Abstract:
This research paper was present analyzing the causes of loan non-performance of
commercial banks in Ethiopia: the case of Oromia bank s.c. Many factors attributed to
the growth of banking industries. Among these, the major one is loan recovery
performance of banking industry. The study was conducted based on the data gathered
from ten Oromia bank branches depending on their grade, four main districts, credit
management department and credit monitoring & loan recovery department. Descriptive
research design was used to answer the research questions that appear through the
review of existing materials and the experiences of the researcher in line with the
assessment of loan recovery performance of banking industry in Ethiopia. A sample size
of 108 is taken which equal to target population. For branches buy using stratified
sampling and for Head office and districts purposive sampling method was adopted for
the study. The data used to conduct this research was collected from both primary data
and secondary data. Secondary data was collected from annual report of Oromia bank
s.c and different thesis in this area. Questionnaires were employed to Oromia bank
selected 10 main branches in respect of their grade and transaction, credit management
department employees, Credit monitoring and loan recovery management department
and District offices. Data was analyzed by using SPSS version 20, tables, graph and brief
interpretation by sentences. The findings of the study indicated that there are many
factors which hamper loan recovery performance of Oromia Bank S.C. These factors
are: internal (Bank-related factors) and external (Customer-related factors) and
Uncontrollable factors that are contributing to non-performing loans. The researcher
recommends that the bank should provide technology that alerts the customers before/on
the time of repayment, the bank should effectively use the potential man power, the Bank
should revise its credit procedural manual and strongly follow up to reduce the amount
of non-performing loans in order to increase performance of loan recovery. Finally, the
bank help the borrower as they update their management expertise, use adequate
planning & accounting systems, start with enough initial capital, provide awareness on
concept of bank loans, how to win strong competition, not to divert Loan purpose and
others.
