An assessment of credit risk management practices of Agricultural Development Bank Limited
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Date
August, 2015
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Abstract
Credit risk management is a key concept in banking which is given much attention among banks across board. This study assessed the credit risk management practices of ADB Bank Ltd. The study employed a qualitative descriptive approach in its research methodology. The Head of Credit of ADB, head office, served as the respondent for the study. The credit portfolio of ADB from the years 2012 to 2014 also served as a key source of data for the study. The findings of the study proved that ADB has a good credit risk management practices which is being reflected in its loan granting, evaluation and monitoring processes. Per the findings of the study, loan applicants are assessed by credit officers based on their capacity, character, capital, conditions and collateral which is popularly referred to as the five C‟s of credit. Further the credit officers together with the relationship managers are responsible for ensuring the repayment of loans by clients. The study further showed that ADB Bank complies to all the regulations enshrined by the Bank of Ghana which comprises of provision of restrictions on lending and investment by banks (Bank of Ghana Act 2004, Act 673/ PART VI), regulation on Liquidity of banks (Bank of Ghana Act 2004, Act 673/PART IV), regulation on Capital and Reserve of banks (Bank of Ghana Act 2004, Act 673/PART III). The study concludes that to a greater extent ADB Bank Ltd has good credit risk management practices that ensure a considerable level of profitability. However, the researcher augments that there are key loopholes in the management of credit risk at ADB due to the fact that they are exposed to a considerable level of credit loss. The study therefore recommended the need for the training of credit officers on better ways of assessing the creditworthiness of clients in order to reduce the rate of repayment defaults among clients. Further the study recommended the need for management of ADB to come up with a policy that will ensure the disbursement of current loans whiles cutting down drastically the approval of loans which have the potency of becoming doubtful or loss to the bank.
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A thesis submitted to the Department of Accounting and Finance
Kwame Nkrumah University of Science and Technology School of Business
in partial fulfillment of the requirements for the degree of Master of Business Administration Finance Option,