Assessment of Credit Risk Management (A Case Study of Commercial Bank of Ethiopia)

Abstract

This study of credit management– A Case Study of Commercial bank of Ethiopia in Addis Ababa city is an attempt to indicate the importance of credit management in financial institutions such as commercial banks, micro finances and others. Thus, the rationale behind for undertaking this study is to deeply investigate the causes of credit management problems and to suggest the possible solutions that enable the bank to run its operation in a safest way as credit is known to be the main stay of all banks. The ability of banks to formulate and adhere to policies and procedures that promote credit quality and curtail non-performing loans is the means to survive in the stiff competition. Inability to create and build up quality loans and credit worthy customers leads to default risk and bankruptcy as well as hampers economic growth of a country. However, little work is done to search the ways and means that enable to quality loan creation and growth as well as to determine the relationship between the theories, concepts and credit policies both at country or regional level. The main objective of the study is to evaluate the performance of credit management of commercial bank of Ethiopia as compared to National Bank’s requirements in comparison with its credit policy and procedures. For the purpose of the study both primary and secondary data are used. Primary data is collected using questionnaires. The secondary data is collected from reports, directives, and bulletins of the bank. Descriptive statistical tools are used in analyzing the data collected. Hence, the nature of the Study is descriptive. Finally, based on the findings possible recommendations are given. These include the issues impeding loan growth and