| dc.description.abstract | The banking sector in South Sudan has experienced more than a decade of significant financial
risks since gaining independence from Sudan. Such risks that pose financial instability are
characterized by internal and external factors like COVID-19 Pandemic and geopolitical tension
both inside and outside the country. The industry comprises of both local, Joint Venture and
foreign commercial banks characterized by poor financial performance. Consequently, the
number of banks is reported undercapitalized and non-compliance with statutory requirement of
20% reserve with the Central Bank. This has led to the collapse of 14 domestic commercial
banks as reported by both Bank of South Sudan and IMF. The financial sector is remaining
vulnerable to risks that pose a threat to sustainability and financial viability, including liquidity,
credit, exchange rate and interest rate risks. The study sought to establish the effect of financial
risk on the financial performance of South Sudanese commercial banks. The objectives were to
determine the effect of liquidity, credit, exchange rate and interest rate risks on the financial
performance of commercial banks in South Sudan. The study adopted the theories of Liquidity
Preference Theory, Interest Rate Parity, International Fisher Effect and Agency theories.
Financial performance of commercial banks is to be assessed through ROA using data from 33
banks. The study used a longitudinal research design that observed data series over a period of
time in which the target population is 33 commercial banks from 2014 to 2023. The researcher
relied on secondary data and that were collected from audited financial statements of commercial
banks and data obtained from Central Bank website. The study employed descriptive and
inferential statistics within the multiple regression model frameworks to analyze the data using
EVIEWS version. Diagnostic tests such as normality, multicollinearity, heteroscedasticity, and
Stationarity tests were performed to eliminate unbiasedness. The study findings indicated that
credit risk (Coef=3.2201,p=0.0323) had a statistically significant and positive effect on the
financial performance while interest rate risk (Coef= -0.5005, p=0.0211) found to have a
statistically significant and negative effect on the financial performance of commercial banks. In
addition, the research results found that exchange rate risk (Coef=0.0035, p=0.1362) and liquidity
risk (Coef=0.0051, p=0.4135) had a statistically insignificant effect on the financial performance
of commercial banks in South Sudan. The study recommended that banks should employ the use
of swaps, spot, forward market, and bilateral agreement to reduce risk associated with exchange
rates. Also study recommended banks to build trust and confidence with the public in order to
reduce NPLs ratios, hence increase customers’ apathy to take loans that bring funds to the banks.
Central bank to impose strict regulation on commercial banks to keep liquidity problems at bay
that causing banks collapsed. | en_US |
