ASSESSMENT OF CREDIT RISK MANAGEMENT PRACTICE IN CASE OF BANK OF ABYSSINIA S.C

Abstract

This study is conducted aiming at investigating credit risk management practice at Bank of Abyssinia. In order to achieve this goal the study targeted current workers of the bank's head office's credit department and gathered primary data. The primary data were collected through questionnaires. The study distributed 89 questionnaires, from which 80 questionnaires were correctly filled and returned. Descriptive statistical methods were used to assess the acquired data. The results show that there is an effective credit risk strategy and policy that clearly identify and recognise areas of credit engagement and the risks associated in these engagements. The result also indicated that respondent employees believed there is good level of credit appraisal and granting process at the bank that checks borrower’s history, financial condition and collateral requirements before granting loans. Also, the findings showed that Bank of Abyssinia uses appropriate internal risk scoring system; risk based scientific pricing and has an independent risk management function. But results also indicated there is a room for improvement with regard to monitoring and controlling activities and also risk mitigation undertaken at Bank of Abyssinia. In line with the findings of the study, it was suggested to the bank to enhance its monitoring by assessing the collateral value and make credit quality report. With regard to risk mitigation give training for employees and make advisory role for its client.