An Assessment of Credit Risk Management Practice: The Case of Awash Bank S.C
No Thumbnail Available
Date
2022-12
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;s failure. Managing credit risk is not a simple task comprehensive
consideration and practices are needed for identifying, measuring, controlling and minimizing
credit risk. The focus of this research is to assess the credit risk management of Awash Bank. In
this study, the researcher utilized simple random sampling technique in order to select
participants of the study. For the purpose of this study, both primary and secondary data were
used. Primary data were collected through questionnaires distributed to respondents found in
head office credit risk management and related directorates. Descriptive statistics such as
percentages, frequencies and tables were used to analyze and present the data. The study found
that non-performing loans (NPL) percentage of the bank’s credit is increasing time to time. This
is due to lack of continuous follow up and proper risk assessment and the current political and
contagious diseases (i.e. Covid-19). Also, the bank’s procedure was not effective in reducing the
NPL status and it needs to be improved. Based on the findings, the paper recommends that in
ensuring the existence of proper and clear guidelines in managing credit, the top managements
support is less and needs to be improved. Also, innovation on new ways of dealing with
borrowers is necessary for banks to be able to recover their loan.
Description
Keywords
Credit risk, credit risk management practice, credit policy and procedure, Nonperforming loans