Determinants of Default in Project Finance (The Case of Commercial Bank of Ethiopia)
No Thumbnail Available
Date
2015-10
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Addis Ababa University
Abstract
This study intends to assess determinants of default in project finance in the case of Commercial
Bank of Ethiopia. In the study both qualitative and quantitative approach were adopted. Using
structured questionnaires a survey was conducted on Banks’ credit performers who directly
involve in project financing process from beginning to end. In order to obtain more insight on
the cases, the study used document review on the Bank record and conducts an in-depth
interview on senior credit officials in CBE. The findings of the study indicates; poor due
diligence assessment made by the bank to know the customer, weak credit negotiation, weak
credit assessment on the feasibility of the project, in adequate skill of the credit performers,
under-finance, poor monitoring and follow-up, shortage of foreign currency supply,
unwillingness of the borrower to disclose truthful information, unplanned and ambitious
business expansion, lack of commitment by the project promoter, lack of understanding the
project by the project promoter, management capacity problem, poor working capital
management, willful default, data or information constraint to appraise project loan, inflation,
foreign currency fluctuation, and poor credit culture in the industry, as a significant cause of
default.
Description
Keywords
Default in Project Finance