Factors Affecting Non Performing Loan in Case of Bank of Abyssinia

Abstract

The Occurrences of banking financial crises as well as bank failures are usually associated with elevations in accumulation of non-performing loans. The objective of this study was to identify the Factors Affecting Non Performance Loan in the Bank of Abyssinia. For this objective, Bank size, Borrowers orientation, Collateralized lending, Credit risk assessment and Credit monitoring were considered as independent variables. Survey was conducted with professionals engaged in Credit department with different positions using a self-administered questionnaire. In addition, the study used structured review of documents and records. The data analysed through regression and descriptive analysis with diagnostics tests by using SPSS version 26.0 for window. Poor credit analysis is related to poor credit assessment this indicates that the causes for the occurrences of non-performing loans and also show a loan is poorly assessed directly affects the occurrence of NPLs while Borrowers orientation and Bank size did not the causes for the occurrence of non-performing Loan in BOA. The study suggests that , the bank should conduct intensive and adequate assessment before credit monitoring of a loan, the bank should follow a balanced policy between profit maximization and risk taking, adequate monitoring system which should start before giving loans by identifying the status of a borrower and adapt pre-and post-credit risk assessment.