The main objective of the thesis is to assess the effect of credit risk management on the quality of loans portfolio in the case of Development Bank of Ethiopia. A sample of 84 respondents was drawn from the employees of the Development Bank of Ethiopia by using purposive sampling technique. Both primary and secondary data were used. Data related to loan portfolio and loan position is obtained from the bank whereas, primary data are collected using structured questioners from the employees of the bank.
Descriptive and inferential statistics were used to conduct the research and Multiple Regression Analysis was run using SPSS Version 21.0 to analyze the data. With regard to credit risk management practices, the result show that DBE has not satisfactory risk Management practice. Precisely, using score 1 (poor) to 5 (best), all the parameters of risk management practice assessment have a score value below 3.40, i.e. Credit Risk Granting and Portfolio Quality Control (3.40), Credit Risk System and Standard (3.20), Credit Risk and Portfolio Quality Control (3.17), Risk Identification, Measurement and Control (3.03), and Risk Environment (2.98). The Bank`s loan portfolio is also more vulnerable to various types of risks, such as to unpredictable risk, predictable, and controllable risks. The bank’s NPL ratio was above 15% for the last five years.
The regression result also showed that sound credit granting process and the existence of comprehensive risk management system and standards are the significant variables that affect loan portfolio quality of the Bank. Credit risk management practice of the bank has insignificant effect on loan portfolio quality. Both in terms of Non-performing loan and concentration, DBE has poor loan portfolio quality which is due to the bank’s poor credit risk management practice. Therefore, there is a need to improve and enhance credit risk management practice of the Bank, especially, by improving the credit granting process to have sound credit risk management, and by updating credit risk management system and standards so as to have strong credit management.
Inhaltsverzeichnis (Table of Contents)
- Chapter One: Introduction
- 1.1 Background of the study
- 1.2 Statement of the Problem
- 1.3 Objective of the study
- 1.4 Research questions
- 1.5 Significance of the study
- 1.6 Scope of the Study
- 1.7 Organization of the Paper
- Chapter Two: Review of Related Literatures
- 2.1 Introduction
- 2.2 Theoretical Literature Review
- 2.2.1 Definition of credit risk
- 2.2.1.1 Determinates Portfolio quality
- 2.2.2 Loan Portfolio Theory
- 2.2.3 Credit Risk Theory
- 2.2.4 Credit Risk Management
- 2.2.5 Portfolio Management
- 2.2.6 Loan Portfolio Quality
- 2.2.7 Relationship between Credit Risk Management and Loan Portfolio
- 2.3 Empirical Literature Review
- 2.4 Conceptualization Frameworks
- Chapter Three: Methodology of the Study
- 3.1 Introduction
- 3.2 Research Design and Approach
- 3.3 Data Sources and collection Tools
- 3.4 Validity and Reliability of Research Instruments
- 3.5 Sampling and Sampling Techniques
- 3.6 Sample Size Determination and Selection
- 3.7 Data Analysis Techniques
- 3.7.1 Model Specification
- 3.8 Ethical Considerations
- Chapter Four: Data Analysis and Result Discussion
- 4.1 The General Background of the Respondents
- 4.2 Credit Risk Management Practice of DBE
- 4.3 Loan Portfolio Quality Assessment of DBE
- 4.4 Trend of Nonperforming loan by number of clients and loan amount
- 4.5 Loan Collection Performance
- 4.6 Credit risk management practice and loan portfolio quality in DBE
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This thesis assesses the effect of credit risk management on the quality of loan portfolios at the Development Bank of Ethiopia (DBE). It aims to evaluate DBE's credit risk management practices, assess the quality of its loan portfolio, investigate the relationship between these practices and portfolio quality, identify contributing factors to non-performing loans (NPLs), and analyze the extent of NPLs in recent years.
- Effectiveness of credit risk management practices at DBE.
- Quality and characteristics of DBE's loan portfolio.
- Relationship between credit risk management and loan portfolio quality.
- Factors contributing to high NPL ratios at DBE.
- Trends in NPLs at DBE in recent years.
Zusammenfassung der Kapitel (Chapter Summaries)
Chapter One: Introduction: This chapter introduces the study, providing background information on risk management in the banking sector, particularly credit risk. It highlights the challenges faced by the Development Bank of Ethiopia (DBE) due to a high non-performing loan (NPL) ratio and the need for improved credit risk management practices. The chapter outlines the study's objectives, research questions, significance, scope, and organization.
Chapter Two: Review of Related Literatures: This chapter reviews existing literature on credit risk management and loan portfolio quality. It examines various definitions of credit risk, explores loan portfolio theory and credit risk theory, and discusses credit risk management techniques, portfolio management strategies, and the relationship between credit risk management and loan portfolio quality. The chapter also presents empirical evidence from previous studies on related topics.
Chapter Three: Methodology of the Study: This chapter details the research methodology employed in the study. It describes the research design (a mixed-methods approach combining quantitative and qualitative data), data sources (primary data from questionnaires and secondary data from DBE reports), sampling techniques (purposive sampling), sample size determination, and data analysis techniques (descriptive and inferential statistics, regression analysis). The chapter also addresses ethical considerations.
Schlüsselwörter (Keywords)
Credit Risk Management Practice, Loan Portfolio Quality, Non-Performing Loans (NPLs), Development Bank of Ethiopia (DBE), Credit Risk Management System, Credit Granting Process, Risk Assessment, Loan Portfolio Diversification, Loan Collection.
Frequently Asked Questions: Assessment of Credit Risk Management and Loan Portfolio Quality at the Development Bank of Ethiopia
What is the overall purpose of this study?
This thesis assesses the impact of credit risk management practices on the quality of loan portfolios at the Development Bank of Ethiopia (DBE). It aims to evaluate DBE's current practices, assess the quality of its loan portfolio, analyze the relationship between these two factors, identify factors contributing to non-performing loans (NPLs), and analyze NPL trends in recent years.
What topics are covered in the "Table of Contents"?
The table of contents outlines the structure of the thesis, including an introduction, a literature review covering theoretical and empirical research on credit risk and loan portfolios, a detailed methodology section explaining the research design and data analysis techniques, and finally, a chapter dedicated to the analysis of data and discussion of results. Each chapter is further broken down into specific sub-sections.
What are the key objectives and themes explored in the study?
The study's main objectives include evaluating the effectiveness of DBE's credit risk management practices, assessing the quality and characteristics of its loan portfolio, examining the relationship between risk management and portfolio quality, identifying factors leading to high NPL ratios, and analyzing NPL trends. Key themes revolve around credit risk management, loan portfolio quality, and the interplay between them within the context of the DBE.
What is covered in each chapter?
Chapter One (Introduction) provides background information on credit risk management, explains the study's context and rationale, and outlines the objectives, research questions, significance, scope, and structure of the thesis. Chapter Two (Literature Review) examines existing literature on credit risk, loan portfolios, and relevant theories. Chapter Three (Methodology) details the research design (mixed-methods), data sources, sampling techniques, and data analysis methods. Chapter Four (Data Analysis and Result Discussion) presents the findings, analyzing the general background of respondents, DBE's credit risk management practices, loan portfolio quality, NPL trends, loan collection performance, and the relationship between risk management and portfolio quality.
What keywords are associated with this research?
The study's keywords include Credit Risk Management Practice, Loan Portfolio Quality, Non-Performing Loans (NPLs), Development Bank of Ethiopia (DBE), Credit Risk Management System, Credit Granting Process, Risk Assessment, Loan Portfolio Diversification, and Loan Collection. These terms encapsulate the core subjects and concepts explored in the thesis.
What type of research methodology was used?
The study employs a mixed-methods approach, combining quantitative and qualitative data. This allows for a comprehensive analysis of both numerical data and insights gained from qualitative sources, providing a richer understanding of the subject matter.
What data sources were utilized in the study?
The research utilizes both primary and secondary data. Primary data was collected through questionnaires, while secondary data was obtained from reports and documents provided by the Development Bank of Ethiopia (DBE).
What kind of data analysis techniques were employed?
The data analysis involved descriptive and inferential statistics, and regression analysis to examine relationships between variables. These techniques help to quantify findings and draw meaningful conclusions.
- Citar trabajo
- Kebede Adane (Autor), 2020, Credit Risk Management in the Development Bank of Ethiopia. Effects on the Quality of Loan Portfolio, Múnich, GRIN Verlag, https://www.grin.com/document/903762
