Assessment of credit management practice at united bank S.C
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Date
2018-06
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Addis Ababa University
Abstract
Sound credit management is a prerequisite for a financial institutions stability and continuing profitability, while deteriorating credit quality is the most frequent cause of poor financial performance and condition. These research asses the practice and effectiveness of credit management in united bank s.co. Therefore the purpose of undertaking this study is to explore the credit management practice in united bank s.co and to see the possible factor that influence the credit management activity of the bank and to suggest possible solution for those factor affecting the bank credit management process negatively. For the purpose of the study both primary and secondary data is used. Primary data is collected using semi structured questionnaire and interview. The secondary data is collected from the bank’s audited annual reports(2013-2017), directives, credit policy and procedure of the bank and bulletins of the bank. Based on the nature of the study the research design is descriptive with a qualitative research method. Descriptive statistical tools are used to analyze the data collected. Hence, the nature of the Study is descriptive. The research found that lack of credit follow up by branches, lack of information system to support the credit risk grading system of the bank, branches negligence to the credit policy and procedure of the bank when exercising their discretionary lending limit, will full default by borrower, borrower lack of knowledge on loan usage, fund diversion for unintended purpose, and centralized decision making by the bank influence the attainment of successful credit management at united bank s.co. Also on a positive note the banks credit policy and procedure is in line with NBE’s rules and regulation. Also for the year under consideration the bank NPL to Term loan ratio is under 5% which is set by the NBE. Finally based on this findings recommendations are given. These includes keeping up with the current portfolio quality, to strictly adhere & implement the banks credit policy and procedure, to take up pre-audit a part of the credit analysis process, managing the length of hour it take to process one loan request.
Description
A thesis submitted to MBA coordination office, college of Business and Economics, Addis Ababa university in partial fulfillment of the requirements for the degree of master of business administration in finance
Keywords
Credit management, Credit portfolio, NPL