ASSESSMENT OF CREDIT MANAGEMENT PRACTICES: IN CASE OF HIBRET BANK S.C

Abstract

The main objective of this study was to investigate credit management in light of the practices of modern credit management in financial institutions in case of Hibret Bank. To achieve this objective, descriptive research design has been employed along with both quantitative and qualitative research approaches. For the study both primary and secondary data is used. Primary data is collected using questionnaire, interview and the secondary data is collected from the bank’s audited annual reports (2018/19-2020/21). A purposive sampling technique was used to select respondents from Hibret Bank employees who work at the head office and 8 other branches in Addis Ababa. Structured questionnaire was used to collect the data from a sample of 79 employees. Data were analyzed using a descriptive statistics. The findings reviled that the bank is not controlling the borrowers limit as per the NBE requirements and it lacks effective credit management system in controlling the credit limit of borrowers. The existing credit policy and procedure of the bank is encouraging flexibility to guide the loaning activity. The bank has been continuously make sure that the NPL cases has transferred to foreclosure process to get timely decision to reduce additional provision expense of the bank. But this does not help the bank to effectively implement its loan recovery mechanism to reduce its bad loans. Moreover, the bank has failed to make proper follow up on the loans availed whether they are spending on the actual purpose of the loan requested and also the credit monitoring procedure is not regularly reviewed and updated in the bank. Finally based on the findings of the study, the following recommendations are given. The bank should checks the borrower history before granting loans and properly assessed the customer ability to meet obligations in credit processing or appraisal system and properly assess the customer ability to meet obligations. Besides, the bank should give sufficient training to the customers on loan usage.