ASSESSMENT OF CREDIT RISK MANAGEMENT PRACTICES IN THE CASE OF AWASH BANK S.CO.

Abstract

The objective of this study is to examine the practice of credit risk management at Awash Bank. In order to address this objective, the study targeted credit and loan department employees who currently work at the head office of the bankand collected primary data. The primary data were collected through questionnaires. The study distributed 88 questionnaires, from which79 questionnaires were correctly filled and returned. The collected data was analyzed using descriptive statistical tools. The findings showed that there is a well-designed credit risk strategy and policy that clearly indicate and recognizes areas of credit engagement and the risks inherent in these engagements. The findings also indicated that respondent employees believed there is good level of credit appraisal and granting process at the bank that checksborrowers history, financial condition and collateral requirements before granting loans.Furthermore, the study showed that Awash Bank uses appropriate internal risk scoring system, employs risk based scientific pricing and has an independent risk management function. But results also indicated there is a room for improvement with regard to monitoring activities undertaken at Awash Bank. In line with the findings of the study, it was suggested to the bank to enhance its monitoring process by regularly inspecting the business of clients after granting credits.