Optimal Loan Portfolio (Using Karmarkar’s Algorithm) Case Study: Capital Rural Bank Limited, Dominase-Sunyani

Thumbnail Image
Journal Title
Journal ISSN
Volume Title
In Ghana, banking industry is now characterized by increasing competition and innovation.This has made most of the banks to adopt scientific approach to improve the quality of their loan structure. The decline of relevant portfolio planning models especially in Ghana is attributed mainly to the evolving dynamics of the Ghanaian banking industry where the regulatory controls have changed with a high frequency. Due to the model used in allocating funds to various loan types, a lot of banks had suffered substantial losses from a number of bad loans in their portfolio.As a result, most banks are not able to maximize their profit on loans due to poor allocation of funds. The purpose of this study is to develop a linear programming model using the Karmarkar‟s projective scaling algorithm to help Capital Rural Bank Limited, Dominase-Agency (Sunyani) to maximize their profit on loans. The results from the model showed that, Capital Rural Bank Limited, Dominase-Agency (Sunyani) would be making annual profit of GH¢5,961,300.00 if they are to stick to the model. From the study, it was realized that the scientific method used to come out with this model can have a dramatic increase in the bank‟s profit on loans if put into practice.
A thesis Submitted to the Department of Mathematics Institute of Distance Learning Kwame Nkrumah University of Science and Technology Kumasi in Partial Fulfillment of the Requirements for the Degree of Master of Science, Industrial Mathematics.