IMPROVING THE METHODOLOGICAL FOUNDATIONS OF ASSESSING THE EFFICIENCY OF LENDING PRACTICES IN COMMERCIAL BANKS

Abstract

The methodological foundations for assessing the efficiency of lending practices in commercial banks are
examined with a focus on their further improvement. It is demonstrated that the prevailing assessment practice, which
relies on a limited set of profitability indicators, does not fully capture the multidimensional nature of lending activities
and, consequently, may not provide sufficiently accurate signals for managerial decision-making. A four-block integral
methodology is proposed, encompassing lending profitability, credit risk quality, resource and organisational parameters,
and the structural and innovative characteristics of the loan portfolio. The methodology combines normalisation relative
to normative values, an expert–entropy procedure for determining weights, aggregation of indicators into a single integral
index, and verification of the results through regression analysis and scenario forecasting. Testing the methodology using
data from “Asakabank” JSC for 2021–2025 demonstrates that the integral lending efficiency index increased from 0.605
to 0.883, with the structural–innovative and credit risk quality blocks making the most significant contributions. Under the
baseline scenario, the integral index is projected to reach 0.951 by 2028. The proposed methodology can be applied by
commercial banks for internal analysis and by supervisory authorities for comparative assessment