Optimal Funds in Commercial Banks Using Linear Programming

Abstract

The allocation of funds in commercial banks is one of the fundamental issues that directly affects financial performance efficiency and banking stability, especially in a banking environment characterized by increasing competition, multiple regulatory constraints, and rising financial risks. Fund allocation refers to the distribution of available financial resources among various credit and investment activities, such as loans, investments in securities, and liquidity reserves, in a manner that achieves a balance between profitability, liquidity, and safety. However, reliance on traditional methods in making allocation decisions may lead to inefficient utilization of financial resources. This study aims to examine the allocation of funds in commercial banks using linear programming as one of the operations research techniques capable of supporting financial decision-making on a quantitative and scientific basis. The research adopts a descriptive–analytical quantitative approach by reviewing the theoretical framework of fund allocation and linear programming and by developing a mathematical model that reflects actual banking activities while taking into account regulatory constraints such as liquidity requirements, capital adequacy, and risk limits. The findings indicate that the use of linear programming contributes to the optimal utilization of available financial resources and helps commercial banks maximize returns while minimizing risks. Moreover, the applied model demonstrates that mathematical programming models based on linear programming provide an effective tool for supporting decision-makers, improving fund allocation efficiency, and enhancing the financial sustainability of commercial banks. The study recommends that commercial banks adopt modern quantitative techniques in their financial decision-making processes and enhance the capabilities of banking personnel in the application of these methods.