ASSESSMENT OF CREDIT RISK MANAGEMENT IN THE CASE OF COMMERCIAL BANK OF ETHIOPIA

Abstract

The research objective was to assess the impact of credit risk management practices on Commercial Bank of Ethiopia. The study was a descriptive research design. The target populations for the study were employees working at head office and 4 districts in Addis Ababa. This study used stratified sampling Techniques were applied to select a sample size of 365 employees from both managerial and non-managerial positions. 365 employees (97.33%) response rate was obtained. Primary data was mainly collected using self- administered questionnaires consisting of both open and closed ended questions with 4 point Likert Scale. Data were also collected through documents overview and interview. The collected data were quantitatively analyzed using SPSS to produce descriptive statistics. The key findings from the study revealed that: the bank has well organized credit policy that counter to credit risk they are exposed to and it also conclude that the bank has good credit granting practice and uses suitable credit risk assessment tools and techniques including loan administration, risk identification, measuring, evaluating, monitoring and controlling mechanism. However, the study also concluded that the bank has drawbacks such as absence of training for clients which results to loan diversion and the priority sectors of the bank in terms of credit facility are highly exposed to credit risk which directly contribute to the increment of NPL. Thus, it is recommended that Commercial Bank of Ethiopia should progress independent risk management policy and procedure from credit policy and procedure to avoid those problems and to take measure on the business.