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Introduction
The expansion of financial intermediation has definitely brought more complex challenges, especially regarding risk management, so it’s crucial for institutions to have robust processes in place to minimize that risk. As Valarezo et al. (2024) indicate, the risk management in the financial sector involves the following stages: identification, measurement, control, mitigation, and disclosure. This structure is vital because, as Salas-Tenesaca (2025) notes, the global banking system is going through a major transformation driven by globalization and technology, which Chowdhury et al. (2023) argue has a direct impact on the economy.
As Dang and Nguyen (2022) point out, economic dynamics have sparked remarkable growth in financial intermediation markets in many countries. Bolivia is no exception here, the country's financial system has gone through a real transformation, marked by a significant expansion in banking operations. This growth has been driven by both micro- and macroeconomic factors, as well as the introduction of Financial Services Law No. 393. Ultimately, this legislation aims to encourage financial inclusion and strengthen the framework for financial services in Bolivia.
To provide context, Cucinelli et al. (2018) emphasize that the financial system plays a vital role in channeling resources across economic sectors, supporting productive development, and facilitating investments and economic growth. Along similar lines, Tabra Ochoa and Aguilar Quiñónez (2022) argue that a nation’s economic growth is closely tied to the progress and consolidation of its financial system, with credit allocation acting as a key driver of economic development by generating financial resources. Another critical consideration is the relative weight of the business sector in the economy. As Gu et al. (2024) note, this sector is a fundamental contributor to national advancement and progress.
When discussing comprehensive risk management, credit risk emerges as a pivotal element. As Rodríguez Guevara et al. (2022) observe, all financial institutions are inherently engaged in credit allocation to enhance investment activities or meet clients’ expenditure needs. These clients, whether individuals or businesses, inevitably expose institutions to credit risk. According to Vinueza et al. (2021), credit risk is one of the most significant factors in assessing profitability and objectively measuring delinquency rates.
In light of these considerations, this study underscores the importance of conducting a systematic review of the literature on this subject. The objective is to analyze the determinants of credit risk in multiple banks in Bolivia through a documentary analysis using the PRISMA methodology (Preferred Reporting Items for Systematic Reviews and Meta-Analyses). The eligibility criteria included scientific articles published between 2014 and 2024 in databases such as Scopus and Web of Science. A total of 83 studies were analyzed. This research is guided by the following questions: Are macroeconomic and microeconomic factors key determinants of credit risk in multiple banks in Bolivia?, and; does credit risk impact the profitability of multiple banks in Bolivia?
The document is structured as follows: Section 1 presents the foundational concepts; Section 2 details the methodology applied for data collection; Section 3 presents the study results; and Section 4 discusses the findings and conclusions.
Methodology
This study is based on a systematic literature review following the PRISMA protocol (Preferred Reporting Items for Systematic Reviews and Meta-Analyses). As Serrano et al. (2022) point out, properly applying this protocol generates reliable and precise responses in educational and research contexts, ensuring that the answers to research questions provide valuable insights for the academic community. Similarly, Page et al. (2021) highlight PRISMA’s usefulness in generating theoretical evidence and formulating recommendations on the studied topic. Zotero was used as a tool to manage and organize bibliographic references. This software enables users to store, categorize, and automatically generate citations for selected documents, thereby ensuring a well-structured and systematic record of all consulted sources.
The search was conducted in reputable academic databases, including Scopus and Web of Science, covering publications from 2014 to 2024. Search terms combined keywords such as “credit risk determinants”, “credit risk”, “risk management”, “Bolivian financial system”, “profitability” and “financial intermediation”, using Boolean operators (AND, OR) to define the results effectively, as shown in Figure 1 below.
Inclusion and exclusion criteria
To optimize the results of this study, both inclusion and exclusion criteria were considered. The following inclusion criteria were applied: peer-reviewed studies analyzing credit risk determinants, research focusing on multiple banks in Bolivia, studies published in Spanish and English, works addressing both external and internal factors influencing credit risk, studies centered on Latin America and emerging economies, publications from 2014 to 2024.
Likewise the following exclusion criteria were applied: studies not directly related to the identification, measurement, or management of credit risk in financial intermediation entities, research without full access to methodology, results, or analysis, works not specifically addressing financial intermediation entities, studies with duplicate results, theses and dissertations.
The information search utilized Scopus and Web of Science, both widely recognized platforms for systematic literature reviews. These databases provide robust tools for selecting research articles, including advanced search functionalities. By employing specific terms and constructing search equations, relevant articles were filtered efficiently. Keywords were translated into English to broaden the search scope and ensure comprehensive coverage.
Search strings were created using logical connectors and Boolean operators such as OR and AND to combine keywords effectively. The search string entered included: ("credit risk determinants" OR "credit risk factors" OR "credit risk") AND ("risk management" OR "credit risk management" OR "financial intermediation") AND ("Bolivian financial system" OR "banking sector in Bolivia" OR Bolivia) AND profitability.
(("credit risk determinants" OR "credit risk factors" OR "credit risk") AND ("risk management" OR "credit risk management") AND ("financial intermediation") AND ("Bolivian financial system" OR "banking sector in Bolivia") AND profitability).
Figure 2 illustrates the volume of articles retrieved from Scopus and Web of Science (WoS), which served as the basis for this research.
This study examined a diverse range of articles, as illustrated in the Figure 3. A rigorous selection process was applied to ensure a consistent and well-founded analysis.
Figure 4 outlines the article selection process, detailing the number of records identified, screened out, and finally included.
3. Results and discussion
Results
Credit risk represents one of the main challenges in financial management for banking institutions. As Bekhet and Eletter (2014) explain, there is a direct relationship between the quality of administrative management and credit risk, making it essential for this factor to be integrated into the administrative policies of banks. This type of risk is defined as the potential loss faced by an institution due to a borrower’s failure to meet financial obligations, as Kwashie et al. (2022) explain, directly impacting the stability and profitability of the financial system. According to Natufe and Evbayiro-Osagie (2023), poor credit risk management leads to a decline in bank performance and reduces returns for investors.
Nourrein Ahmed Mennawi (2020) says academic research has shown growing interest in understanding the determinants of credit risk. Studies have examined internal factors such as capitalization, operational efficiency, and credit-granting policies, as well as external elements including regulatory frameworks, sector competition, and macroeconomic conditions as Jansson et al. (2023) argue.
When we look at the most recurring internal factors, we find delinquency rates, operational efficiency, and financial leverage. As Sahiti et al. (2022) also indicate, bank size, profitability, and asset quality play a key role. These factors have proven to be significant in various contexts across countries like Ghana, Peru, India, and Vietnam. As Boateng et al. (2019) and Doko et al. (2021) point out, higher operational efficiency and proper leverage control are correlated with lower levels of credit risk. Along the same lines, Priyadi et al. (2021) explain that profitability indicators-such as Return on Equity (ROE) and Return on Assets (ROA)-show a negative relationship with credit risk exposure.
Regarding external factors, key macroeconomic elements include GDP growth, inflation, the country’s regulatory framework, and the competitive environment, as Musau et al. (2018) indicated. Systemic events such as financial crises also play a critical role. Studies conducted in the Eurozone, Turkey, and Middle Eastern countries, such as those by Yağli and Topcu (2023), demonstrate that regulatory policies and economic conditions directly affect banks’ ability to manage their loan portfolios and minimize risks.
Based on a systematic analysis of the selected studies, several determinants of credit risk in banks have been identified. These determinants can be grouped into two broad categories: internal factors and external factors, as illustrated in Figure 5.
Moreover, Butola et al. (2022) drawing on the Indian experience, highlight a positive correlation between sound risk management and bank profitability. Their statistical analysis supports the view that prudent internal supervision practices are key determinants of institutional financial performance.
Notable differences have emerged between developing and developed countries regarding the influence of internal bank variables on credit risk. ALrfai et al. (2022) argue that foreign direct investment significantly impacts credit risk. Differences in regulation and market structure are also relevant; for example, Islamic banks exhibit distinct credit risk behaviors due to their unique contractual structures and financial principles. As Gassouma and Ghroubi (2021) point out, there is a direct link between administrative inefficiency and conventional risks in financial intermediation entities.
Regional comparisons further illustrate these dynamics. Rakotonirainy et al. (2020) show that in Asian countries, macroeconomic factors predominate, while in African regions, financial inclusion plays a critical role, as Moloi (2014) highlights. In Eastern Europe, bank capital and unemployment exert significant influence. Likewise, Mendoza and Rivera (2017) emphasize that in emerging markets, external shocks can increase or reduce credit risk, with competition and banking income acting as key modifiers.
In regions such as Asia and Africa, macroeconomic conditions exert considerable influence, as Karadima and Louri (2020) note. In Eastern Europe and countries with weaker institutional frameworks, internal bank factors become critical determinants. Additionally, Morina (2020) argues that trends such as digitalization, financial inclusion, and competition are increasingly shaping the risk landscape.
The following Table 1 presents the studies included in this systematic review, allowing for comparison of regions and countries of study:
Table 1: Works studied (2025)
| Author | Title | Source | Country of study | Conclusions |
| Thi Thanh Tran and Phan (2020) | Bank size, credit risk and bank profitability in Vietnam. | Malaysian Journal of Economic Studies | Vietnam | The outcomes show that there is a significant adverse relationship between credit risk and bank profitability, but this harmful effect tends to decrease in larger size banks. The negative correlation between bank size and profitability indicates that large banks tend to perform inefficiently compared to small banks. |
| Akram and Rahman (2018) | Credit risk management: A comparative study of Islamic banks and conventional banks in Pakistan | International Journal of Islamic Finance | Pakistan | Loan quality has a direct positive relationship with credit risk management, while asset quality shows a negative relationship with credit risk management. |
| Bsoul et al. (2022) | Determinants of Banks’ Credit Risk: Evidence from Jordanian Banks Listed on Amman Stock Exchange | Academic Journal of Interdisciplinary Studies | Jordan | There is a direct negative relationship between return on assets, income ratio, and bank size with the level of credit risk. |
| Kil et al. (2021) | Scoring Models and Credit Risk: The Case of Cooperative Banks in Poland | Risks | Poland | A more advantageous solution for small, relational, and local banks is to apply standard models developed by a credit reference bureau at the sectoral level rather than models created individually on small samples, the effectiveness of which has not been confirmed. |
| Valarezo et al. (2024) | Riesgo de crédito en instituciones financieras en Ecuador | Revista Venezolana de Gerencia | Ecuador | Credit risk and delinquency affect all institutions engaged in financial intermediation. They have a negative impact on these entities’ profitability, liquidity, and solvency. When financial resources are limited, the ability to expand the loan portfolio decreases, leading to a lower market penetration rate and a reduced potential for profit growth. |
| Calderon-Contreras et al. (2022) | Determinants of credit risk: a multiple linear regression analysis of Peruvian municipal savings banks. | Decision Science Letters | Peru | The variable with the greatest negative impact on the Credit Risk of Peruvian municipal savings banks is the Coverage of Provisions, and the variable with the greatest positive impact is the Liquidity Ratio in PEN. In contrast, the variable with the least impact on the Credit Risk of Peruvian municipal savings banks is the Interest Rate for SMEs. |
Credit risk stands as one of the main challenges to the stability of Bolivia’s financial system, much like in other developing countries. Effective management is essential to preserve banking profitability and maintain user and client confidence, as Lajili et al. (2022) indicate. International evidence shows that both internal and external factors have a direct influence on the levels of exposure to risk. In the Bolivian context, these factors are equally significant, particularly given the growth of consumer lending and microenterprise credit.
Similarly, as noted by Ngo et al (2021), the analysis shows that sound prudential practices, robust internal supervision, and regulatory policies tailored to the country’s realities reduce the likelihood of default. Bolivia has implemented financial inclusion policies aimed at expanding credit portfolios; consequently, it is imperative to strengthen comprehensive risk management, enhance credit evaluation models, and refine loan approval processes. These actions will help consolidate the resilience of the financial system and in turn, foster the country’s sustainable economic development.
Discussion
It is essential to enhance prudential banking supervision mechanisms by adapting them to the structural and economic specificities of each country and region. Risk-sensitive supervision enables institutions to anticipate systemic vulnerabilities more effectively. Martín-Oliver et al. (2020), argue that it is a priority to integrate macroeconomic variables and internal bank characteristics into predictive models for credit risk assessment. Only a holistic approach can capture the complexity of today’s financial environment.
The global financial crisis precipitated a wave of failures across the traditional banking sector as Ghenimi et al. (2017) argue. Financial education and banking inclusion should also transition from ancillary policies to core strategies for reducing collective risk exposure. Empowering financial users strengthens the overall health of the banking system, as Balina and Idasz-Balina (2021) note.
Institutional capacity-building for the production, collection, and analysis of financial data must become a top priority, particularly in emerging economies where structural constraints often hinder evidence-based decision-making. Duarte et al. (2020) recommend developing regulatory frameworks that promote transparency in collateral management practices, preventing distortions in bank-client relationships.
In the competitive institutional environment, fostering conditions that reduce disparities among financial institutions can improve efficiency and equity in credit allocation. Rehman et al. (2019) advocate for an organizational culture grounded in transparency, accountability and strong corporate governance. According to Nguyen and Nguyen (2024), financial regulators must address the challenge of designing control schemes that are more responsive to the digital context, characterized by new forms of risk and unexplored opportunities.
The systematic analysis of reviewed studies reveals that credit risk in banks arises from a combination of internal factors (specific to bank management) and external factors (associated with the macroeconomic environment). Among internal factors, capitalization levels, profitability, loan portfolio growth, liquidity, and asset quality stand out, as Bawa and Basu (2020) say. Externally, GDP growth, inflation, unemployment, foreign direct investment, and remittances exert significant influence.
Regional comparisons reveal significant differences. Le and Diep (2020) report that in Asia, macroeconomic conditions exert strong influence, while in Eastern Europe and countries with weak institutions, internal bank factors are critical determinants, as Sahiti and Sahiti (2021) note. Digitalization, financial inclusion, and competition also play important roles in emerging markets.
The comparative analysis identifies the most frequent determinants of credit risk as follows: External (macroeconomic) factors: GDP growth, inflation, interest rates, unemployment, foreign direct investment, remittances, and public debt. Internal (bank-specific) factors: capitalization, bank size, profitability, loan portfolio growth, liquidity, and prior delinquency.
As Barra and Ruggiero (2023) indicate, credit policies, loan volumes, and intermediation costs significantly influence bank delinquency levels. As Mukhtarov et al. (2018) state, these factors vary in intensity depending on each country’s economic and regulatory context. For instance, studies in Jordan and Vietnam reveal significant sensitivity of credit risk to macroeconomic conditions, while in European countries, as Karadima and Louri (2020) observe, internal variables and financial inclusion carry greater weight.
At a comparative level, notable convergences exist between developing and developed countries regarding the influence of internal bank variables on credit risk. However, contextual differences introduce important nuances according to Papanikolaou (2019). For example, Koh et al. (2022) assert that Islamic banks exhibit distinct risk behaviors due to their unique contractual structures and financial principles. In terms of implications, the findings highlight the importance of proactive risk management based on internal financial indicators, coupled with adaptive regulatory policies. For academia, this comparative analysis advances a more comprehensive and contextualized understanding of credit risk in the banking sector.
As Sadaa et al. (2023) note, corporate governance and bank performance variables emerge as the most frequently cited factors, followed by macroeconomic and contractual variables. These results align with prior reviews in European and Asian contexts, although the intensity of effects varies across regions and levels of financial development. Furthermore, there is growing interest in leveraging big data tools and internal credit records to anticipate risks more accurately. This trend represents a significant evolution in financial analysis applied to the banking sector.
After conducting the analysis, we determined that there is insufficient academic production and scientific literature on the subject in Bolivia. It is important to highlight this point, as the relevance of the present study is grounded in this component. We observed that numerous studies exist in European and Asian countries, which may be due to the fact that in those regions the financial system is more consolidated and serves as an economic benchmark. In contrast, we consider that developing countries must make greater efforts to give the financial system the importance it deserves something that can be achieved through effective risk management, particularly in the area of credit risk management.
In conclusion, this systematic review underscores the need to strengthen regulatory frameworks, improve internal management practices, and embrace emerging technologies as key strategies for reducing credit risk exposure in multiple banks in Bolivia.
Conclusion
The reviewed studies reveal that credit risk in banks stems from a complex interaction between internal factors-related to the structure and efficiency of bank management-and external elements dependent on macroeconomic conditions. Internally, key variables include capitalization, profitability, loan portfolio growth, liquidity, and asset quality; these metrics serve as critical indicators of a bank's financial health. Conversely, external factors encompass variables such as GDP, inflation, interest rates, unemployment, foreign direct investment, remittances, and public debt.
Comparative regional analysis uncovers significant nuances. For instance, while macroeconomic conditions serve as critical determinants in Africa, the internal performance of financial entities becomes the primary driver of credit risk in Eastern Europe and countries with weak institutions. Furthermore, in emerging markets, dynamics such as digitalization, financial access, and increased competition also act as influential forces shaping risk exposure. In countries such as Jordan, credit risk shows high sensitivity to macroeconomic cycles; conversely, in Egypt, internal variables and financial inclusion factors are the dominant drivers. These contextual differences underscore the necessity of avoiding oversimplified generalizations when analyzing credit risk.
Despite these particularities, common patterns emerge across countries with varying levels of development, particularly regarding the influence of internal variables. However, national regulatory frameworks and contractual practices between banks and borrowers remain pivotal. Islamic banks exemplify this dynamic, as their distinct practices-based on ethical and contractual principles-directly influence risk perception and management. From a financial management perspective, these findings emphasize the need for a proactive, evidence-based approach to risk mitigation, grounded in reliable internal metrics and flexible regulatory frameworks capable of adapting to environmental changes. In this context, corporate governance and financial performance are equally pivotal.
In conclusion, this systematic review underscores the urgent need to strengthen institutional frameworks, optimize internal control practices, and leverage emerging technological capabilities to significantly mitigate credit risk vulnerabilities across diverse banking systems.
Particularly in Bolivia, the current economic landscape demands a robust and resilient financial system capable of fostering stability and ensuring long-term sustainability. Given the scarcity of scientific research on this subject, it is the responsibility of the academic community to contribute novel insights and propose relevant solutions that drive the country’s economic and financial development.
