ASSESSMENT OF CREDIT RISK MANAGEMENT PRACTICE: THE CASE OF OROMIA INTERNATIONAL BANK

Abstract

Credit risk management is one of the most important tasks for the financial liquidity and stability of banking sector in connection with increased sensitivity of banks to the credit risks. This research asses the practice of credit risk management in Oromia International Bank. Therefore, the main objective of undertaking this study is to assess the credit risk management practice of Oromia International Bank and to see the possible problems that influence the credit risk management activity of the bank and to suggest possible solution for those problems exhibited on credit risk management practice of the bank. For the study primary data is used. Primary data is collected using questionnaire and interviews. Regarding to the nature of the study, the research design is descriptive and quantitative study approach is adopted to assess credit risk management practice of bank. Even if the NPL position of the bank is below the thresh hold set by NBE which is 5% considering the period from 2017/18 to 2019/2; the research found that, credit risk monitoring procedure is not reviewed and updated regularly, the bank’s credit professionals do not conduct a formal meeting to discuss the customer’s history and future plans and there is lack of adequate training to credit management staffs and there is lack of adequate staff in credit management department of the bank. Finally based on the findings of the study, the following recommendations are given. Credit monitoring procedure should be reviewed and updated on regular basis; the bank should be adequately staffed the credit management department and the bank should arrange short term or/and long-term training to update and enhance the employees understanding about credit risk management.