An Assessment of Credit Risk Management Practice: The Case of Awash Bank S.C

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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.



Credit risk, credit risk management practice, credit policy and procedure, Nonperforming loans