CHAPTER THREE

3. DATA ANALYSIS AND PRESENTATION

3.1. Overviews
The topic provides data analysis and assessment collected from questionnaire.
The purpose of data analysis is to assess the credit analysis and processing in
commercial Bank of Ethiopia. Credit analysis is the critical phase of the credit
granting process. It is an area where the loan officer needs document that he or
she has actually performed proper evaluations of the various risks involved
with the particular credit request. Under this analysis the officers can be
covered the five credit analysis, that is, character, capital, collateral, capacity
and condition. Credit processing is a series of action or operations performed
by the bank in order to give a credit (loan) service for the customers. In other
word, lending process in phases occurs in every lending situation and it covers
from the application phase up to monitoring phase.

3.2. Presentation and Analysis of Primary Data

The primary data used for this study is collect from two types of respondents,
from CBE staff working on loan and from the bank borrowers. These two
groups are select because surveying and presenting the opinion of these groups
is believe to be relevant and meaningful to study the problem properly.
Therefore, the researcher will try to analyze the questioner collected separately.
Respondents were made aware of the objective of the study so that they could
give genuine and relevant information. Analysis and explanations for amounts
in the table is giving only for most frequent and extreme figures.

3.2.1. Presentation and Analysis of Bank Staffs Response

7 questionnaires were prepared and distributed to CBE bank staffs but only
the 6 were properly filled out and returned. All the 6 questionnaires were filled
out by the bank’s staffs who are directly involved in the process of related

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tasks. As shown in Table 1, of the total respondents 2 found to be female and
the rest 4 are male. It is also show that, most of the respondents are loan
officers and loan clerks.

Table-1: Experience on Loan and Position of Respondents

Description Number Percentage (%)

Sex
 Male 4 66.67%
 Female 2 33.33%
Total 6 100%
Educational Level
 Diploma 2 33.33%
 Degree 4 66.67%
Total 6 100%
Experience
 < 2 years 2 33.33%
 2 – 4 years 0 0
 > 4 years 4 66.67%
Total 6 100%
Position
 Branch Manager 1 16.67%
 Loan Officer 1 16.67%
 Loan Clerks 4 66.67%
 Other Clerical Staff 0 0
Total 6 100%
Source: Primary Data

Out of the total questionnaires distributed to the bank’s staffs, responses

obtained from the loan clerks accounts for 66.67% of the total respondents.
The rest were fill out and returned by the branch manager. Thus, I believe that
I am in a strong position to claim these responses. Furthermore, 4 (66.67%) of
respondents were working for more than 4 years in their respective field of
operation which again strengthens the credibility of the data gathered.

The educational level and experience of the respondents was also inquired
Table 1 shows that out of the 6 respondents, 4 (66.67%) are degree holders and
the rest with diploma level. Regarding their experience, most of them have

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worked for more than 4 years in the bank (66.67%). From this, I can infer that
most of the Bank’s credit employees are qualified & experienced.

Table-2: Responses on Time Taken in Interviewing, Document Collection

and Credit Analysis of Customers

How long will interview, Number Percentage (%)

document collection and credit
analysis takes?
One month 5 83.33
Two month 0 0
Three month 1 16.67
> Three month 0 0
Total 6 100

Source: Primary Data

Most of the time loan staffs give much time in interviewing, document
collection and credit analysis. This is simply to increase or to build their
confidence and to minimize the time required while making the loan
assessment. As shown in table 2, majority of the respondents 5 (83.33%)
confirmed that customer’s requests will be answered in one-month period. The
other 1 (16.67%) customers responded it take two months for loan processing.
Generally the total time elapsed for interviewing, document collection and
credit analysis i.e. more than one month (16.67%) as per the respondent is not
fair. Thus according to the responses obtained from the customers I can
conclude that the time taken for pre-loan process tasks is slightly lengthy in
CBE’s current practice.

Table-3: Responses on Financial Analysis of Business Applicants

Does the bank make financial Number Percentage (%)

analysis properly to assess the

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 proposals of a business applicant?
Yes 5 83.33
No 1 16.67
Total 6 100
Source: Primary Data

The response of the staff as shown in table 3 indicates that out of 20

respondents 15 (75%) responded that the bank conducts financial analysis
properly, while 5 (20%) of them responded that the bank doesn’t conduct
financial analysis properly. From table 3 we can infer that there is a proper
financial assessment practice to evaluate the proposals of business applicant,
which will impose strictness on mal processing/misuse of the financial
resources.

Table-4: Responses Regarding the Bank’s Standard Criteria & Forms to

Make Credit Analysis & Assessment

Do you think that the criteria adopted by Number Percentage (%)

the bank are adequate enough?
Yes 5 83.33
No 1 16.67
Total 6 100
Source: Primary Data

Generally, Banks are required to have a set of standard criteria’s and forms to
make proper credit analysis and assessment. This is also true for CBE, which
is confirmed by 5 respondents (83.33%) of the respondents who agree with the
question as depicted in table 4 and the rest 1 respondent, (16.67%) responded
inadequate. This shows that there is a need for little further work and revision
required on the credit assessment of the bank.

Table-5: Responses given about the Credit Analysis form Used for Loans

Do you use the same credit Number Percentage (%)

analysis before granting the loan?
Yes 1 16.67
No 5 83.33
Total 6 100

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Source: Primary Data

As shown in table 5, out of 6 respondents 5 (83.33%) responded that they do

not use the same credit analysis techniques because, different credit
assessment will made based on the type of loan requested by the borrower,
which could be business loan, commercial loan, personal loan etc. This shows
that the Bank almost issues different credit assessment techniques depending
on the type of loan required by borrower. The credit assessment increased with
the amount of the loan, credit risk details are also strength the documents the
borrower provides and viability of the project.

Table-6: Respondents Response Regarding the Loan Capacity

Determination Criteria

Do you feel the loan capacity Number Percentage (%)

determination criteria is sufficient
to judge borrowing capacity?
Yes 4 66.67
No 2 33.33
Total 6 100

Source: Primary Data

Most of the time the loan capacity determination criteria are sufficient to judge,
the borrowers borrowing capacity. As can be seen from table 6, 4 (66.67%) of
the respondents indicate that, the bank’s criteria of determining borrower’s
loan capacity are sufficient, whereas 2 (33.33%) of these indicated to be
insufficient. As information gathered from officers, the criteria’s for capacity
determination have two aims, first it mitigates problems that the officers face
on follow-up, second it saves the borrower. Thus, it is very critical that, loans
should only be advanced up on the sufficient borrowing capacity of the
borrowers.

Table-7: Responses Given Regarding the Degree of Rejecting Loan by the

Assessment Result

How do you rate the degree Number Percentage (%)

of rejecting loan by the
assessment result?
Very high 1 16.67
High 0 0

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 Medium 3 50
Low 2 33.33
Very low 0 0
Total 6 100

Source: Primary Data

Before loans are disbursed to borrowers, they are required to be properly

assessed in order to determine whether the project is viable or not. However,
in CBE as table 7 shows, loans are rejected merely, as 83.33% (medium 50%
and low 33.33%) of the respondent shows. This makes sure that CBE’s
customers mainly have capacity of borrowing and fulfill the criteria. Whereas,
20% of the respondents indicate there is an opportunity that they were
rejected.

Even if these problems came from external factors, because of lack of reliable
data and absence of true information from the borrowers. The bank has a
failure in assessing and analyzing the data forwarded by the borrower to grade
its loan, to estimate the profitability of the project and loan repayment capacity
before disbursement and compare the actual result to upgrade or dawn grade
its loans.

Table-8: Responses on Customer Satisfaction in Relation with the Bank’s

Loan Processing Requirement

Do you think customers are satisfied Number Percentage (%)

in relation with the bank’s loan
processing requirement?
Yes 4 66.67
No 2 33.33
Total 6 100

Source: Primary Data

As shown in table 8, 33.33% of the respondents had answered that customers

are not satisfied by the bank’s credit processing requirement because, it takes

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long processing time, poor customer handling, inefficient bureaucracy and the
approval limit of the branch is limited. While the rest 66.67% indicated that
customers are being satisfied with the loan processing requirements of the
bank. Hence, CBE’s prerequisites for credit processing are deemed to be
appropriate and necessary for which will result in a sound credit risk and
incapacitating non-performing loans.

Table-9: Responses on Collateral Criteria for Evaluation of Loan Request

Is collateral the primary Number Percentage (%)

criteria for evaluation of
loan request?
Yes 4 66.67
No 2 33.33
Total 6 100

Source: Primary Data

For the Bank, collateral is a vital thing and in the absence of it, no loan will be
secure. However, existence of collateral is not sufficient by itself but it needs to
be accompanied by repayment capacity of the will be borrower, which could be
proved through salary and business income. As shown in table 9, 33.33% of
the respondents indicated that collateral is not the primary criteria for
evaluating loan request. Whereas, 66.67% of respondents mentioned collateral
as one of the primary criteria’s for loan request. Therefore, collateral is not the
only criteria’s for evaluating loan request but the key factor determining the
loan’s consideration for approval, holds the biggest and consideration on loan.
Therefore, for loans to be approved, the essence of collateral is not a primary
criteria the primary criteria the business that customer engaged.

Table-10: Responses about Appraisal of the Market Value of Collateral

Held up on Renewal of Credit Facility

How often do you update the Number Percentage (%)

values of the collaterals
pledged for a loan (in years)?
One year 2 33.33
Two years 3 50

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Three years 1 16.67
Total 6 100

Source: Primary Data

As per the Banks credit procedure, buildings, which are held as collateral in
connection with credit facility like overdraft, are required to be estimated every
two years. The summarized response of the sampled respondents in table 10
also prove that 50% of respondents believes that the collaterals held should be
updated every two years, 33.33% of the respondents replied that, the bank
takes one year time laps for re-estimation of collaterals and the rest 16.67%
responded that collateral values should be updated every three years. But
respondents feel there is no estimation made on collateral if there is no renewal
of the facility or additional loan requested on the same collateral pledged. The
above respondent prove that the bank gives due consideration on updating the
collateral value not only on while changes are made on the collateral. The
collateral previously estimated may appreciate or depreciate or might lose
market value because of different cases.

Thus, it is imperative to update the values of the collateral pledged for a loan
frequently, if possible, whereas, in the case of CBE, which updates collateral
values every two years, which in fact is supported by 50% of the respondents.

Table-11: Respondents Response on the Bank’s Problem of Lending

Procedures

Do you think that the Number Percentage (%)

bank’s lending procedure
has got a problem?
Yes 2 33.33
No 4 66.67
Total 6 100

Source: Primary Data

Assessing the problems of lending procedures is the crucial task of the banks.
As shown in table 11, 33.33% of the respondents indicated that there is a

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problem. The rest 66.67% indicated that there is no problem on the bank
lending procedure. The interest and other factors are not flexible with the
market need.

According to the respondents who said the bank’s lending procedure has got a
problem due to:

 The loan procedures were not regularly updated

 Lack of adequate information about the re-payment of the borrowers

 Limited lending capacity of the bank

 Unavailability of connection with other banks result increasing risk of

lending.

Thus, as per the responses given, it is evident that the banks’ lending
procedure has some defects that should be modified to cop up with the current
market situations. Moreover, the management of the bank should eagerly
update and modify the bank’s lending strategy to make it competitive in the
banking industry.

Table-12: Responses about the Loan Officer’s Selection/Assignment

How do you evaluate loan Number Percentage (%)

officer selection/assignment in
your opinion?
Excellent 0 0
Very Good 0 0
Good 3 50
Fair 2 33.33
Poor 1 16.67
Total 6 100
Source: Primary Data

Attempt was also made to see if the loan staffs of the Bank are being properly
evaluated before assigned. As shown in table 12, 83.33% of the respondents
assumed the loan officer selection of the bank is good (50%) and fair (33.33%).
The other 16.67% of the respondent indicate poor. From this data, it is safe to

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say that the Bank’s system of assigning employees as loan officer is acceptable
but the respondents that say poor (16.67%) will have a significant role on
unavailability of good selection and assignment. This will lead to loss of
customers in today’s competitive market.

Table-13: Respondents Response Regarding Loan Officers Training

Before Assignment

Do loan officers get Number Percentage (%)

enough training before
assignment?
Yes 2 33.33
No 4 66.67
Total 6 100

Source: Primary Data

Regarding the loan officers training before assignment, it is essential to get

enough training because well-trained officers can properly handle credits. As
shown in table 13, 4 (66.67%) of the respondents show the officer’s does not
get enough training before being assigned. The rest 2 (33.33%) has answered
yes. This is necessary because technical skills and competence is advantageous
in the competitive market. This would affect the process of credit analysis and
assessment. The grass root of CBE’s problem started here on and the other
deleyance issue, mistakes made by loan officers and the analysis problem will
emerge because of inexperience and poor training before assignment of loan
officers.

Table-14: Responses on the Problems of Credit Assessment in CBE

Do you think that there are Number Percentage (%)

problems on the credit
assessment in CBB?
Yes 2 33.33
No 4 66.67
Total 6 100

Source: Primary Data

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  Assessing credit properly is a crucial task for banks because it is one of
the most sources of income generated for them. As shown in table 14, 4
(66.67%) of the respondents feel there is no problem whereas 2 (33.33%)
of them respondent indicate there is problems in the bank’s credit
assessment. Moreover, the credit assessment report is not properly filled
by the loan officer and does not provide genuine information about the
loan. In addition, CBE’s updating information is weak and also financial
analysis relies on personal judgment. This all indicate that there are
problems on credit assessment in CBE.

 How much interest rate are giving for savings?

I am also tried to collect information about how much interest rate are giving
for savings. Then, the respondents say that for savings only 5% interest rate
are giving and also another savings without interest like none interest bearing
saving and special demand deposit (SDD).

 What type of loans providing by bank?

There are different types of loans providing by the bank to customer like-

 Domestic trade service

 Agriculture term loan

 Building and construction term loan

 Motor vehicle loan and so on

 How much interest rate is charging from the loan?

The CBEs charges from the loan is 9.5% interest rate.

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 3.2.2. Presentation and Analysis of Borrowers’ Response

5 questionnaires were prepared and distributed. And all are collected.

Table -15: Respondents response past relationship with CBE

What kind of service you got from Number Percentage (%)

commercial bank of Ethiopia?
Saving 0 0
Credit 3 60
Both 2 40
Total 5 100

Source: Primary Data

As shown in table 15, 3(60%) of the respondent responded that there is credit
kind of past relationship they have with CBE and 2(40%) of respondent
responded that they have both saving and credit relationship with the CBE.

From this, the researcher understands that there is credit kind of relationship
between customer and the commercial bank of Ethiopia according to the
majority of the respondents.

Table-16: Reasons for Choosing Other Banks Loan

Do you have relations Number Percentage (%)

with other bank?
Yes 1 20
No 4 80
Total 5 100

Source: Primary Data

This question presented to the sampled borrowers was to check whether

borrowers choose other banks loan or not. As indicated in table 16, 1 (20%) of
borrowers have chosen other banks because of simplicity in getting loan and
lesser collateral requirement. Other respondents choose for being close
relationships with some employees, need for near branches to their neighbor
and simple from the promotion the banks made will attract them to use their

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service. Thus, it is likely that almost half of the banks customers have relations
with other banks. This shows that customers have the habit of wondering from
bank to bank for so many reasons.

Table-17: Respondents response any kind of credit facilities provided by

the bank?

Have you used any kind Number Percentage (%)

of credit facilities
provided by the bank?
Yes 2 40
No 3 60
Total 5 100

Source: Primary Data

From the above table17, 2(40%) of respondent replied that the customer have
used credit facilities provided by the bank and 3(60%) of the respondent replied
that they have not used any kind of credit facilities provided by the bank. From
this the researcher understand that majority of the customer have not used
any kind of credit facilities provided by the bank according to the majority of
the respondent.

Table -18: Purpose of the Loan Borrowers Requested

Purpose of Loan Number Percentage (%)

Requested
Residential Construction 3 60
Business Construction 0 0
Working Capital 0 0
Personal 1 20
Others 1 20
Total 5 100

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Source: Primary Data

There are different reasons why borrower(s) use loan like for construction of
residential house, commercial building and others, personal loans and any
other reasons. Developments of economy in the business sector in which the
borrowers operate are among the main reasons for the increasing loan need. As
shown in table 18, 60% of use for residential construction. The other use for
different purposes like personal loan 20% and 20% is for other purposes like,
purchase of machinery and equipment. This indicates the most of the Bank’s
loan is meant for construction and business construction.

Table-19: Opinion of Borrowers on Time Taking From Date of Application

to Date of Approval

What is the time taken for Number Percentage (%)

processing your loan application?
1-2 weeks 3 60
3-4 weeks 1 20
5-7 weeks 1 20
Total 5 100

Source: Primary Data

Even if recently the management of the bank is studying the way to shorten the
time taken for loan processing, there was a practice in the bank to process one
loan file more than several weeks as some borrowers informed. The reason for
this is the decision was made at different level of the credit committee
including board of directors. Due to this, the bank looses many customers. As
shown in table 19, almost 40% of the loan process takes long time and 60%
replied it takes shorter time. Time is the most precious resource now a day and
customers are sensitive about the time that the process takes. CBE’s focus
given for time taken was less. Therefore, the competitors are so alert on
searching gaps the other bank face and will publicly announce to compute on
it.

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Table-20: Responses of Borrowers on Relevancy of All Documents

Do you think that all the Number Percentage (%)

required documents you are
asked to present are
necessary?
Yes 4 80
No 1 20
Total 5 100

Source: Primary Data

Even though, the bank request borrowers to fulfill all the necessary
documents, it is difficult for borrowers to submit all the required documents.
But sometimes borrowers complain that there are unimportant documents
requested by the bank. As shown in table 20, 1 (20%) of borrowers believed
that banks request unnecessary documents. On the contrary 4 (80%) of the
respondents believed that the bank’s request of documents was appropriate.
But as a government institution the bank uses all its effort to be good for
customers to increase construction, provide job opportunity on the
construction area and to increase the number of qualified houses. Documents
are significant when the loan transferred to legal cases. The court primarily
determines considering the document and other obligations that the borrower
was willing to be guided at the time of the loan contract insured by his
signature. Therefore, as proved by the customer’s bank’s strictness in
document is reasonable.

Table-21: Responses on Problems of the Bank’s Lending Procedures

Do you think that the Number Percentage (%)

bank’s lending procedure
has got problems?

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 Yes 2 40
No 3 60
Total 5 100

Source: Primary Data

As shown in table 21, 2 (40%) of the respondents indicated that the bank’s
lending procedures have problems. Their main reasons are long processing
time, limited loan amount, repetition of documents during renewal, time taking
and high interest rate and complain about salary deduction etc. Their
suggestions and comments about the lending procedures of the banks have to
revise lending procedures, set minimum interest rate and improve deduction of
their salary. Thus, the CBE must prepare box for customers to give their
compliance and appreciation about the banks service and made continuous
follow up to satisfy the customers need.

 The reason customers choose CBE

The researcher also tried to collect information about the reason why they
choose this bank using the question “what unique services in relation to loan
service do you get from CBE?” Then, the customers forwarded the following
justifications:-

- Reasonable and faire interest rate from the market on loans product

- Long-term construction loan up to 30 years of retirement

- It appreciates loans by taking different source of repayment.

- The respondent also says there is no unique services get from CBE.

What is your opinion regarding to the follow-up made by the CBE?

- The customers clearly reveal that the follow-up made by CBE is

acceptable and reasonable. This is supported by about 80% of the
customers. But some customers write the follow-up made by CBE is
sometimes may face difficulty and the bank must consider this
occasions.

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- The follow-up is informative and good customer relation made by officers.

- Not take a force only communication.

- It allows skipping repayment formally.

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