An investigation into the impact of ICT on Zimbabwean bank's credit risk management

Abstract

Information and Communication Technologies are reshaping the business models of every industry across the continent. Faced with credit risk banks are taking advantage of technology advancements being developed and adopting latest credit risk tools and models in the market in order to reduce credit risk. Some banks are investing in these technologies without proper evaluations and cost benefit analysis. This research investigated the impact of these technology investments on the Zimbabwean banking industry. To evaluate the impact of ICT on credit risk, quantitative research approach was used on the selected ten banks out of seventeen banks in the Zimbabwean banking industry. Ten questionnaires were sent to each of the ten banks to the people that use credit and risk systems, and those that maintain the systems. The questionnaire used open ended questions, closed questions and Likert scale questions. Data collected was analysed using SPSS to test for the correlation amongst the variables and to check whether ICTs can be used to reduce credit risk in the Zimbabwean banking industry. Evidence collected showed that 81% of the respondents agreed that ICTs play a crucial role in ensuring that the bank adopts latest internal rating models and credit risk tools. However, Information Systems do not reduce information asymmetry which causes credit risk. In order to fully utilise ICTs, the research recommends that banks must ensure data stored in the systems be accurate and complete. This can be done through continuous data cleanup and regular user training in order to increase information systems and reduce system errors. The research focused on the banking industry and there is need for further study into the impact of ICT on the Micro-Finance Industry.