ASSESSMENT OF THE PERCEPTION OF BANK EMPLOYEES ON FACTORS AFFECTING NON-PERFORMING LOANS: A COMPARATIVE STUDY OF COMMERCIAL BANK OF ETHIOPIA & AWASH BANK S.c.

Abstract

The goal of the study is to assess factors that influence non-performing loans in the commercial banking sector, namely in public CBE and private awash banks in Home Office Level. The researchers focused at institutional and customer-specific factors that affect NPLs, as well as remedial techniques that can be applied to lower the amount of NPLs, in order to meet the "general and specific objectives." This study also employed the descriptive research design and a mixed research approach, using 181 credit staff members from the CBE and Awash banks in the Headquarter level as the primary source of data. Purposive sampling method were used to select the target banks in the study and the sample, on the other hand, was extended to credit employees using census sampling method. The sample, on the other hand, was confined to credit professionals. Descriptive statistics such as mean, frequency, and percentages were utilized to analyze the data. The study's findings revealed that bank-specific factors include as bank- specific factors affecting NPLs, bank size and performance, credit size, bad credit evaluation, poor loan terms, lack of aggressive credit collection mechanism, and inadequate nature of collateral were discovered. On the other hand, customer specific factors that can affect NPLs have included the borrower's unwillingness to pay back the loan and the customer's money diversion for unexpected purposes. As a result, the stakeholder is suggested to minimize the occurrence of loan default. Should create awareness for unwillingness customers to pay back the loan and the customer's money diversion for unexpected purposes, Should clearly & effectively communicating with lending officers regarding policies & procedure and ensure to discount future occurrences of credit risk or loss, strengthen its applicant screening criteria and due diligence assessment to select potential risk taking applicants, adopt appropriate pre and post credit risk assessments, Banks needs to ensure that borrowed funds are being used for the intended purpose through enhanced timely credit monitoring after the loan is being disbursed.