Assessment of Loan and Advances practices: The Case in Bank of Abyssinia Head Office

Abstract

The paper entitled assessment of loan and advance in Bank of Abyssinia aimed to assess loan practices of bank of Abyssinia, in addition to this the research also tried to investigate major challenges encountered at the approval process. To achieve the main objective of the study the researcher used descriptive research design. The target population for the study were the loan officers of bank of Abyssinia in credit department. In order to collect necessary data related to the title the researcher used the census of the total population. This study is conducted with a population of 61 employees of the bank and financial statement data's from 2019 to 2023. The necessary data for the study was gathered from primary and secondary source of data. Primary data was gathered using questionnaires and interview and secondary data was gathered from bank of Abyssinia financial statements. This -thesis also strived to analyze the level of correlation between selected total assets and deposits factors on the banks loan and advances in BoA; the study found lending practices, lack of focused loan monitoring and follow-up, estimation of collaterals terms and conditions system suspense, and weak customer and bank relationship as the major factors that contribute to loan default. The finding of the study also shows that changing of the national bank of Ethiopia directives frequently, regular government policy changes, lack of understanding from customer side and the lack of full document of a collateral fixed assets are the main challenges in a loan and advance process. Finally, the researcher recommended that, in order to increase profit from loan and advances Bank of Abyssinia should have to work on financial stability by diversifying the saving products to increase the total deposits of the bank and providing the capital for borrowers at a lower costs