The Effect of Credit Risk Management on the Bank’s Profitability: The Evidence from Commercial Banks in Democratic Republic of the Congo

This study examines the impact of credit risk management practices on profitability of commercial banks in the Democratic Republic of Congo (DRC). Amidst high economic volatility and sectoral concentration in mining, credit risk indicators such as the Non-Performing Loan Ratio (NPLR), Loan Loss Provision Ratio (LLPR), Capital Adequacy Ratio (CAR), and Cost-to-Income Ratio (CIR) are analyzed for their influence on Return on Equity (ROE) and Return on Assets (ROA). The methodology used a quantitative approach with multiple regression analysis, and the data were collected from commercial banks annual reports. The units of analysis were the annual reports of the three largest banks of the DRC. The results reveal that CAR positively affects profitability, whereas CIR has a negative impact, underscoring the role of operational efficiency and capital strength in high-risk environments. However, the NPLR and LLPR have varying effects on profitability. This study contributes to the understanding of the role of credit risk in emerging markets and offers practical insights for policymakers to strengthen risk management frameworks in the Congolese banking sector. This study offers practical insights for policymakers to strengthen credit risk management frameworks, enhance financial resilience, and promote profitability in the DRC banking sector.