THE TREND OF LOAN RECOVERY PERFORMANCE IN BANKING INDUSTRY: A CASE STUDY OF OROMIA INTERNATIONAL BANK S.C.

Abstract

The objective of the study was to examine the trend of loan recovery performance of banking industry, a case study of Oromia International Bank s.c. Many factors attributed to the growth of banking industries. Among these, the major one is loan recovery performance of banking industry. A sample size of 68 respondents was used and simple random sampling method was adopted for the study. The data used to conduct this research was collected from both primary data and secondary data. Secondary data was collected from annual report of National Bank of Ethiopia and OIB’s annual report and primary data was collected from 68 employees of OIB s.c who are working in the area of loan activity. Moreover, semi-structured and structured interview was also used to gather information that can be used as a case study from OIB’s loan officers. In addition, questionnaires were employed to OIB city branch managers and credit department employees. Data was analyzed by using tables and a brief explanation by words. The findings of the study indicated that there are many factors which hamper loan recovery performance of Oromia International Bank s.co. For example: Luck of paying attention up on loan collection by all concerned parties, inadequate loan assessment and lack of follow up; lack of effective use of loan for the intended purpose; lack of appropriate revision of credit manual; social instability and market problem etc. The researcher recommends that the bank should provide Loan advisory service before and after the loan, the bank should effectively use the potential man power, the Bank should revise its credit procedural manual and follow up to reduce the amount of NPL.