ASSESSMENT OF CREDIT MANAGEMENT PRACTICE – A STUDY ON UNITED BANK S.C

Abstract

This study attempts to assess credit management practice in private commercial bank – A case Study of United Bank Share Company. Through analyzing the practices of credit management practice, the study attempts to indicate the importance of credit management in financial institutions such as commercial banks. Thus, the rationale behind for undertaking this study is to deeply investigate the causes of credit management problems and to suggest 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 promotes credit quality. 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. For the purpose of the study both primary and secondary data were used. Primary data was collected using semi structured questionnaires for this a sample size of all employees in related to credit management who are bank’s managers, assistant branch managers, supervisor, credit officers, internal auditor and credit committee members of UB four branches totally 30 employees were selected purposively and 48 loan clients who was also selected by taking at least 40% of the target population from four sub groups (such as: - import, manufacturing, domestic service and building construction). The secondary data has been collected from annual reports, directives, and bulletins of the bank. Descriptive statistical tools were used in analyzing the data collected hence; the nature of the study is descriptive. The findings indicate that, the majority of the banks employees working in the loan area have first degree holder experienced and trained, almost all of the employee have agreed on the compliance of credit policy and credit procedure, to the regulation and directions of national bank of Ethiopian (NBE), and credit policy of the bank is moderate and updated up to 2015 Finally, based on the findings possible recommendations are given. These include the improvement of credit policy and procedure of the bank and updated of credit policy and rising loan clients complaint on the bank regarding the valuing of properties offered for collateral, lengthy of loan processing, amount of loan processed and approved, loan period, and discretionary limits affecting the credit management practice.