Abstract:
The study assessed factor affecting credit risk management practice of some selected private
banks in Ejere. The study was identifying the factors that influence credit risk management
practices of the banks focused on the five dimensions of service quality such as, on the
establishment of credit granting process, credit risk measurement and monitoring processes,
market risk, operational risk and legality risk. In these ways the study used both descriptive
and explanatory research design and the data were analyzed using frequency, percentage,
means, Std. Deviation, Pearson correlation as well as regression. The data were analyzed by
using SPSS Package version 30. Based, on this the result of correlation coefficient shows that
all variables are statistically significant and positively correlated with the credit risk
management practice of the studied banks. Accordingly, the bank’s credit risk
management was more affected by lack of establishing appropriate credit environment
which represented, followed by challenges of credit appraisal measurement and
monitoring, Lack of Market risk analyses, Operational risk and challenges sound Credit
granting process, however, Legality of risk assessment has a negative relation and
insignificant impact on credit risk management practices of the study banks. The
Result regression coefficients also implied the extent of the independent variables
influence on the dependent variables. This study analyzes data from 2019 to 2023 to
examine key factors influencing credit risk management practices at Oromia Bank. The
results show that all six variables ACRE, SCGP, CAMMP, MRM, ORA, and ALR—have a
positive and statistically significant impact, with ACRE and SCGP being the most influential.
The findings suggest that strengthening the credit risk environment and credit granting
process, along with reinforcing monitoring, operational, and legal risk measures, will
enhance effective credit risk management. Based on the findings the study recommend the
following management bodies of the of the banks further investigate the main reason of
that affect credit risk management practice of their respective banks and tried to
create Continuous improvements on the major factors affecting credit risk management
area.
