Abstract
This study examines the effectiveness of risk management in mitigating credit risk in domestic banks, using Zambia Industrial Commercial Bank (ZICB) as a case study. Guided by a pragmatist philosophy and employing a sequential mixed methods design, the study integrates quantitative and qualitative approaches to generate both measurable evidence and contextual understanding of credit risk management practices. Data were collected through structured questionnaires administered to staff involved in credit operations, risk management, compliance, and internal audit, followed by semi-structured interviews with selected key informants. The study addressed three objectives: to assess the effectiveness of ZICB’s credit risk management framework in identifying, measuring, and monitoring credit risk exposures; to evaluate the adequacy of ZICB’s credit risk mitigation strategies in minimizing potential credit losses; and to investigate the extent to which ZICB’s credit risk management practices comply with relevant regulatory guidelines and best international practices. Quantitative findings indicate that respondents generally perceive ZICB’s credit risk identification, due diligence processes, financial analysis procedures, credit history checks, monitoring systems, and internal controls as effective. Mitigation measures such as collateral requirements, defined credit limits, early identification of problem loans, and post-disbursement monitoring were also rated positively. Furthermore, respondents expressed favorable perceptions regarding compliance with Bank of Zambia guidelines, stress testing practices, and alignment with best practices. Qualitative findings corroborate the quantitative results, highlighting the central role of structured policies, standardized procedures, and experienced personnel in supporting effective credit risk management. However, both phases of the study reveal persistent challenges related to limited automation, fragmented data systems, and partial alignment with advanced international regulatory frameworks, particularly aspects of Basel III. The study concludes that while ZICB’s credit risk management framework is generally sound and functional, its effectiveness could be significantly enhanced through greater investment in automated credit systems, predictive analytics, staff training, and digital compliance tools. The study contributes empirical evidence on credit risk management practices in a developing-country banking context and offers practical insights for strengthening institutional risk management frameworks in domestic banks operating in emerging markets.