Credit Risk Management Practices and Perceived Challenges in Credit Cooperatives: Evidence from Da Nang, Vietnam

Abstract

Credit cooperatives operate in lending environments characterized by information asymmetry, where incomplete knowledge of borrowers’ financial capacity, intentions, and repayment behavior can create substantial challenges for credit decisions and loan portfolio management. This study examines the relationship between credit risk management practices and perceived credit risk management challenges among clients of selected credit cooperatives in Da Nang, Vietnam. A quantitative cross-sectional research design was employed using data from 610 clients selected through proportionate stratified sampling from a population of 3550 registered clients across four credit cooperatives. Data were collected through a validated structured questionnaire covering credit risk management practices and perceived implementation challenges. Descriptive, correlation, and multiple regression analyses were employed to examine the study relationships. The findings reveal strong implementation of client appraisal, credit risk control, and collection practices, with verification of client information receiving particularly favorable assessment. Respondents generally reported limited difficulties associated with credit risk management, although communication during appraisal and procedural complexity emerged as comparatively more noticeable concerns. Correlation analysis identifies significant relationships between the three credit risk management dimensions and perceived challenges. When the practices are considered simultaneously, client appraisal emerges as the only significant independent predictor and is associated with fewer credit risk management challenges. Credit risk control and collection policy do not demonstrate significant independent relationships after accounting for the other practices. The findings underscore the importance of information verification, transparent appraisal procedures, effective borrower assessment, and coordinated lending controls in strengthening credit risk management within cooperative financial institutions.