Factors Affecting Effectiveness of Credit Risk Management System in Ethiopian Commercial Banks

Abstract

The main objective of this study is to examine the factors affecting effectiveness of credit risk management in commercial banks. To identify the major factors and the degree of the impact, this study used both descriptive and multiple regressions. According to the descriptive statistics analysis result, most of the respondents are not satisfied that the credit information, credit disbursement and credit approval process in a banking business, while they are agreed that monitoring and follow up was appropriately implemented. Pearson correlation coefficient reveals significant correlation coefficient of the factors with the effectiveness of credit risk management system. Moreover, the result of the multiple regression show that the factors has an effect on the effectiveness of credit risk management system that is credit information, credit approval, credit disbursement and monitoring and follow up has a positive and significant effect. Based on the study findings, the researcher forwarded recommendation that commercial banks should give high emphasis on the credit information, credit approval, credit disbursement and monitoring and follow up process in order to attain the effectiveness of credit risk management system.