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To Recommend The Likely Policy Implication Based On The Findings of The Study
To Recommend The Likely Policy Implication Based On The Findings of The Study
MARY'S UNIVERSITY
BY
MARSILAS TARIKU RAD/0055/2012
FEVEN DEMELASH RAD/0294 /2012
YOHANES ASSEFA RAD/ 0074/2012
SUBMITED TO
MR.YEWALASHET
.
ACKNOWLEDGEMENT
First and foremost, we would like to thank the Almighty God who gave us the
courage through his endless love and blessings that helped us start the study. It is
through His abundance grace that has brought this research work this far. Also I
would like to thank my advisor, MR.YEWALASHET, for his unreserved advice,
guidance, and evaluation that has support me to complete this research paper .
.
.
Table of Contents
CHAPTER ONE:............................................................................................................................................3
1. INTRODUCTION.......................................................................................................................................3
1.1 BACKGROUND OF THE STUDY...........................................................................................................3
1.2 STATEMENT OF THE PROBLEM.........................................................................................................4
1.3 Research Questions..........................................................................................................................5
1.4 Objectives Of The Study....................................................................................................................5
1.4.1 General objective.......................................................................................................................5
1.4.2 Specific objective........................................................................................................................5
1.5 SIGNIFICANCE OF THE STUDY...........................................................................................................5
1.6 DEFINITION OF THE TERMS OR CONCEPTS.......................................................................................5
1.7 DELIMITATION/SCOPE OF THE STUDY..............................................................................................6
CHAPTER TWO:...........................................................................................................................................7
2. REVIEW OF THE RELATED LITERATURE...................................................................................................7
2.1 Theoretical Literature.......................................................................................................................7
2.1.1 Financial Institutions..................................................................................................................7
2.1.2 The Purpose of Development Banks..........................................................................................7
2.1.3 Development Bank of Ethiopia..................................................................................................7
2.1.4 The Role of Loan Collection in Financial Institutions.................................................................8
2.1.5 The Process of Loan Collection in Financial Institutions............................................................8
2.1.6 Credit Risk Management............................................................................................................8
2.1.7 Credit Analysis and Approval Process........................................................................................8
2.1.8 Reasons for Loan Delinquency...................................................................................................9
2.1.9 Performing Loans.....................................................................................................................10
2.2 Empirical Literature.........................................................................................................................11
2.2.1 Summary of Empirical Literature.............................................................................................12
CHAPTER THREE:.......................................................................................................................................13
3. RESEARCH DESIGN AND METHODOLOGY.............................................................................................13
3.1 Research Design...............................................................................................................................13
3.2 POPULATION, SAMPLE SIZE AND SAMPLING TECHNIQUES:............................................................13
3.2 DATA TYPE AND SOURCE.................................................................................................................14
3.3 Data Gathering Tools/Instruments..................................................................................................14
.
3.4 METHOD OF DATA ANALYSIS...........................................................................................................15
3.5 ORGANIZATION OF THE STUDY........................................................................................................16
3.6 WORK PLAN (TIME SCHEDULE)........................................................................................................17
3.7 COST /BUDGET SCHEDULE..............................................................................................................18
LISTES OF REFERENCES..............................................................................................................................19
APPENDIX..................................................................................................................................................20
CHAPTER ONE:
1. INTRODUCTION
1.1 BACKGROUND OF THE STUDY
.
2
Development banks are viewed as a crucial tool to correct market flaws that would prevent the funding of
either commercial initiatives or enterprises that produce good externalities (Bruck 1998, Yeyati, Micco
and Panizza 2004). These banks help to reduce capital scarcity and encourage entrepreneurial activity to
strengthen new or existing businesses in economies with major capital constraints (Armendáriz de Aghion
1999; Cameron 1961). Additionally, they provide loans to businesses who would not invest in projects if
long-term, subsidised capital from a development bank wasn't available (Rodrik 2004, Yeyati, Micco, and
Panizza 2004). Despite these advantages, development banks and state-owned banks in general are
sometimes blamed for assisting politically linked businesspeople (Antunes, Cavalcanti and Villamil 2012,
Lazzarini, Musacchio, Bandeira-de-Mello and Marcon 2015)
The development bank of Ethiopia (DBE) is one of the financial institutions engaged in Providing short,
medium and long term development credits. The "project"-based lending tradition of DBE sets it apart
from other lenders. The Bank carefully chooses and prepares the projects it finances through thorough
appraisals, close supervision, and objective evaluation. The bank has been actively fostering the overall
economic development of the nation ever since it was founded.
The Society for the Promotion of Agriculture and Trade (also known as The Societe Narional d' Ethiopie
Pour le Development de l' agriculture et de Commerce) was founded in the Menelik II era in 1909,
marking the beginning of the Development Bank of Ethiopia's history. Since then, the Bank has gone by
various names. Since then the Bank has taken different names at different times although its mission and
business purpose has not undergone significant changes except for occasional adjustment that were
necessitated by change in economic development policies of the country.
In long years of existence, DBE has established recognition at national and international levels.
Nationally, it is the sole Bank with reputable experience in long term investment financing.
Internationally, it is recognized as an important on leading channel for development program financed by
bilateral and/or multilateral sources. Currently DBE has Head twelve districts and one hundred seven
branches (www.dbe.com.et.).
Controlling non-performance of loans is essential for both an individual bank's success as well as the
performance of the financial sector as a whole due to the growing complexity of the banking industry and
the changing operating environment. and the financial environment of the economy (Kenneth, 2013).
To the best of the researcher's knowledge, there have been no earlier studies completely focusing on
institutional issues affecting the Development Bank of Ethiopia's loan collection performance, despite the
extensive related studies completed at the national and international levels. Therefore, by concentrating
on the factors affecting loan collection performance from the perspective of the institution, the study
seeks to close the gap in the literature.
Credit has long been acknowledged as a crucial element for ensuring the success of development
initiatives that promote economic growth. Similar to this, the Addis Ababa District of the Development
Bank of Ethiopia offers sustainable lending facilities for people working in the manufacturing, agro-
processing, agricultural, tour-operating, mining, and other sectors that can lead to national development.
.
3
Currently, the Development Bank of Ethiopia, Addis Ababa District, gives the government's priority
sectors the attention they need in order to boost the economy and lower unemployment. Therefore, in
order to maintain this goal, the bank needs to carefully examine the variables that affect loan repayment
success; otherwise, there will be insufficient credit allocation, which will result in poor investment
projects. However, granting credit on its own does not contribute to the country's economic growth unless
it is done in combination with efficient financial use to enable loan repayment in line with the terms of the
agreement.
The bank's capacity to remain sustainable rests not only on its access to local and international capital but
also on how well it recovers its loans. To ensure that the bank can continue to operate as a bank and
maintain a bankable asset quality, its clients' loan repayment performance must be effective.
Consequently, the bank must improve loan recovery in order to sustain this goal by strengthening its
liquidity position.
A bank's ability to collect loans could be impacted by a number of variables. The majority of studies
concentrate on aspects connected to customers. Some of the issues identified in other studies, include lack
of monitoring, high interest rates, inadequate loan sizes, improper loan appraisal and client selection,
employee and client training, lack of use of technology and cost-effective methods, human resource
issues, loan capital issues, and a weak loan collection system. One of the main causes of the failure of
many banks worldwide, particularly in developing nations, is poor loan collection performance
According to the government's strategic goals, term loan projects funded by the Bank have prolonged
loan repayment terms of up to twenty years, with a maximum five-year grace period. Additionally, the
bank stands out from other lending organizations due to its low interest rate compared to commercial
banks. The interest rate of DBE is 8.5% for projects in priority areas and 9.5% for those not in priority
areas (DBE Loan Manual, 2022).However, provision of credit alone does not support the economic
development of the country unless it is accompanied by the effective credit management for efficient
utilization of the fund in order to repay the loan in accordance with the agreement (Tekeste
Gebrekidan ,2016)
Development Bank of Ethiopia has a serious problem of Nonperforming loan that is 40% of the total loan
portfolio of the bank as of Oct 1, 2018 analysis (www.capitalethiopia.com). This shows very far below
the accepted non-performing loan directive of National Bank of Ethiopia number SBB/48/2010 which is
5%.
As a result, the primary goal of this study will be to examine the variables that influence the development
bank of Ethiopia's performance in terms of loan collection. The study's findings might help the bank
understand the crucial elements of loan repayment and help it take the appropriate action.
The current study will aim to close the research gaps of high Nonperforming loan by concentrating on the
elements influencing DBE's Addis Abeba loan collection performance and tries to address the following
fundamental research questions:
1.3 Research Questions
4
What is the existing loan collection strategy of the DBE?
What are the challenges on the loan collections performance of DBE?
What are the major staff related factors that affect Loan Collection performance of DBE?
How operational efficiency affect Loan Collection performance of DBE?
This research is expected to close a gap in the literature and assist the Development Bank of Ethiopia in
using the findings to enhance their operations and loan collection performance.
The study's findings will aid practitioners and academics in understanding how the Development Bank of
Ethiopia's loan collection performance is influenced by different issues.
Additionally, future academic and business research in the topic area are likely to use this research as a
starting point and a source of information. The study is also significant to identify the types of assistance
that needed to be provided to curb such challenges so as to take specific measures to be taken to improve
loan collection performance of Development
The study will help the bank improve the efficiency and effectiveness of loan collection from its clients
by demonstrating to the bank's management and other interested parties the present status of loan
collection performance.
Borrower: borrower is the one who borrows money from the lender (Bank). (Armendáriz, 1999)
Credit: is a legal arrangement whereby the borrower receives something of value now and pledges to pay
the lender back at a later time, typically with interest. (Armendáriz, 1999)
.
5
Default; Liquidation, bankruptcy, loan loss or charge off, nonperforming loans, or loans that are late on
payments are all considered forms of default and are used as stand-ins for default by many banks.
(Armendáriz, 1999)
Lending: When one party provides resources to another party (gives a loan), there is a debt created since
the second party doesn't immediately compensate the first party. Instead, the second party makes
arrangements to repay or return the resources at a later time. (Armendáriz, 1999)
Nonperforming loan (NPL); is a loan when the borrower has fallen behind on payments for a
predetermined amount of time and is therefore in default. Despite the fact that the specifics of
nonperforming status might change based on the conditions of a certain loan, "no payment" is typically
understood to mean that there have been no principal or interest payments. Additionally, the time frame is
different based on the sector and loan type. (Armendáriz, 1999)
The research will be concentrating on developmental bank branches found in Addis Ababa district with
the title Factors affecting loan collection performance.
The study's emphasis will be on how institutional issues affects the Development Bank of Ethiopia's
performance in collecting loans.
Geographically, the investigation will be restricted to the Development Bank of Ethiopia's Addis Ababa
headquarters. The decision to limit the study's geographic reach and data collection options to the head
office was chosen in part because the data from the head office of DBE seems to be representative of all
of the company's branches in terms of the services it provides, the kinds of clients it serves, the various
types of projects it lends money to, and the analysis employee demographic factors. As a result, the
study's target demographic is restricted to those who work at the corporate headquarters. It excludes
borrowers of the Development Bank of Ethiopia due to capital and borrower availability constraints. Both
primary and secondary data were used in the investigation.
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CHAPTER TWO:
2. REVIEW OF THE RELATED LITERATURE
2.1 Theoretical Literature
According to the definition, a financial institution is "an establishment that offers financial services to its
members or clients. A financial institution is any organization that receives funds and invests them in
securities like stocks, bonds, bank deposits, or loans (Nigam, 2011:27).
One of the most crucial elements of every nation's financial system are financial institutions. They are
crucial in establishing the effectiveness and efficiency of the financial system and are related to financial
institutions' significance because they offer services to the economy. They stand for the crucial
framework by which capital moves from savers to investors across a range of economic sectors (Mishkin,
2016:21).
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2.1.4 The Role of Loan Collection in Financial Institutions
Loan collection is a crucial function that keeps borrowers happy and makes money available for more
lending. The secret to instilling positive habits and a payment culture among borrowers is a systematic
procedure. It can also be viewed as a commercial operation whose main goal is to produce gains for the
organization, turning losses into income (Wittlinger et al., 2008:p.2).
Financial institutions should view collections as a critical component, not only the last stage, of the credit
cycle. Promotion, evaluation, approval, and payout are the four sub-processes of the lending cycle that
institutions receive feedback on along the collections process (Wittlinger et al., 2008:p.4).
• Borrowers repayment history and current capacity to repay, based on historical financial trends and
future cash flow projections under various scenarios;
• Terms and conditions of the credit including covenants designed to limit changes in the future risk
profile of the borrower;
8
• Current risk profile of the counterparty (including the nature and aggregate amounts of risk), and
sensitivity to economic and market developments, especially for major exposures; and
9
significant impact on how NPLs develop. The claim is that a bank can employ lax credit policies in an
effort to convince the market that it’s lending is profitable, increasing present revenues at the expense of
future troubled loans. Loan loss provisions are another tool a bank may employ to increase current
earnings. 16 As a result, historical earnings may be favorably correlated with upcoming NPLs. (Louzis,
Vouldis, and Metaxas 2012)
Therefore, if both principal and interest payments are current and have been agreed upon both the creditor
and the debtor, the loan may be said to be performing. Therefore, managing loans properly has a
favorable impact not only on the performance of the bank, but also on the borrower companies and the
nation as a whole. Lack of management of loans, which account for the majority of bank assets, would
probably result in a period of high levels of non-performing loans.
There is a substantial correlation between institutional characteristics and loan repayment by customers of
banks , according to a study on the factors impacting loan repayment failure business banks. The study
has identified institutional problems, such as weak credit risk management, inadequate credit information
.
10
management, and lax enforcement of loan advance policies. According to the research, there is a "strong
association between firm/group variables and the loan repayment among consumers of commercial banks
in Kenya. The study also comes to the conclusion that there is a substantial correlation between the
characteristics of individual borrowers and loan repayment among clients of commercial banks in Kenya.
The study also comes to the conclusion that among Kenyan customers of commercial banks, there is a
substantial correlation between loan variables and loan repayment. According to the study, commercial
banks should be required to oversee borrowers' loan utilization and repayment. The study also
recommends that banks use efficient and effective credit risk management to ensure that loans are
matched with borrower ability to repay, that insider lending is avoided or minimized, that loan defaults
are projected appropriately, and that appropriate steps are taken to minimize them.
The study recommends that commercial banks should also apply rigorous policies on loan advances so as
loans are awarded to those with ability to repay and mitigate moral hazards such as insider lending and
information asymmetry”. (Kenneth, 2013: 63)
Another study has highlighted institutional problems such as lack of loan supervision, insufficient loan
repayment terms, ineffective loan use and repayment mechanisms, poor monitoring of loan use for
specified purposes, and management staff's incompetence (Stella, 2013). Similar to this, a study on
financial institutions in Ghana found a correlation between institutional characteristics and loan default,
including inadequate monitoring, high interest rates, insufficient loan amounts, inaccurate loan
assessment, and poor client selection (Korankye, 2014)
According to a study on loan recovery performance, the factors that were identified included various
types of collateral that were used to assist credit applicants, technology-enabled credit follow-up support,
ridged credit police, complicated loan processes, a lack of closed follow-up, a lack of loan advisory
service before and after the loan, and pure loan recovery performance. The study suggests that the bank
offer pre- and post-loan loan advising services, a variety of loan kinds, good credit evaluation, follow-up,
and the requirement that collateral remains enforceable and realizable in order to reduce the quantity of
NPL. (Abay,s2015:45)
According to results of a different study on the same subject, "adequate loan amount and flexible loan
repayment time were the most statistically significant determining factors affecting Successful loan
repayment performance. Loan default rates rise amid inflation, and if banks couldn't change repayment
schedules, borrowers wouldn't be able to repay their loans effectively and efficiently, which could lead to
loan default. Therefore, if there is inflation, loan default may rise and the borrower may not be able to
repay the debt in full. As a result, there is a statistically significant negative correlation between inflation
and debt repayment. According to the study, a suitable and larger loan amount would improve investors'
access to essential inputs and business management chances, resulting in higher productivity, lower per-
unit costs, and higher income. Thus, lending institution should disburse sufficient amount of money
equivalent to loan applied by the investors”. (Walelign, 2019:65)
According to a study on the Development Bank of Ethiopia, the loan portfolio of the Bank is also more
susceptible to several sorts of risks, such as to unpredictable risk, predictable risk, and controlled risk.
Over the past five years, the bank's NPL ratio has been above 15%.
The regression analysis also revealed that the Bank's loan portfolio quality is significantly influenced by a
solid credit granting procedure and the presence of a thorough risk management system and standards.
The bank's credit risk management procedures have little impact on the quality of the loan portfolio. Due
to the bank's subpar credit risk management procedures, DBE has a poor loan portfolio quality in terms of
both non-performing loans and concentration. Therefore, there is a need to strengthen and improve the
.
11
Bank's credit risk management practices, particularly by upgrading the credit risk management system
and standards and refining the credit giving process to have sound credit risk management. . (Kebede,
2020:48)
Significantly, the results of the study demonstrated that "better management of loans issued to clients will
return more revenues for the firms. Additionally, profitability and the issue of recovery from past-due
loans had a large correlation. Poor project viability analysis and profitability had a positive association as
well. Last but not least, there was a strong correlation between the difficulty in recovering past-due loans
and inadequate analyses of project feasibility. (Evans et.al, 2014:8)
CHAPTER THREE:
3. RESEARCH DESIGN AND METHODOLOGY
Under this section research design, the sources of data, method of data collection and analysis
will be discussed, which helps the researcher to answer research questions and met research
objectives.
The methodology that is going to be adopted in the study will contains diverse methods and tools that are
relevant to achieve the desired research outcome.
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3.1 Research Design
This study will use a descriptive research methodology. According to Muranaga and Ohsawa
(2002) descriptive research is used to obtain information concerning the current status of the phenomena
to describe "what exists" with respect to the conditions or variables in a situation. The major feature of
this type of research is that the researcher can only report what has occurred or is occurring because he
has no influence over the factors. Descriptive research focuses on defining the nature of a demographic
segment without addressing the "why" behind a particular phenomena. It describes the features of the
study group, answering the question "what is." It is common practice in the behavioral sciences,
epidemiology, education, and nutrition to do descriptive research, which is a study of status. Its worth is
based on the idea that by observation, analysis, and description, issues can be resolved and practices may
be made better. The survey, which incorporates questionnaires, personal interviews, phone surveys, and
normative surveys is the most prevalent descriptive research technique.(Eunsook T. Koh & Willis L.
Owen 2000)
The technique was appropriate as it involved a careful in depth study and analysis of Factors affecting
loan collection performance of development bank of Ethiopia in the Case of Addis Abeba
Accordingly, both quantitative and qualitative (mixed methods) research procedures will be used in this
study. When a researcher wants to carefully explore and assess an event, program, or problem, they must
apply a quantitative technique of inquiry (Creswell, 2003). In order to arrive at measurable findings,
quantitative data research depends on the measurement and analysis of statistical data. In qualitative study
design.The methodology was chosen because it may capture many points of view and provide detailed
descriptions of the topic under study (Baxter & Jack 2008;)
The first stage in creating any sample design is to precisely define the group of items, or the universe as it
is known technically (population). The target demographic for this study will be employees and officials
at the head office of the Development Bank of Ethiopia. The study focused on the 105 professional staff
members of the banks who made up the study's population.
The Development Bank of Ethiopia's present employees make up the study's population. There are a total
of 105 employees in the following departments
The researcher will use simple random sampling formula to determine the sample size. Thus, the
researcher will use simple random sampling formula to determine the minimal sample size of a
population size:
13
Thus, using a simple random sample procedure, 50 responders will be
chosen from a group of 105 staff members. Additionally, convenience and proportionate sampling
methods will be used to choose the final responders for each department.
The study will consist different instruments so as to assess Factors affecting loan collection performance
of development bank of Ethiopia. These are interview, self-administered questionnaire, document
analysis and observation.
Questionnaire
we will use questionnaire because of its appropriateness to secure data from many people at a time and
for its natural characteristics that allows informants express their ideas and opinions freely. This
questionnaire will be composed of both open-ended and close ended items that will be administered
participants.
Observation
According to Ahmed (2016), observation refers to the process of observing and recording events or
situations. We will do observation for the purpose of detail data analysis and check list to see the actual
phenomena.
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14
Interview
Interview is chosen for a face to face contact with interviewee and it will be helpful to raise different
questions for further additional information. Interview guidelines
will be used to guide in depth interview with the officials of development bank of Ethiopia. During the
interview, the responses of the participants will be recorded by writing in the notebook.
Documents Analysis
To strengthen the data obtained through questionnaires, interview and observation, document analysis
will be used in this study. The instrument helps the researcher to easily identify the gap between previous
studies and the current researcher study area and enables the researcher to gain more information about to
previous back ground and their common major problems concerning Factors affecting loan collection
performance of development bank of Ethiopia. It will also help to suggest possible solutions for factors
affecting Factors affecting loan collection performance.
With the use of SPSS, descriptive data will be analyzed and interpreted. After a thorough study of the
statistics produced to ascertain the replies for each item under the three variables, the examined data will
be shown in the form of descriptive tabulations, percentages, and frequencies. Organizing, tabulating,
displaying, and explaining the gathered data are all aspects of descriptive statistics. When transforming
the data into a form that can be handled, descriptive statistics are crucial. The research employs
description as a technique to arrange data into patterns that emerge during analysis when in-depth,
narrative descriptions of small numbers of cases are involved. (1984, Glass & Hopkins)
15
3.6 WORK PLAN (TIME SCHEDULE)
Work plan
Action plan
1 Problem Identification
.
16
2 Reading related research activities books, and
other literatures
Budget plan
17
5 Miscellaneous 200.00
expenses
total 1440.00
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LISTES OF REFERENCES
o Amha, W. & Narayana, P. (2000). Review of Microfinance Industry in Ethiopia:
Regulatory
Framework and Performance, AEMFI.(p.36-45)
o Cresswell, JW, (2003). Research Design: Qualitative, Quantitative and Mixed Method
Approaches. Sage Publications, Second Edition. Thousand Oaks, California.
o Creswell, J, Hanson, W, Plano Clark, V & Morales, A 2007. Qualitative Research
Designs: Selection and Implementation. Counseling Psychologist, 35(2)
o Daniel Tolesa (2010). Determinants of Foreign Direct Investment in Ethiopia, Master of
Science
in Accounting and Finance, School of Graduate Studies, Addis Ababa University, Addis
Ababa, Ethiopia.
o Eunsook T. Koh & Willis L. Owen Descriptive Research and Qualitative Research 2000
o Greuning, H. And Iqbal, Z. (2007), Banking and Risk Environment in Archer, S. And
Karim, R. A. A. 2007, Finance: The Regulatory Challenge, John Wiley and Son (Asia)
Pte Ltd.
o Kenneth, O. (2013). Factors Affecting Loan Repayment among Customers of
Commercial Banks in Kenya: a case of Barclays Bank of Kenya. University of Nairobi.
(pp.43-61)
o Mulugeta Shiferaw (2010). The Determinants of Agricultural Loan Repayment
Performance. Unpublished Master‟s Thesis, Hramaya University.
o Muluken Tariku (2014). Factors Affecting Loan Repayment Performance of Floriculture
Industries to the Development Bank of Ethiopia.
o Muluken, A. and Mesfin, L. (2014). Assessment of Factors Affecting the Performance of
Microfinance
o Murag ohag. (2002). Non-Performing Loans of Banks, Some Panel Results, Economic
and Political eekly,Vol. 37 (5), 2-8.
o National Bank of Ethiopia (2010). Revised Risk Management Guidelines, Bank
Supervision Directorate.
o National Bank of Ethiopia (NBE) (2010). Bank Risk Management Guidelines (Revised),
Addis Ababa, Ethiopia .
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APPENDIX
Questionnaire
Dear Respondent,
We are students of St. Mary’s University. We are conducting this research in partial fulfillment
of bachelor Degree in Accounting and Finance. This research is being conducted on the factors
affecting loan collection performance of Development Bank of Ethiopia: the case of Addis
Ababa, head office. We are thankful for your cooperation in filling this questionnaire. And we
would like to assure you that all the responses you provide through this questionnaire will remain
confidential at all times and will only be used for academic purposes.
Section two
QUESTIONS ON FACTORS AFFECTING LOAN COLLECTION PERFORMANCE
Please indicate your degree of agreement or disagreement to the statements that
affect loan recovery performance
N Strongly
Disagree
Neutral Agre Strongly
o Disagree (3) e Agree
(2)
(1) (4) (5)
1 Strict monitoring ensures loan
performance
2 Poorly assessed and advanced
.
20
loans may perform well if
properly monitored
3 Loan follow up is directly related
to occurrence of nonperforming
loans
4 Banks with higher budget for
loan monitoring have lower non
performing loans
5 Collateralized loans
perform well
6 Most of the time non
collateralized loans are
defaulted
Staff-related Factors
N Strongly
Disagree
Neutral Agree Strongly
o Disagree (3) (4) Agree
(2)
(1) (5)
1 DBE staff's credit-scoring
undertakings have positively
impacted
loan collection performance.
2 Following the occurrence of
problem loans, DBE's staff
always
responds in ways that improve
loan collection performance.
3 DBE's loan collection
performance is improved as a
result of expert
valuation of collateral supplied
by borrowers prior to loan
approval.
4 The staff is well-versed in
negotiating with delinquent
borrowers to
come up with the best
alternatives in order to improve
loan
collection performance.
5 The effectiveness of the follow-
up service for debtors after their
loans were approved improved
loan collection performance.
.
21
6 The staff is effective in
monitoring debtors once loans
are granted,
resulted in improved loan
collection performance.
7 Once loans are granted, the staff
is capable of controlling debtors,
resulting in increased loan
collection performance.
8 DBE follows best management
practice that enhances its Loan
collection performance.
9 DBE's management puts enough
effort to transfer knowledge from
other banks in order to improve
loan collection performance.
10 Staff-related factors are rarely the
source of non-performing loans.
N Strongly
Disagree
Neutral Agree Strongly
o Credit Processing Disagree (3) (4) Agree
(2)
(1) (5)
1 The Bank Checks the borrower
history before granting loans
2 The Bank properly assessed the
customer ability to meet
obligation
3 Crediting-granting approval
process established
accountability for
decision taken
4 There are times credit granting
and monitoring process is
overridden
by Directors, senior management
5 The bank carried out credit
processing activities independent
of
appraisals
Monitoring and Control of
Credits
6 The bank strictly implement the
conditions and sanctions set by
different approving organs
.
22
7 Collateral coverage is regularly
assessed and related to the
borrowers financial positions
8 The bank monitor the business of
clients after granting credits on
regular interval basis
9 Customers are often given
sufficient training on loan usage
Credit Administration
10 The process of “ Credit
administration “ is performed
independently
of individuals involved in the “
business organization” of credit
11 The Bank segregate the workout
activity from the area that
originated the credit
12 The bank has well-structured
documentation tracking systems
for
credit and collateral files
13 The bank has appropriate criteria
for Credit classification and
provisioning
Section three
What strategies do you propose to the Bank so as to improve the quality of loans as high as
possible and enhance the overall Credit risk Management of the Bank?
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What are the significant challenges that you have faced credit risk management
activities
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7. Any comment
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.
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