UNITY UNIVERSITY

COLLAGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

ASSESMENT OF CREDIT MANAGEMENT: IN THE CASE OF LION

INTERNATIONAL BANK

BY: BEZA GEZAHEGN

KIDIST GIRMA

MESERET KIDANE

YONATAN WORKU

YORDANOS GETACHEW

ADVISOR:

DECEMBER, 2018

ADDIS ABABA, ETHIOPIA

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Table of Contents

CHAPTER ONE ........................................................................................................................................... 1

1.INTRODUCTION ...................................................................................... Error! Bookmark not defined.
1.1. BACK GROUND OF THE STUDY ............................................................................................... 1
1.2. STATEMENT OF THE PROBLEM ............................................................................................. 2
1.3. OBJECTIVES OF THE STUDY .................................................................................................... 2
1.3.1. GENERAL OBJECTIVE ............................................................................................................ 2
1.3.2 SPECIFIC OBJECTIVE .............................................................................................................. 2
1.4. SIGNIFICANCE OF THE STUDY................................................................................................ 3
1.5. SCOPE OF THE STUDY .............................................................................................................. 3
1.6. LIMITATION OF THE STUDY ................................................................................................... 3
1.7. METHODOLOGY OF THE RESEARCH ................................................................................... 3
1.7.1. RESEARCH DESIGN ........................................................................................................ 3
1.7.2. DATA TYPE AND SOUURCE ......................................................................................... 4
1.7.3. METHOD OF DATA COLLECTION.............................................................................. 4
1.7.4. METHOD OF DATA ANALYSIS .................................................................................... 4
1.8. ORGANIZATION OF THE PAPER ......................................................................................... 4
Reference ...................................................................................................................................................... 5

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 CHAPTER ONE

1. INTRODUCTION
1.1. BACK GROUND OF THE STUDY
A banking institution various types of service are providing among those credits is one of
the most important core businesses of most banks. The word credit itself is derived from
the Latin word “credere” to believe to put confidence in some one trust same one( Conant
1899, baltnsperger 1987)
Bank is financial institution that are established for lending , borrowing, issuing,
exchanging, taking deposit, safe guarding or handling money under the law and guidelines
of respective country. Among their activities credit provision is the main product which
bank provides to potential business entrepreneur as main source of income. While
providing credit as main source of income bank takes in to account many considerations as
factor of credit collection management which helps them to minimize the risk of default
that result in financial distress and bankruptcy. This is due to the reason that while a bank
providing credit they are exposed to risk of default( risk of interest & principal payment)
which needs to be managed effectively to acquire level of loan growth and performance
(bass, 1991)
In competitive environment more lines of business which need huge environment are being
opened. Some of this investment is financed through commercial bank loan. With this
respect bank play major role in the overall economy development of the country. However,
in this process of extending credit to customers. A bank should have a way securing its
borrowers so that it will minimize the risk of default (Bas, 1998 fundamental of risk 3rd
edition).

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 1.2. STATEMENT OF THE PROBLEM

Credit collection management is one part of the bank service. But it has wide
approaches. There is high demand of borrowing money used for different purposes.
Investors, individuals and government itself needs money for their own purposes. Most
of the time the economic units needs to satisfied the banks. The previous studies
focused their attention only on credit collection management of lion international bank
of Ethiopia. Thus study focus on determining efficiency and effectiveness of assessing
credit collection of the company. Thus study will try to investigate the problem of lion
international bank due to the fact that some of loans and advances grant to its users
turned to be bad loans. Because level of loans that grant by lion international bank to
its uses to be bad loans (probability that loan returned by the customer is low) is
increased year to year.
RESEARCH QUESTIONS
Therefore it is necessary to raise the following research questions to identify the
problems.
1. How the bank evaluated the credit worthiness of the debtors?
2. What are the criteria used by lion international bank credit worthiness of the
borrowers?
3. What are the causes of customer in ability to pay the loan to the bank?

1.3. OBJECTIVES OF THE STUDY

1.3.1. GENERAL OBJECTIVE

The main objective of the study will examine and assess the credit collection of management
procedures and performance in the lion international bank in jackros branch

1.3.2 SPECIFIC OBJECTIVE

1. To assess the insolvency of the customer or the borrowers.
2. To identify the criteria used to evaluate and estimate the collateral used as pledge
for granting loan.
3. To identify the causes of customers default in repaying loan

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1.4. SIGNIFICANCE OF THE STUDY

 The study on assessment of credit collection management on lion international bank

jackros branch has a vital role.
 This role to contribute the organization i.e. banks is to get interest and to attract the new
customers and to satisfy the existing customers because it provides information that will
enable effective measures to be taken to improve the performance of credit collection
process of lion international bank jackros branch.
 This study is useful in bringing in to light the strong and weak point in managing credit
risk. This research will be a reference for further study.

1.5 SCOPE OF THE STUDY

Lion international bank is privately owned Share Company which is currently has
170 branches both in Addis Ababa and regional towns. This study focus on
assessing credit collection management in lion international bank jackros branch.

1.6. LIMITATION OF THE STUDY

1. Lack of skill and experience of the researcher about the research.

1.7. METHODOLOGY OF THE RESEARCH

1.7.1 RESEARCH DESIGN

The research is more of descriptive type of research design. Because descriptive

research method is easy to describe what the researcher can do.

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1.7.1 DATA TYPE AND SOUURCE

The necessary data will be collected from both primary and secondary data
(source). The primary source will be collected through questionnaire from
employees of lion international bank in jackros branch.

1.7.2 METHOD OF DATA COLLECTION

The data will be collected mainly from credit collection management

department of lion international bank. Necessarily primary data will be
collected through questionnaire of lion international bank employees and
secondary data will be collected from internet, and relevant written documents.
1.7.3 METHOD OF DATA ANALYSIS

The data gather interview and questioner method and try to analysis descriptive
methods that are percentage and appropriate explanation of the table.

1.8. ORGANIZATION OF THE PAPER

The paper contains five chapter the first chapter is introduction which include
background of the study, statement of the problem, objective of the study, significance
of the study, scope and limitation of the study.
The second chapter deals with literature review, the third chapter consists of
methodology of the study, the fourth chapter is data analysis and interpretation, and
The final chapter is conclusion and recommendation of the study.

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Reference

 Bass,1991
 (Bass,1998),fundamental of risk 3rd
 Conant 1899,Baltnsperger 1887