ASSOSA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

ASSESSEMENT OF LOAN AND ADVANCE PROCESSING PRACTICE

A CASE STUDY ON ABAY BANK ASSOSSA BRANCH

A RESEARCH PROPOSAL SUBMITTEDIN PARTIAL FULFILLMENT FOR THE
REQUEMENTS OF BA DEGREE IN ACCOUNTING AND FINANCE

BY: -NAME ID

1/ ASFERAW ADMAS ----------------------------------------2234/11

2/ ASTEGACH DEMELASH--------------------------------0001/11

3/ ASRESIE SIMENEH ----------------------------------------0029/11

ADVISOR: GEDION F.

MARCH, 2021

ASSOSA, ETHIOPIA
ACKNOWLEDGEMENTS

First of all, we would like to thank God and his mother’s St. Merry for helping us in every
aspect of our lives. Next, we would like to thank our advisor instructor Gedion F. for his
encouragement, constructive comments, suggestions and guidance that made this proposal
possible. Thirdly, we are thankful tour parents for their finical and moral supports
throughout our endeavor. Further, we would like to thank Abay bank officials (managers
and employees) in Assosa branch who gave us valuable information in doing the proposal.
Finally, we would like thank all of our friends who contribute kindly with their advice and
suggestions.
 Table of contents

Title page

Chapter one

Introduction

1.1 Back ground of study ------------------------------------------------------------------------------------1

1.2 Statement of the problem -------------------------------------------------------------------------------2

1.3 Objective of the study------------------------------------------------------------------------------------2

1.3.1 General objective ------------------------------------------------------------------------------------2

1.3.2 Specific objective of the study ---------------------------------------------------------------------2

1.4 Significance the study -----------------------------------------------------------------------------------3

1.5 Scope the study -------------------------------------------------------------------------------------------3

Chapter two
2. Review related literature ----------------------------------------------------------------------------------3

2.1 History of banking ---------------------------------------------------------------------------------------3

2.2 Types of banks --------------------------------------------------------------------------------------------

3

2.3 Function of Abay Bank----------------------------------------------------------------------------------4

2.4 Loan account ----------------------------------------------------------------------------------------------4

2.4.1 Diaspora banking --------------------------------------------------------------------------------------4

2.4.2 Diaspora mortgage loan--------------------------------------------------------------------------------

5

2.4.3 Loan and Advance--------------------------------------------------------------------------------------5

2.4.4 Loan processing ----------------------------------------------------------------------------------------6

2.4.5 Types of loan-------------------------------------------------------------------------------------------6

2.4.6 Loan based on purpose ------------------------------------------------------------------------------7

2.4.7 Overdraw AL----- ------------------------------------------------------------------------------------7

2.4.8 Loan approval form ----------------------------------------------------------------------------------8

2.4.9 Loan settlement ---------------------------------------------------------------------------------------8

2.4.10. Over draft facility-----------------------------------------------------------------------------------8

2.5 Loan facility ---------------------------------------------------------------------------------------------8

2.6 Risk associated with lending ---------------------------------------------------------------------------9

2.7 Working capital financing and project financing loan --------------------------------------------10

2.8 Credit analysis ------------------------------------------------------------------------------------------11

2.9 Loan commitment --------------------------------------------------------------------------------------11

2.10 Establishing a written loan policy ------------------------------------------------------------------11

2.11 Empirical literature review-------------------------------------------------------------------------12

Chapter three
3. Research methodology----------------------------------------------------------------------------------13

3.1 Research design --------------------------------------------------------------------------------------13

3.2 Method of data collection ----------------------------------------------------------------------------13

3.3 Target population and sample size ------------------------------------------------------------------13

3.4 Data analysis -----------------------------------------------------------------------------------------13

CHAPTER FOUR

4. Time schedule and Budget -------------------------------------------------------------------------14

4.1 Time schedule--------------------------------------------------------------------------------------14

4.2. Budget -----------------------------------------------------------------------------------------------15

CHAPTER ONE

Introduction

Background of the study

Financial institutions are one of the most heavily regulated of the all business in the world.
Around the global the service, firms face stringent government rule committing the service they
can offer, the territories they can enter or not enter. The makeup of their portfolios of assets,
liability and capital and even how they price and deliver the service to the public (Rose, 2010)

Banking occupies one of the most important positions in the modern economic world. It is
necessary for trade and industry. Hence, it is one of the greatest agencies of commerce. It is the
financial institution that accepts deposit of money from the public and keeps the main its custody
for safely (kcshekar, 2005).

Loan is an amount of money advanced to borrower to be required at the later date, usually with
interest. Legally a loan is a contract between borrower and lender, enforceable under commercial
code in most states. The terms and conditions for re-payment of a loan, specified in a loan may
be payable on demand or demand loan in equal monthly installments (Lakshmi&Shekhar 2005).

It is generated for a definite period and borrower is given the facility to repay it in one lump sum
or installments. It also defined as when a lender gives money or property or repays the borrowed
money along with interest on agreement at a determined date in the future. According to the
Shaker (2005), loan generates the largest share of operating income at most banks. As far as
banks are concerned, the operating cost of a loan is lower as compared to a cash credit or an
overdraft. This method of granting loan and advance has the advantage of strengthening the
financial discipline in the use of the bank credit that could be more effective in the case of loan
as compared to cash credit. The three basic types of loans are pure discount, interest only loan
and amortized loan.

1. Interest only loan: a types of loan repayment plan calls for borrower to pay interest each
period and to repay the entire principal (original loan amount at some point in the future).
2. Amortized loan: with a pure discount loan or interest only loan, the principal is repaid all
at once.
3. Pure discount loan: is the simplest of loan with a such loan, the borrower receives money
Today, and repay a single lump sum at some time in the future (Rose, 2006)

1
Statement of the problem

Banking industry from its nature is a bit wide and modern which has various function within its
structure such as lending, deposit and remittance. Therefore, the profitability of the bank is
affected by the loan and advance system. Lending activities require a bank to make judgment
related the creditworthiness of borrowers. Because, banks face a credit risk when the borrowers
fail to meet the terms of a loan agreement (Jhingan,2012). Abay bank is one of the strong private
commercial banks playing important role in the country’s banking industry and economic
development. Among the services provided by the bank, loan extending would be one of the
principal activities. Abay bank has a better share in the financial market. But one of the major
problems faced by the bank assed by the prior studies is existence of non – performing loan
(NPL), but this study will primarily focus on assessing both the non-performing loans and credit
risks associated with lending problems in loan and advance processing practice. The borrowers
of Abay bank may be either in default or close to being default. Although the bank has been
working for the better position of non-performing loans, i still needs great attention. This is
because of two reasons. First one is loan is the ultimate source of profit for banking and the
second one is banking in one country economy is used as a channel for the conversion of saving
in to capital (Gary, 1991). Due to this, the researchers will assess the loan and advance
processing practice in Abay Bank Assosa Branch. This study will try to answers the following
questions.

 What are the types of loan and advances provided by Abay bank?
 What are the problems faced by the bank and borrowers with loan and advance?
 How does the bank evaluates loan and advance processing?
 Has the loan and advance processing practice contributed to the occurrence of
non-performing loan?

Objectives of the study

1.1.1 General objective

The general objective of the study is to assess the loan and advance processing practice of Abay
Bank in Assosa branch.

1.1.2 Specific objectives of the study

 To identify the types of loan and advance practice of the bank
 To examine the problem faced by the Bank and borrowers in loan and advance
 To assess the loan and advance evaluation practices of the bank
 To assess whether the loan advance processing practice contributed to non- performing
loan.

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1.4 Significance of the study

This study will contribute to solve the problems that are observed in the loan and advance
processing practice of Abay Bank. And it gives a possible solution as to how the managers and
credit officers should process potential healthy loans during loan and advance processing system.
This research will also increase the knowledge and understanding of the researchers and could
serve as a starting point for researchers who have an interest
to conduct further study in the area.. Finally, it helps as a guideline to the concerned managers of
the bank with regard to how they properly address the credit need of their customers.

1.5 Scope of the study

Abay Bank is a huge company having 104 branches in all parts of the country. In this case this
study might be more attractive and important if it was conducted on a country level. However, it
might be quite difficult in terms of time and money to have that information from all branches.
Due to this, the research would be forced to delimit its scope only to assess loan and advance
processing practice of Abay Bank in Assosa branch.

CHAPTER TWO

2. Review of related literature

2.1 History of banking

As we seen the history of bank the world “Bank” is derived from “Banc us” or” Banque or Bane”
all terms however mean branch up on which the medieval European money lenders or money
lenders or changers used to care on their monetary transactions. The term Bank or “Banking”is
generally used in every broad sense including the capitalist, the financiers, the stock brokers, the
corporations. Banking company which carries on as its principal business the accepting of the
deposit of money on current account or subject to withdrawal by cheque (T. N. HAJELA 2015)

2.2 Types of banks

Broadly speaking there are different types of Bank these are, Commercial bank, Industrial bank,
agriculture bank and foreign exchange banks. The responsibility function of commercial Bank
generally advance short term loan to business men and traders, because them deposits are only
for short period. Generally, these Banks give loans for a period extending from six months to six
months. Industrial Bank these are special types of as the name itself suggests. They extended
long term loans to industries. They also help industrial firms in selling and purchasing debenture
and shares. Agricultural Bank for meeting the requirement of agricultural community, special
types of bank have been set up in predominantly agricultural countries. The agriculturalists and
peasants require short term loan to purchase various inputs like seeds, fertilizers etc. Foreign

3
exchange Banks these Banks specialize in financing foreign trade by making international
payments through the purchase and sale of foreign exchange bills (T. N. HAJELA 2015)

2.3 Function of Abay Bank

Function Abay Bank has to perform variety of function which is common in either development
and underdeveloped country or nation. Those are:

A. Saving deposit account: saving and deposit account is an interest bearing deposit it which
can be opened with a minimum acceptable of birr 25:00
B. Special saving deposit account (SSDA): A special saving deposit account is a non interest
Bering account. The account is opened similar to that of a saving account. Source:
manual of Abay Bank
C. Child trust account: The account is opened for under –aged individual (minor) by the
parents or guardians of the minor, or by a court order.
D. Provident fund account: This account is opened for administration of provident fund
accounts.
E. Zero –balance account: This account maintains a disbursing account at “zero” by
transferring funds from a saving account,
F. Demand or current account: A demand deposit account (current or chequing account) is a
non-interest bearing account. The minimum amount of money required for individual
trade operators is birr 25000 while for private limited companies and others it is birr 500.
The account is operated by cheque.
G. Fixed time deposit account: it’s a deposit received for a certain period of time it provides
an attractive and higher interest rate. The minimum balance for a fixed time deposit is
birr 2,500,00000.
H. Foreign currency account. A foreign currency account is an account whose sources of
fund is overseas and can be maintained in hard currency or in birr. Major types of foreign
currency accounts: non-resident non-transferable foreign currency and Diaspora account.
Source: manual of Abay Bank
2.4 Loan account

Abay Bank provides a range of credit services that are supposed to fit the existing and future
demands the customer. The Bank loan service include: overdraft, overdraw, merchandise loan,
import letter of credit, import of letter of credit settlement loan advance bills, term loan for
various sector etc. source of Abay Bank.

2.4.1. Diaspora Banking

In line with our objective of “Banking “for all”, we have extended our service to Ethiopia
Diaspora that suit their Banking needs while they are living and working abroad. Using Abay

4
Bank Diaspora banking service, you are guaranteed to easily access; Diaspora account, credit
facilities, Diaspora mortgage loan, Diaspora investment loan etc. manual of Abay Bank.

2.4.2. Diaspora mortgage loan

This services are unique in its kind in the sector in which the Bank pays as facilitator and arrange
the mortgage loan scheme to Diaspora customers to their dream house by saving 50% of the cost
in the foreign currency. Sources manual Abay Bank.

2.4.3. Loan and advance

Loans and advance are financial instruments originated by the Bank by providing money to the
debtors. The loan and advance are stated at cost less impairment losses. Impairment losses
comprise specific provision against identified as bad and doubtful and general provisions against
losses when are likely to be presented in only loans and advance portfolio. The Bank follow the
national Bank of Ethiopia supervision of banking business directive number SSB43/2007. In
determining the extent of provision for impairment losses. The directive classifies loans and
advance in to the following.

1. Pass loan: loans and advance in this category are fully protected by the current financial
and paying capacity of the borrower and are not subject to criticism. In general loans and
advances which are fully secured both as to principal and interest by or cash substitutes
are classified under this category regardless of past due status or other advance credit
factors.

2. Special mention: any loan or advance past due 30 days or more but less than 90 days is
classified under this category.

Sub-standard: None performing loan or advance past due 90 days or more but less than
180 days is classified under this category.

3. Doubtful: non-performing loans or advances past due 180 days or more but less than 360
Days is classified as doubtful.

4. Loss: Non- performing loan or advance past due 360 days is classified a loss.

According to the National Bank of Ethiopia’s directives number SSB43/2008 and

international practice the non-performing loan of any bank should be below 5% its total
loan. Source: manual of Abay Bank.

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2.4.4 Loan processing

Entire sequences of steps from the time a loan application is received (a loan offer is
accepted) to the time loan is closed. Steps involved in loan processing 1 st Borrowers must
first contact the clients guidance and advisory of loan division 2 nd for detailed
discussions on loan application the project idea background, equity contribution etc 3rd
the department may either accept or reject the application at prima facie consideration
based on policy or technical contents of application form grounds 4 th appraisal work is
carried out by the loan division, checked by the general manager, commented on by loan
committee and for awarded to the board of management for approval (Christine peter,
2004)

 Require loan processing document

For a loan application accepted based on the interview the customer’s relationship officer collect
all processing documents based on the check list. The statements may be actual and or project in
the following manner.

A. All business established as share companies should submit audited financial statements
regardless of the requested loan type and amount.
B. All business established a private limited company’s sole proprietorship that has been in
business for a year or above and whose total exposure exceeds birr 5000,000 should
submit audited finical statements.
C. All business established as private limited companies whose total exposure is less than
birr 5000000 must present provisional financial statements for at least three consecutive
fiscal years. Source: manual of Abay Bank.

2.4.5 Types of loan

Banks make a wide variety of loans to a wide variety of customers in order to address the credit
need of the business society. Bank divides their loan in to different groups for different purpose.
These are based on purpose and maturity (Rose, 2002)

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2.4.6 Loan based on purpose

Bank loans can be classified according to the purpose for which is borrowed, for example:

Commercial loan is provided to large or small companies who use the funds provided to make
purchase or make payroll and pay back to the lender over an agreed up on time, usually for a
short term (from 30 days to one years). Loan given for trading activities such as purchasing
inventories.

Industrial loan: A loan gives for industrial activities

Consumer loan: an amount of money lent to an individual, usually on a non-secured basis for
personal family house hold purpose.

Mortgage loans: loans advanced for purchase of residential houses and commercial building are
classified under this category.

Construction loan: is relatively short term credit that repaid when builder obtains long term
credit are repaid (Rose 2002)

 Requirements to be considered for mortgage loan

1 The maximum term of the loan should not exceed 5 (five) years.

2 The source of payment towards the loan could be either from monthly salary for employed
personnel or income from business for business people.
3 Disbursement should be effected directly to the suppliers/seller after transfer of ownership
(title deeds) in the name of the borrower is completed and submitted to the bank and also up
on registration of the same with the appropriate government authority. Further written and
signed consent of the borrower should be obtained prior to disbursement.
4 Borrower should offer primarily the building to be purchased as collateral for the loan and /or
others acceptable collateral: source Abay Bank

2.4.7 Overdraw

A) An over drawl is a temporary facility that’s a customer the right to with draw a specified
amount of fund over and above the overdraft limit in order to meet unexpected cash
shortage.
B) In principle the Bank does not encourage an over drawl, but in a certain circumstance,
depending on the relationship with the customer over draw may be allowed for a maximum
period of two months (60 days) and may be approved only once in a twelve (12) month
period.
C) The over draw amount should not exceed 25% of the approved over draft limit or birr five
million whichever is lower.

7
2.4.8 Loan approval form

Loan approved form: is the principal of credit decision document on which relevant on which
relevant information the loan request, recommendations and the credit decision of the credit
approving team individuals are to record. The loan application form includes: amount of loan
requested, loan term purpose of loan, source of funds recover loan and types of collateral needed
etc. (Christine peter 2004).

2.4.9. Loan settlement

Settlement document prepared by lending institution and present to the borrower at the loan time
showing the amount and frequency of the settlement for the loan repayment.(www.business
dictionary. come.)

2.4.10. Over draft facility

 An overdraft is a form of credit facility by which a customer may be allowed to draw beyond
the deposit of its current accounts for the sole purpose of the day to day operational needs of
a viable an ongoing business. The outstanding balance of the over draft is re payable on
demand by the Bank. It is financed for a limited duration normally for six months and in
exceptional cases for one year.

 Based on strict and continuous follow up the Bank shall call back the outstanding over draft
loan balance at any time when its performance is un satisfactory unless considered
exceptionally.

 Over draft facility shall be reviewed every six months unless the bank demand it to be
reviewed by the credit approving team for any remedial action when the performance of the
account it deteriorating.

 Interest is charged on the overdraft facility’s outstanding balance on daily basis. Source
credit manual of Abay Bank.

2.5. Loan facilities

Abay Bank currently offers services for diverse credit needs with fixable borrowing options. An
arrangement where a person or organization can borrow money up to a particular amount if and
when they need it.

1. Merchandise loan facility: merchandise refers to a specific product or group of products

goods manufactured or acquired by a trading business for purpose of sales. A merchandise loan

8
is a short term credit facility providing by the Bank against which the merchandise or document,
evidence (railway receipt, ware house receipt and air way bills held as a pledged or collateral for
the loan). The purpose of merchandise loan facility is reliving customer from cash flow problems
arising from money being up in the merchandise. Merchandise loan facility shall be every year.
The amount of merchandise loan facility has to be up to maximum of 80% of advance rate,
depending on the type of merchandise, customer satisfaction and credit risk grade level. Source
credit manual of Abay Bank

2. Staff consumer loans: staff members can enjoy consumer credit facility, however details
governing this arrangement are provided separately in the human resource policy of the Bank.

3. Building construction loan: are loans to be advanced to individuals and enterprises to

partially cover construction or renovation cost of residential and non-residential building.

Eligibility criteria

To obtain credit facilities from the bank applicant should at least full fill the following criteria.

1 Applicants should be legally licensed and have been in the captioned business to be financed.

2 Applicants should be able to present any document required from them for smooth processing
of the loan.

3 Applicants should be having any prior record of loan defaulting in any Banks.

4 Construction machinery loan: construction machinery loan is a loan for the purchase of
construction machinery such as dozer, grader, loaders, excavators etc.

 Eligible criteria
A. Applicant should be legally licensed and have been in the captioned business to financed.
B. Applicants should be able to present any document required from them for the smooth
processing of the loan.
C. Applicants should not have any prior record of loan defaulting in any Bank. Sources;
credit manual of Abay Bank.

2.5 Risks associated with lending

Banks accepts risk in order to earn profit. They must balance alternative strategies in terms of
their risk/return characteristics with the goal of maximizing shareholder’s wealth the office of
comptroller of the country. Lists nine risk for purposes of Bank supervision, some of them.

1 Financial risk: Dose intern comprise two types of risk.

9
Pure risk: includes liquidity credit and solvency risk which can be result in losses for a bank if
they are properly managed. (Peter’s rose 1999). Speculative risk: are based on finical arbitrage
and can result in a profit if the arbitrage is correct or loss if it is in correct. The main categories
of speculative risk are interest rate risk, currency risk, and market price risk.

2 operational risks: are related to a bank over all business strategy, organization functioning of
internal systems including computer related and other technologies. Complain with bank policies
and procedures.

3 business risk: are associated with Bank business environment including macroeconomic and
legal regulatory factors.

4 Credit risk: the risk that a firm’s customer and the parties to which it has lent money
will fail to make promised payment is known as credit risk.
5 Default risk: is the probability that promised payment of interest and principal will not
be made on the time (Peters rose 1999)

2.6 General features of term (working capital and project financing loan)

 Working capital financing loan: provide business with short term credit, lasting forming a
few days to about one year. Working capital loans are most often used to fund the purchase
of inventories or raw materials.
 Project financing loan: the riskiest of all business loans are project loans- credit to financing
the construction of fixed assets designed to generated a flow of revenue in future periods.
Prominent examples include oil refineries and power plants (Sylvia c, hundgins,2010).
 A term loan: is a loan granted to customers to be repaid within a specific period of time
with interests.
 Short term loan: is a loan extended by the bank to finance the working capital needs,
and or to address other short term financial concentrates of the borrower’s business. The
maturity period of short term loan must not exceed one year from the date of signing the
loan contract. Repayment period is quarterly and semi-annually based one the cash flow
generated capacity of the business.
 Medium term loan: is a loan which has a maturity period exceeding one year but less
than or equal to five years from the date of signing the loan contract.
 Long term loan: is a loan which has a maturity period longer that five but not exceeding
a maximum period of fifteen(15) years with periodic installment purpose of the loan is to
financing new projects and to meet working capital needs. Repayment period is quarterly,
semi-annually and yearly. Source credit of Abay Bank.

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2.8 credit analysis
Credit analysis: is the evaluation of borrower’s capacity of properly servicing the loan
proper credit analysis the core part of quality loan in a bank in doing this. The five basic
credit factors (5C, s) to be evaluated; character, capacity, capital, collateral and condition.
Character: refers to the borrows reputation and the borrower’s willingness to meet credit
obligations. In evaluating character, the borrower’s honesty integrity and trust worthiness are
assed.
Capital: refers to the owner’s level of investment in the business. The customer’s financial
reserves
Collateral: also called security is the assets that the borrower pledges to the bank to mitigate
the Banks risk in event of default.
Condition: general economic conditions in the customer’s line of business. Are external
circumstance that could affect the borrower’s ability to repay the amount financed. (timothy
w. Koch, 2006)

2.9 Loan commitments

These days most commercial and industrial loans are made by firms that takes down (or
borrower against) renegotiated line of credit or loan commitments rather than borrow spot loans.
Spot loans are made by the financial institutions and the borrower uses or takes down the entire
loan amount immediately. Loan commitments agreement is a contractual commitment by a
financial institution to lend to a firm a certain maximum amount at give interest rate (Anthony
Saunders, 2010)

2.10 Establishing a written loan policy

One of the most important ways of a lending institution can make its loans meet regulatory
standards and are profitability is to establish a written loan policy. Such as a policy gives loan
offers and management specific guidelines in making individual loan decision and in shaping the
overall loan portfolio. The loan policy is not functioning effectively and should be either revised
or more strongly enforced. What should a loan policy contain? The most important element of a
will written loan policy. These elements include.

1. A loan statement for the loan portfolio (i.e. statement of the characteristics of a good loan
portfolio in terms of types, maturities, size and quality of loans).

2. Specification of the lending authority given to each loan office and loan committee (measuring
the maximum amount and types of loan that each employee and committee can approve and
what signatures of approval are required)

3. Lines of responsibility in making assignments and reporting information.

11
4. Operating procedures for soliciting, evaluating and making decisions on customer loan
applications.

5. The required documentation that is to accompany each loan application and what must be kept
in the lenders files (financial statements, security agreement’s etc.).

6 Guide lines for taking evaluating and performing loan collateral. (Rose, 2006)

2.11 Empirical literature review

2.2 Empirical literature review

According to Vonpischke (1991), identified problem as a major
Cause of poor loan recovery performance credit project design problem and credit project
implementation problem. Credit project design problem include debt Vs equity, book
keeping conveniences Vs loan cash flow patterns. Loan project implementation problem
include low services levels, coordination access (i.e. information problem and lack of
decision making experience in landing to specific target groups) and financial recording.
According to Abafita (2003), analyzed the Abay bank repayment performance of Abay
loan and saving institution in Ethiopia. According his finding sex lionize and number of
dependents are negatively related to loan repayment on the other hand age was found to
be positive, while age guard turned to be negatively, income from activities financed by
loan repayment period suitability and loan supervision are positively and significantly
related to loan repayment performance.
According to Vigano (1993), employed loan scoring model for development bank
based on sample borrowers in the development bank of Burk nafanso. He found out that
being women married, aged, more business experience value of asset, small periodical
repayment related to loan repayment performance.

12
CHAPTER THREE

3. Research methodology

3.1 Research design

The research uses descriptive type of research design. Because this study describes and
summarizes the data about a particular events and helps to describe about what has happened or
what is happing.

3.2 Methods of data collection

To make the research reliable, the researcher will use primary data sources. Primary data will be
collected by way of interview with bank officials, mainly with bank manager and loan officers,
and through questionnaires.

3.3 Target population and sample size

The target population of the study will be employees of Abay Bank, Assosa branch. In Abay
Bank Assosa branch, there are 10 employees including managers. Therefore, the researchers will
use a census method of data collection through questionnaires, because the size of the population
is small.

3.4 Data analysis

After collecting the necessary data, the researchers will analyze the data through appropriate
tools. The data collected through structured interview will be analyzed by the qualitative analysis
method, and the data collected through questionnaires will be analyzed and interpreted by using
quantitative techniques such as frequency, percentage and tabulation.

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CHAPTER FOUR

4. Time schedule and Budget

4.1 Time schedule

No Activities February March April May June July

1 Title submission x

2 Title selection x

3 Literature review x

4 Proposal writing x

5 Proposal first draft submission x

6 Proposal final draft submission x

7 Proposal presentation x

8 Data collection and process x

9 Data analysis and interpret x

10 First draft research writing x

11 Final draft research writing x

12 Research presentation x

14
4.2 Budget

NO Items Unit of measurement Output Unit price Total

1 Paper Page 250 1.00 250.00

2 Pen Unit 10 10.00 100.00

3 Ruler Unit 1 12.00 12.00

4 Mobil card Unit 6 25.00 150.00

5 Binding Cover page 3 10.00 30.00

6 Flash Disk 16GB GB 1 250.00 250.00

7 Photocopy Page 45 0.75 33.75

8 Printing Page 48 1.50 72.00

9 Miscellaneous - - - 200.00
expenses

10 Total - - - 1097.75

15
References

Anthony Saunders, (2011) financial institution management, international edition, 7th Edition
Christine peter, (2004) Ethiopian business development service network, Addis Ababa Ethiopia.
Gary, (1991) money banking and financing intermediation Addiso-wesely publishing company.
Jhinganm.l (2012), money banking international trade and public finance veranda publications
1td,8th Edition
Peter s. Rose (2010), commercial bank management USA Irwin/mc grew, hill 8th edition
Shekher,kc (2005) banking theory and practice, New Delhi vkas publication
Sylivac,hundgins (2010)banking management and financial service, published by mc graw-hill,
international edition, 8th Edition.
T.N hajela, (2015) money banking and international trade, published by one books private
limited company,8th Edition
Timothy w,Koch (2006) banking management, printed in United State America 6th Edition
www.abay bank.et.com
www.business. Dictionary.com

16
 ASSOSA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

QUESTIONNAIRE FOR ABAY BANK MANAGERS AND EMPLOYEES

This questionnaire is designed for the purpose of collecting data on assessment of loan and
advance processing practice which is required for senior essay as an integral part of our study.
Your participation increases the credibility of this paper and we assure you that the study would
be undertaken with utmost confidentiality. The data that will be collected from you is used for
the academic purpose only. Therefore, we request you to help us in answering these questions
below. Your response has a great value to the soundness as well as the validity of the study
finding.

Note

 No need of writing your name

 Pease put (x) mark on the box which is correspondent to your answer (Where needed).
 Thank you your cooperation in advance.

Background of the respondent

1. Sex male female

2. Education level

Diploma BA Degree Certificate above BA degree

3. Indicate you work experience in Bank credit process.

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 Below 1 year 1-2 years 3-5 years 5-10 years Above ten years

4. Your current position in the branch

Loan officer Branch manager division head (loan) section head (loan)

Credit analyst

OBJECTIVE RELATED QUESTIONS

5. Which type’s loans are provided by Abay Bank?

construction loan Transport

Agriculture loan Import export

consumer loan manufacturing loan

Domestic trade service

6. What are the main problems that the Bank is currently facing in loan processing activity?

Adverse economic condition

Lack of information about customer

Lack of qualified staff

Government regulation policy

Competitors entrance in the industry.

7. Are the customers willing to disclose any information the bank needs for loan and advance
Processing?
Yes No

8. Which loan facilitates are available in Abay Bank?

Overdraft Term loan

Guarantees Over drawl

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 9. Which department of the Abay Bank approves credit facility requests by prospective
borrowers?

Branch credit committee

Manager credit committee

Executive Management credit committee

Board committee

10. Does Abay Bank has collateral evaluation criteria?

Yes No

11. What assets the Bank would accept as collateral?

Building Inventory Machinery Vehicle

12. How do you evaluate the effectiveness of Abay Bank loan processing and follow up
Activity?
High Medium Low

13. Do you think Abay Bank achieves its objectives in relation to loan processing?

Yes No

14. Is there any effort exerted by Abay Bank to create customers’ awareness about loan?

Yes No

15. Is the loan agreement properly documented?

Yes No

16. What types of Non-performing loans does Abay Bank face?

Yes No

17. How much is loan to collateral ratio of the Bank?

40% 50% 60% 80%

18. Does Abay Bank apply loan portfolio management?

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 Yes No

19. Does the bank have working capital financing loan and project financing loan?

Yes No

INTERVIEW QUESTIONS

1/ What are the requirements expected from the applicants to get loan from the Bank?

2/ What are the major problems facing the bank with regard to loan processing?

3/ In your opinion what is the impact of loan processing practice on non- performing loan?

4/ How does the bank evaluates the creditworthiness of the customer?

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