Credit Risk Management in Light of Economic Fluctuations: Challenges and Solutions for Libyan Banks "A Field Study on Alsahary Bank - Main Branch"

Abstract

This study aimed to evaluate the effectiveness of credit risk management strategies in mitigating credit portfolio default at Sahary Bank, in light of the challenges posed by rapid macroeconomic fluctuations in the Libyan environment, including exchange rate volatility, high inflation rates, and liquidity crises. The study adopted a descriptive-analytical approach, utilizing a structured questionnaire distributed to a purposive sample of (32) administrative leaders and financial analysts at the bank's general management and main branch.

The study reached several substantial findings, most notably the existence of a statistically significant positive correlation between the efficiency of early warning systems and the ability to protect banking asset quality. The results also indicated that relying on traditional methods and manual analysis, amidst the absence of modern financial technology (FinTech), constitutes a major barrier to predicting crises before they occur. Furthermore, the study revealed that weaknesses in the legislative framework and administrative centralization limit the speed of corrective actions toward defaulting borrowers. The study concludes with strategic recommendations, emphasizing the necessity of automating risk management processes, developing credit scoring models that incorporate real market variables, and enhancing the technical capabilities of human resources to keep pace with the transition toward digital Islamic banking.