ASSESSMENT OF CREDIT RISK MANAGEMNT PRACTICES; THECASE OF ABAY BANK S.C

Abstract

Credit risk management has become an important topic for financial institution; especially due to the fact the business sector of financial service is associated with situations of uncertainty. The turmoil of the monetary enterprise emphasis the significance of effective risk management procedures. The aim methodology, major findings, conclusion and recommendation of this look at the study is to examine the practice of credit risk management in Abay bank. In order cope with this goal, the examine focused credit and loan department employees who presently work at head office of the bank and collected primary data. The primary data were collected through questionnaires. The study distributed 81 questionnaires, from which 65 questionnaires have been successfully filled and returned. The collected data was analyzed the use of descriptive statistical tools. The finding showed that there is credit risk policy and procedures, credit risk strategy are effectively communicated through the organization and practical loan processing and appraisal activities of at the bank. Furthermore, the study showed that Abay bank uses appropriate internal risk scoring system, employees scientific pricing, credit limit established by the bank, adequate measure put in place to recover non-performing loans, and training of employees on credit risk management functions. But results also indicated there is a room for approving with reference to monitoring activities undertaken at Abay bank. In line with findings of the study, it becomes advised to the financial institution to enhance its monitoring system through regulatory analyzing the business of customers after granting credits.