FACTORS AFFECTING CREDIT RISK MANAGEMENT PRACTICES, THE CASE OF SELECTED PRIVATE COMMERCIAL BANKS IN ETHIOPIA

This study tried to asses factors that affect credit risk management practices of some selected private commerial banks in Ethiopia. In light of this, the study identified some dimensions of service quality such as , credit granting process, credit risk measurment and monitoring process, market risk, operational risk, legal risk, the establishment of credit risk environment. So as to come up with the desired results data were collected from four private commercial banks, namely; Oromia, Birhan, Debub global and Anbessa. A total of 106 respondents participated in this study selected purposively. In the study both descriptive and explanatory designs were used. Frequency percentage, mean, standard deviation, pearson correlation cofficient as well as regression were used for data analysis process using SPSS version 20. The result of correlation cofficient showed that all variables are statistically significant and positively correlated with the credit risk management practices of the mentioned private banks. Hence, the banks credit risk management practices were significantly affected by lack of appropriate credit environment, followed by challenges of credit appraisal measurment and monitoring, lack of market risk analysis , operational risk and challenges of sound credit granting process. Legality of risk assessment is found to have a negative relation and insignificant impact on credit risk management practices of the mentioned banks. As per the regression cofficient which vividly shows the effect of the independent variables on dependent variables , lack of appropriate credit risk environment (beta = .993, t = 9.612, p = < .000), followed by lack of operational risk management (beta = .713, t =1.003, p = .318) and lack of credit measurement and monitoring process (beta =.610, t= -571, p < .569) respectively and significantly affect credit risk management practices of the studied private banks. Having all this big crystals of truth in hand,the study gave some recommendations that the management body may need to take so as to come up with a more effective and efficient risk management practices.