also on national economic growth, the bank’s motivation for risk management comes from those risks which can lead to the poor performance. This study aimed at focusing on the association of risk management practices and finance performance in Bank of Kigali Ltd. This study also intended to investigate whether efficient risk management translate into enhanced performance of bank. Documentary technique was used to collect secondary data which was on two years progressive, these data from financial statements and annual report of 2014, 2015 were processed discussed and analyzed and revealed that by the efficient practice of the five types of risks inherent in Bank of Kigali (credit risk, liquidity risk, foreign exchange, interest risk, capital management risk.) have a positive impact on its financial performance with ROA and ROE of 3.9% and 21.7% respectively. The bank’s net profit of FRw 20.5 billion with the net interest income of 46.2 billion with the income ratio of 47.8%. the loan book grew of 34.5% on year the increasing deposits on the other banks of 384.7 billion and the liquidity assets in the form of placements with correspondent bank increased significantly to FRw 39.2 billion.