ASSESSMENT OF CREDIT MANAGEMENT PRACTICE; THE CASE OF DEVELOPMENT BANK OF ETHIOPIA

Abstract

Credit management is one of the most important activities in any financial institution which are engaged to provide a credit service. In the credit financing process sound credit management is the primary task of financers for the reason to secure organizational sustainability. The study sought to conduct to assess the credit management practice of Development Bank of Ethiopia (DBE). The research was carried out by analyzing different institutional factors that directly or indirectly affect the credit management practice of the bank. Descriptive research design was adopted to prepare the study. Stratified random sampling method was utilized to select respondents from the entire population. 120 respondents were drawn from the credit management directorate and other six directorates which are performed the same role with credit directorate. Both primary and secondary data were used as a source of information. Primary data was collected from respondents using questionnaires where all the issues raised on the questionnaire were addressed. Descriptive statistics methods such as, tables, frequency and percentage were used to analyze the data. The impacts of institutional factors such as, credit approval, credit appraisal, follow up and supervision, credit risk management practices, collection techniques and staffing roles on the credit management process were analyzed and discussed in detail. As the result of the finding indicates the raised factors has its own effect on the credit management practice of the bank. The major findings of the study shows that impeding loan quality is occurred due to absence of adequate controlling and monitoring, inadequate appraisal & approval, poor collection culture, absence of effective risk mitigation strategy are some of the factors raised as a challenge. The bank has gaps regarding with for all factors presented for discussion. The overall credit management practice of the bank has poor and not performed as the expected level and it needs improvements. Finally the study recommends that banks should improve the overall credit management activities through critically assess the existing challenges how to fill it according to the provided recommendation.