ASSESSMENT OF CREDIT MANAGEMENT AT COMMERCIAL BANK OF ETHIOPIA: IN THE CASE OF HOSSANA DISTRICT

Abstract

This study assesses the credit management practices at the Commercial Bank of Ethiopia (CBE), focusing on the Hossana District. Credit management is a critical function in banking, ensuring efficient loan administration, minimizing non-performing assets, and optimizing financial performance. The research aims to evaluate the effectiveness of credit policies, identify challenges in credit management, and recommend improvements to enhance loan performance. A mixed-methods approach was employed, combining quantitative data from questionnaires administered to 20 Credit Department and qualitative insights from interviews with the Credit Manager credit monitoring officer, credit recovery officer, credit analyst, and customer relationship manager. The findings reveal that while the bank has established credit policies (confirmed by 100% of respondents), challenges such as inadequate staff for risk analysis (60%), poor lending practices (15%), and borrower bankruptcy (25%) hinder effective credit management. Loan defaults were predominantly observed in the service sector (60%), with key causes including insufficient borrower information (30%) and lack of consultancy services (30%). The study recommends strengthening follow-up mechanisms, improving staff training, updating credit policies to reflect current market conditions, and prioritizing short-term loans to mitigate liquidity risks. These measures aim to enhance the bank’s credit management system, reduce defaults, and improve overall financial stability. The findings provide valuable insights for CBE management, policymakers, and future researchers in the field of banking and finance.