| Abstract: | The purpose of this study was to assess the credit risk management policies and
practice of Development Bank of Ethiopia. To undertake the study, a descriptive
research design was used. The sample consisted of bank managers, credit analysts,
supervisors and workers in Addis Ababa hade office. A structured questionnaire
was used to collect data from respondents. Censes sampling technique was
employed to select 60 respondents who have direct experience with credit.
However, 2 respondents did not return the questionnaires and 58 questionnaires
were collected. The data obtained from the 58 respondents were analyzed using
descriptive statistics. Findings revealed that Development Bank has a documented
policy, strategies and guidelines to manage credit risk. The Bank makes use of
credit risk management techniques that include; thorough risk rating, asking for
collateral and checking the credit history of the borrowers. Additionally, the bank
uses different risk management tools or instruments like knowing borrowers by
using 5C of credit which are Character, Capital, Capacity, market condition and
Collateral. Most of the strategies employed by the Bank align with the principles of
credit risk management. There are factors affecting credit risk management. One is
natural and environmental factors, which are one of the important obstacles to the
effectiveness of credit risk management. In order to manage the dynamic nature of
credit risk, the Development Bank’s management needs to periodically revise its
credit policy and procedures, incorporating the feedback of clients and employees,
in order to manage credit risk. |
