An Assessment of Credit Risk Management Practice: The Case of Abay Bank S.C
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Date
2024-05-03
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
A.A.U
Abstract
Credit risk is an essential factor that needs to be managed. Credit risk is the possibility that a
borrower or counter party will fail to meet its obligations in accordance with agreed terms.
Credit risk is one of the most vital risks for any commercial bank. Credit risk arises from nonperformance
by
a
borrower.
Among
the
risks
that
face
bank’s
credit
risk
is
one
of
great
concerns
to
bank authorities and banking regulators. This is because credit risk is that can easily and
most likely prompts bank failure. Managing credit risk is not a simple task comprehensive
consideration and practices are needed for identifying, granting, controlling and evaluating and
monitoring credit risk. This research asses the practice of credit risk management in Abay Bank
S.C. Therefore, the main objective of undertaking this study is to assess the credit risk
management practice of Abay Bank S.C. For the study primary data is used. Primary data is
collected using questionnaire and interviews. Regarding to the nature of the study, the research
design is descriptive and quantitative study approach is adopted to assess credit risk
management practice of bank. The research found that, credit risk monitoring procedure is not
reviewed and updated regularly, the bank’s credit professionals do not conduct a formal meeting
to discuss the customer’s history and future plans and there is lack of adequate training to credit
management staffs and there is lack of adequate staff in credit management department of the
bank. Finally based on the findings of the study, the following recommendations are given.
Credit monitoring procedure should be reviewed and updated on regular basis; the bank should
be adequately staffed the credit management department and the bank should arrange short term
and long-term training to update and enhance the employees understanding about credit risk
management.