Effect of Credit Management on Profitability of Selected Commercial Banks in Rwanda

Banking sector in Rwanda has faced various challenges that include non-performing loans and fluctuations of interest rate among others, which have threatened the bank stability. Credit management is important to bank management because banks are risk machines they take risks; they transform them and embed them in banking products and services. Risks are uncertainties resulting in adverse variations of profitability which shows the performance or in losses that show the bank’s failure. The main aim of the study was to assess the effect of credit management on profitability of commercial banks. The findings revealed that client appraisal affects the bank profitability because the bank before loans to borrowers they make sure that make an assessment of that borrower to will be able to pay back the loan through collateral, capacity, capital, character and conditions. The study concluded that client appraisal affect the profitability commercial banks. The study concluded that there is a strong positive link between that credit management and profitability of selected commercial banks in Rwanda.The study therefore recommends an appropriate value at risk model for credit risk management. Banks needs to put in place rigorous measures to ensure that collateral are well assessed so that in case the borrowers are not able to repay the loans the bank recover the money lost from the collateral provided by borrowers.