CREDIT RISK MANAGEMENT AND PROFITABILITY OF COMMERCIAL BANKS IN AN EMERGING MARKET: THE CASE OF UZBEKISTAN

Abstract

This study investigates the relationship between credit risk management (CRM) and the profitability of
commercial banks in Uzbekistan, an emerging market characterized by a rapidly evolving banking sector. Credit risk,
defined as the potential for borrowers to default on their obligations, directly affects both the stability and profitability
of banks, making its management a critical concern for banking institutions. In the context of Uzbekistan’s ongoing
economic liberalization and alignment with international regulatory standards, effective CRM practices have become
increasingly important. This research examines the CRM practices of Uzbek commercial banks, their compliance with
regulatory frameworks, and their impact on key profitability indicators, including Return on Assets (ROA) and Return on
Equity (ROE). Employing a quantitative methodology, the study analyzes financial and credit risk data from a sample of
commercial banks to evaluate how CRM variables such as non-performing loans, capital adequacy, risk coverage, and
liquidity influence bank performance. The findings provide empirical evidence on the role of CRM in enhancing bank
profitability and offer practical insights for improving risk management strategies in the Uzbek banking sector.