| Abstract: | The objective of the study is to “assess the credit risk management practices of Awash Bank. A sample of 60 respondents was drawn from the employees of the Awash Bank by using purposive sampling technique. Both primary and secondary data were used. Primary data were collected using structured questioners from the employees of the bank. Descriptive statistics such as frequency, percentage, mean score, standard deviation, and graphs were employed and SPSS Version 20.0 was used to aid the analysis of the data. With regard to credit risk management practices, the result showed that Awash Bank has good risk Management practice. Precisely, using score 1 (strongly disagree) to 5 (strongly agree), all the parameters of risk management practice assessment have an average score value of 3.99. Moreover, assessment of credit risk management practice of Awash Bank against the NBE guidelines and Basel Committee credit risk management principle was found to be good. There were also an open ended questions that was provided to the respondents with regard to disclosing what best CRM practices Awash Bank has missed and it was found that the bank highly depends on collaterals instead of the repayment capacity of the counterparty, there is also no continuous checkups on testing the competence of their staffs and similarly they have poor understanding of concentration risks. Therefore, in general it can be concluded that the bank is in a good position in terms of the credit risk management practice and in following the credit risk management system and standards so as to have strong credit management. However, the study also concluded that the bank has weakness: for instance, absence of training for employees which results to less understanding and application of credit risk management strategy, policy and procedures and applying on diversification of credit exposures. Thus, it is recommended that Awash Bank should develop a common understanding about the strategy, policy and procedures across the bank and under no circumstance should the bank violate the limit set by NBE and finally prepare training for credit and risk related staffs to manage credit risk effectively and efficiently. |
