ASSESSMENT OF LOAN RECOVERY PERFORMANCE IN WEGAGEN BANK S.C

Abstract

Loan recovery is a very essential component for the performance of banking institutions as it plays a key role in ensuring the major goal of the bank that is to issue loans that results into the preferred outcome of making a profit margin beyond the loans advanced.. Therefore the purpose of undertaking this study is to describe the loan recovery performance in Wegagen Bank S.C and to see the loan recovery performance in relation to credit assessment, loan follow-up, collateral and workout and to suggest possible solution. The study is based on primary data collected through questionnaires survey from 84 employees by using censes method working in loaning unit of the Bank which are directly involved in credit processing and administering because they would better be able to assist with the relevant research data and un-structured interview for some staffs in credit area of the bank. Based on the nature of the study the research design is descriptive research method. SPSS statistical software is used to analyze the data collected. The research found that lack of financial follow-up, absence of scheduled physical follow-up, lower budget for loan monitoring, collateral miss estimation, unavailability of additional collaterals, lack of marketability for collaterals, collaterals with high depreciable values, fraud made by some dishonest staffs, complicated collateral estimation procedure and Inefficiency in implementing detailed workout strategies are factors that decreases the loan recovery performance of the bank . Positive note the banks credit policy and procedure is in line with NBE’s rules and regulation and have good legal follow-up that can enhance loan recovery performance. Finally based on this findings recommendations are given. These includes improve the credit assessment, give advisory service to its customer, provide adequate budget to loan monitoring, insist the staffs to strictly apply its credit procedure manual, revise complicated collateral estimation manual and prepare an action plan for the reduction of NPL .