ARBA MINCH UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

ASSESSMENT OF NON-PERFORMING LOAN MANAGEMENT IN DASHN BANK IN

ARBA MINCH BRANCH
A SENIOR ESSAY SUBMITTED TO THE DEPARTMENT OF ACCOUNTING AND
FINANCE COLLAGE OF BUSINESS AND ECONOMICS, ARBA MINCH
UNIVERSITY FOR PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE
BACHELOR OF ART (BA) DEGREE IN ACCOUNTING AND FINANC

SET BY;
RUSSIA KADIR
ID NO; RBE/1027/11

ADIVISOR;

BIZUNEH GIRMA (MSC)

SEP,2021
ARBAMINCH ETHIOPIA
 Declaration
I undersigned deader that this student Research proposal is my original work and has not been
presented for a degree in any other university and all the materials used for this study have been
duly acknowledged.
_________________ ______________
Name of student; Russia kadir Signature
Date-----------

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 Approval sheet
This student research paper has been submitted for examination with my approval as university
advisor.
__________________ _____________
Name of advisor; Bizuneh Girma Signature
___________
Date

III | P a g e
 Statement of certification
This is to certify that student Russia Kadir with ID NO RBE /1027/11 has conducted her senior
essay paper title: assessment of non-performing loan management in case of Aba minch and the
work is completed with satisfactory evaluation of the advisor and the examiner as per the
requirement of the university.

Advisor name: Bizuneh Girma(Msc) …………........……….... Signature… ….… Date ….. .

Examiner name: ……………..………… Signature… ………Date…….

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 Acknowledgement
First of all, I would like to thanks my almighty God for his excellent protection and support.
Secondly I would like to express my sincere gratitude to my advisor Bizuneh Girma(Msc) for his
unreserved advice and assistance to develop this study in a proper manner and for her
professionally nice suggestion and correction. Finally, my heartfelt appreciation and reputation
passes to those people who helped me by giving supportive ideas and encouragements to develop
this research.

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Acronyms
CBE - Commercial bank of Ethiopia
NBE - National bank of Ethiopia
NPA - Non performing asset
NPL- Non-performing loan
NPLM - Non-performing loan management

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 Table of content
Contents pages

Declaration......................................................................................................................................II
Approval sheet...............................................................................................................................III
Statement of certification..............................................................................................................IV
Acknowledgement..........................................................................................................................V
Acronyms......................................................................................................................................VI
List of tables..................................................................................................................................IX
Abstract...........................................................................................................................................X
CHAPTER ONE..............................................................................................................................1
1. Introduction...........................................................................................................................1
1.1. Back ground of the study..................................................................................................1
1.2. Statement of the problem..................................................................................................3
1.3. Research question.............................................................................................................4
1.4. Objective of the study.......................................................................................................4
1.4.1. General objectives.....................................................................................................4
1.4.2. Specific objectives.....................................................................................................4
1.5. Significance of the study..................................................................................................4
1.6. Scope of the study.............................................................................................................4
1.7. Limitation of the study......................................................................................................4
1.8. Organization of paper.......................................................................................................5
CHAPTER TWO.............................................................................................................................6
2. LITERATURE REVIEW.......................................................................................................6
2.1. Meaning of bank and its functions....................................................................................6
2.2. What is loan?....................................................................................................................7
2.2.1. Types of loan.............................................................................................................8
2.3. Characteristics of Loan.....................................................................................................8
2.4. Non-performing loan and banking crises.........................................................................9
2.5. Non-performing loan management.................................................................................10
2.6. Problem of loans and losses............................................................................................10
2.6.1. Bank credit and lending procedures........................................................................11
2.7. Lending procedures........................................................................................................11

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 2.7.1. The interviews.............................................................................................................11
2.7.2. Loan application......................................................................................................11
2.7.3. Financial statement and property estimation...........................................................11
2.7.4. Insurance and security.............................................................................................12
2.8. Credit risk.......................................................................................................................12
2.9. The role of credit analysis in minimizing credit risk......................................................12
2.10. Empirical Literature......................................................................................................14
2.11. Research Gap................................................................................................................16
CHAPTER THREE.......................................................................................................................17
3. Research Methodology..........................................................................................................17
3.1. Research design and research approach.........................................................................17
3.2. Data source and Method of data collection....................................................................17
3.3. Target population and sample size.................................................................................17
3.4. Sampling techniques.......................................................................................................18
3.4. Method of data analysis..................................................................................................18
CHAPTER FOUR.........................................................................................................................19
4. DATA PRESENTATION AND INTERPRETATION.........................................................19
4.1. Primary data analysis......................................................................................................19
4.2. Advance loan to customer..............................................................................................21
4.3. The interview covers.......................................................................................................25
4.4. Analysis of the secondary data.......................................................................................26
4.4.1. Non-performing loan portfolio................................................................................26
4.4.2. Trends of loan disbursements and collection...........................................................26
CHAPTER FIVE...........................................................................................................................27
5.Conclusion and Recommendation..........................................................................................27
5.1. Conclusion......................................................................................................................27
5.2. Recommendation............................................................................................................27
References.....................................................................................................................................XI
APPENDIX I................................................................................................................................XII
APPENDIX II.............................................................................................................................XIV

List of tables
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Table. 4.1. Analysis of personal background of respondents........................................................20
Table. 4.2. The way in which non-performing loan manage.........................................................22
Table 4.3. Recognized non-performing loan.................................................................................22
Table 4.4. cause for non- performing loan....................................................................................23
Table 4.5. Make non -performing loan to performing loan...........................................................24
Table 4.6. Working to the management of non-performing loan..................................................24
Table 4.7. Sequence of procedures when the payment are overdue..............................................25

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 Abstract
This research paper conducted to assess the non-performing loan management in Dashen bank
Arba minch branch. In this study the researcher used descriptive research design and also use
qualitative and quantitative research approach. For the purpose of the study both primary and
secondary data would be used. The primary data is collected through questionnaires and
structured interview. The secondary data is collected from Dashen bank annual report. The
researcher used judgment sampling technique, because this method helps to select respondents
who are believed that they can give necessary information. The target respondents that are used
by the researcher are manager, loan officer and selected employee of bank. After the data has
been gathered, it would be analyzed and presented. The data analysis would be carried out
based on tabulation and percentage method. Careful interpretation of analyzed information
would be carried out to arrive at reasonable generalization.

Key words: non-performing loan management, Dashen bank.

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 CHAPTER ONE
1. Introduction
1.1. Back ground of the study
A bank is financial institution which deals with deposits and advances and other related services.
It receives money from those who wants to save in the form of deposit and lends money to those
who need it. Banks are financial institutions that accept deposits and make loans. Included under
the term of banks, firms such as loan association, mutual saving banks and credit unions.
Because banks are the largest financial intermediaries, most people keep a large proportion of
their wealth in bank in the form of checking accounts, on other types of bank deposits.
(Mishikin,1997)
major roles of banks are accepting deposits advancing loans receiving of valuables for safe
custody acting as reference issue letter of credit in foreign trade merchant banking service
provides deal in foreign exchange issuer of travelers cheque and credit cards sale and purchase of
stock exchange securities.Banks are among the most important financial institutions in the
economy. There are the principal sources of credit for many households for most local units of
government and for business men. The principal economic function of banks is to make loan for
most banks loan account for half or more of their total assets and above half- two thirds of their
revenue (Rose, 1999).
Loan is an arrangement in which a lender gives money or property to a borrower and the
borrower agrees to return the property or repay the money usually along with interest at some
future points in time. Usually, there is a predetermined time for repaying a loan and generally the
lender has to bear the risk that the borrower may not repay a loan.
Non-performing loan is sum of borrowed money upon which the debtor has not made his or her
scheduled payments for at least 90 days. A non-performing loan is either in default or close to
being in default. Once a loan is nonperforming, the odds that it will be repaid in full are
considered to be substantially lower. If the debtor starts making payments again on a non-
performing loan, it becomes re performing loan even if the debtor has not caught up on all the
missed payments. Institutions holding non-performing loans in their portfolios may choose to
sell them to other investors in order to get risky assets and clean up their balance sheets. Sales of

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non-performing loans must be carefully considered since they can have numerous financial
implications, including affecting the company’s profit and loss, and tax situations.
According to Rawlinset al(2012), the principal aim of any business is to make profits. That is
why any asset created in conduction of business should generate income for the business. Since
this issue is applicable for the banking sector business, banks should give due consideration on
the management of loans because lending is the main business and loan is normally the main
assets and vital source of revenue for the (Daniel andWandera, 2013). Deposits in banks are
offset by higher margins from creation of credits as loans. However, if such assets do not
generate any income, the banks` ability to repay the deposit amount on the due date would be in
question. Therefore, the banks with such asset would become weak and such weak banks will
lose the faith and confidence of the customers. Ultimately, unrecoverable amounts of loans are
written off as non-performing loan (Maliket al., 2010).
The study of Skarica (2013) on the non-performing loans in Central and Eastern European
Countries through fixed effect model was also found as Gross Domestic Product growth rate,
unemployment rate and inflation had negative and significant impact on non-performing loans.
Similarly, Carlos (2012) based on ordinary least square model estimators found as non-
performing loans have negative association with gross domestic product growth rate whereas
positive association with unemployment rate. Similar to the Western and other African countries,
in Ethiopia also Wondimagegnehu(2012) Conducted a study on nonperforming loans and found
as poor credit assessment, failed loan monitoring, underdeveloped credit culture, lenient credit
terms and conditions, aggressive lending, compromised integrity, weak institutional capacity,
unfair competition among banks, and fund diversion for unexpected purposes and overdue
financing had an effect on the occurrence of non-performing loans.
It is fact that the bank plays important role in the economic development of the nation by
providing different service to the customer. Loan is one of the most important services that the
bank renders and relevant to this study. According to directives of national bank of Ethiopia
‘loan or advances’ or means any financial asset of the bank arising from the direct or indirect
advances by a bank to a person that are conditioned on the obligation of the person to repay the
fund, either on a specified date or dates usually within interest . .
The issue of non –performing loans has gained increasing attention in because the immediate
consequence of large amount of NPL in the banking system is bank failure. Thus the existence of

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non-performing loan in line with clients financed by Dashin bank arba minch area needs a
practical investigation.

1.2. Statement of the problem

Once of the main activities of banks in Ethiopia and other parts of the world is lending. This is
evidenced by the volume of loans that constitute banks assets and the annual substantial increase
in the amount of credit granted to borrowers in the private and public sectors of the economy.
Loan portfolio is typically the largest asset and the predominant source of income for banks. In
spite of the huge income generated from their loan portfolio available literature shows that huge
portions of banks loans in Ethiopia in 1998 usually become non-performing by the amount of
1,524,583.8 and therefore affect the financial performance of these institution.
Non-performing loan management is a process of restoring recovering a doubtful debt through
corrective actions (restructure renewal, cash collection legal measures etc.) with a view to
improving the condition or the capacity of the borrower and to minimize loss to the bank. .
Different studies on issues of non-performing loan indicates that loan default disallow new
applicants to credit as the banks cash flow management problems increase indirect proportion to
the increasing default problem .
Hunt (1996) argues that default problems destroy lending capacity as the flow of repayment
declines, transforming lenders in to welfare agencies, instead of viable financial institutions. It
incorrectly penalizes creditworthy borrowers whenever the screening mechanism is not efficient.
An empirical study made by (Ajayi 1992) on factors which influence default in mortgagee
finance institution with particular reference to the federal mortgagee bank of Nigeria showed that
non-payment of loan has largely been positively influenced by age of borrowers, repayment term
and annual income of borrowers. Based on the understanding that the banking industry is
different form other business, it is among the most regulated industries in the world.Despite
heavy regulation of the banking industry, the NPLs problem in different economies does not
necessarily share identical immediate causes.
However, all studies did not specifically identify evaluated the cases for becoming non-
performing and method that should be used by lending institution to minimize NP .Even the
studies do not give emphasis for the lending institutions characteristics that cause loan to
become nonperforming. In view of the above problems, this paper is to identify the cause for

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loan in becoming non-performing from both borrower and lending institution side and how the
manages it.

1.3. Research question

 How the non-performing loan can be managed?
 To what extent the bank was running to manage the non-performing loan?
 What were the sequences of procedures for borrowers whose payments were
overdue?

1.4. Objective of the study

1.4.1. General objectives
The general objective of the study is to assess non-performing loan management in Dashen Bank
in Arbaminch District.

1.4.2. Specific objectives

Based on the above brief general objectives of the study, specific objectives of this study are
emphasized on the following critical points.
1. To assess the way of non-performing loan can be managed.
2. To examine the extent of banks run to manage the non-performing loan.
3. To identify the sequences of procedures for borrowers whose payments are overdue

1.5. Significance of the study

This research important for government and other parties involved in the promotion of the
development of banking industries use the finding of the study as additional information to
address the problem uncovered in the development of bank and also used as a source of reference
and guidelines for other researcher who want to make further studies in this area.

1.6. Scope of the study

The scope of the study is limited on assessment of non-performing loan management in case of
Dashen bank Arbaminch sikella branch. To come up with effective research it would be better to
limit the boundary of the study.

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1.7. Limitation of the study
The researcher’s faces different limitations to complete this study. From this limitation, some of
them are the researcher Lack Experience about research and carelessness and Unwillingness of
some respondent to give full information.

1.8. Organization of paper

his paper is organized to five major parts. In the first part, the study would try to indicate
introduction with back ground of the study, statement of the objective of the study, significance
of the study, scope of the study, limitation of the study and organization of paper. The second
chapter is literature review. The Third chapter is research methodology. The fourth chapter
consists of data analysis and interpretation of findings. The fifth chapter is including conclusion
and recommendation of the study.

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 CHAPTER TWO
2. LITERATURE REVIEW
In this chapter an attempt is given on some theoretical background and experience on the area of
non-performing loans and its management and bank crises in Dashen banks.

2.1. Meaning of bank and its functions

Banks are among the most important financial institutions in the economy. They are principal
source of credit for many households, for most local units of government and for business men.
The principal economic function of banks is to make loan. For most banks, loan account for half
or more of their total assets and above half- two thirds of their revenue (Rose, 1999). A bank is a
financial institution which deals with deposits and advance and other related services. It receives
money from those who wants to save in the form of deposit and it lends money to those who
need it.(http://www.ehnow.com/list -6127387- character, combank, htm )
Banks are financial institutions which take deposits from customers and in return make loan to
borrower. Dashen banks are so named because they specialize in giving loans to dashen and
industrial business. Dashen banks are owned by private investors called stockholders or by
companies called bank holding companies (Smith, 1991).
Banks are financial institutions that accept deposits and make loans included under the term
banks are firms such as saving and loan association, mutual saving banks and credit unions.
Because banks are the largest financial intermediaries, most people keep a large proportion of
their wealth in bank in the form of checking accounts, saving accounts, on other types of bank
deposits (S.mishkin, 1997)
The role of dashen banks in the national level are mobilizing savings for capital formation,
financing industry by providing short term, medium term and long term loan to industry and
financing both international and external by helping the movement of goods and services from

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one place to another by providing facilities such as discounting and accepting bill of exchange
and providing overdraft facilities. (Smith, 1991,)

Beside the above benefit, the banks help in monetary policy by faithfully following monetary
policy of the country, also the process of creating and destroying of money is done by the banks.
Generally, it contribute much more to the growth of developing economy through their loan and
advance provisions to trade and industry. It also help agriculture by directly financing
agriculturists for the market of their products and for modernizing their farms. (Posner, 1995)
In general the banks render domestic and international banking services. Domestic banking
services includes deposit mobilization, saving accounts, current account (demanded deposit
fixed) timed deposit, local money transfer and issuance of local guarantees. International banking
services include facilitation of foreign trade, foreign exchange service, facilitation of
international payment and international money transfer. (Smith, 1991) Major roles of banks are
accepting deposits, advancing loans, receiving of valuables for safe custody, acting as references,
issue letter of credit in foreign trade, merchant banking service provides, deal in foreign
exchange, issuer of travelers cheque and credit cards, sale and purchase of stock exchange
securities (http://www.social studieshelp.com/eco-banko.8:50Am)

2.2. What is loan?

Loans is An arrangement in which a lender gives money or property to a borrower and the
borrower agrees to return the property or repay the money, usually along with interest, at some
future points in time (http://www.investorwords.com/2858/loan.html).
The loan is generally provided at a cost, referred to as interest on the debt, which provides
incentives for the lender to engage in the loan. In a legal loan, each of these obligations and
restrictions is enforced by contracts. Although this article focuses on monetary loans, in practice
any material object might be lent. Acting as a provider of loans is one of the principal tasks for
financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical
source of funding. (www.wiki.com)

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According to ( peter S.Rose,1992) loans are among the highest yielding asset a bank can add to
its portfolio, and they provide the largest portion of operating revenue. The principal business of
bank is to make loans to qualified borrowers. Far more important in dollar volume, however are
direct loans both business and individuals. This loan arises from negotiation between the bank
and its customer and result in written agreement designed to meet the specific credit needs of the
customer and the requirement of bank for adequate security and income.
Historically banks have preferred to make short term loans to businesses principally to support
purchase of inventory. in recent years however banks have long then end the maturity of their
business loans which have maturity over one years to finance the purchase of building machinery
and equipment. Because the longer term loans carry greater risk due to unexpected changes in
interest rates banks have also required a much greater proportion of new loans to carry variable
interest rates can be changed in response to shifting market condition.(S. Rose, 1992)

2.2.1. Types of loan

According to their maturity times Dashen Bank (2007:7) Loans are divided in to three types:
Short - term loans - these are loans that is a special commitment lone of a single - purpose with
a maturity of less than one year. Its purpose is to cover cash shortage, such as special inventory
purchase, an unexpected increase in account receivable or a need for interim financing.
Intermediate or medium-term loans - this are term loans to finance the purchase of furniture,
fixtures, vehicles, and plant & office equipment. Maturity generally runs more than one year but
less than five. Consumer loans for automobiles, boats home repair and remodeling are also
intermediate loans.
Long term loans - mortgage loans are used to purchase real estate and are secured by the asset
itself. They usually run between ten – forty years.
Generally, types of loans include mortgage, credit card debts, car loans lines of credit,
promissory notes and bonds. Loans are usually provided with terms out lined written contracts
but also are acknowledged by an oral promise to repay presently, banks and finance &
companies are the most
providers of loan; historically merchants have provided this service.

2.3. Characteristics of Loan

Cording to Impendey, (1984:256) the characteristics loans are as the
following:

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A. Time to Maturity - the length of the loan contract. Loans are classified according to their
maturity into short term, intermediate - term debt and long-term debt. Revolving credit &
perpetual debt have no fixed debt for retirement banks provide revolving credit through
extension of a line of credit brokerage firms supply margin credit for qualified customer on
certain securities.

In this case the borrower constantly turns over the line of credit by paying it down and borrowing
the funds when needed a perpetual loan requires only regular interest payment. The borrower
who usually issued such debt through a registered offering determines the timing of the debt
retirement.
B. Repayment schedule - this schedule is a schedule that shows two parts that is apportion of the
outstanding principal and the interest costs with the interest cost with the passage of time the
principal amount of loan is reduced, or repaid little by little until it is completely retired. It is
required at the end of the contract or on asserted interval, usually on a monthly or semi - annual
basis.
C. Interest - it is a cost of borrowing. The interest rate charged by lending institution must be
sufficient to cover operation & administrative costs on acceptable rate of return. It may be fixed
for the term of loan or adjusted to reflect the changing market condition; floating rates are tied to
some market index and are adjusted regularly.
D. Security - assets pledged as security against loan are known mortgages. Unsecured debt relies
on the earning as collaterals credit backed by collateral is secured. In many cases the asset
purchased by the loan often serves as the only collateral in other cases the borrower puts other
assets including cash, aside as collateral. Real estate or land collateralized power of borrower.

2.4. Non-performing loan and banking crises

Studies reveal that the recent Asian financial crises were due to increased volume of non-
performing loans. Non-performing loans create problems for the banking sectors balance sheet
on the asset side. They also credit a negative impact on income statement as a result of
provisioning for loan losses. Thus, banks have exerted substantial effort and man power to
recover bad loans consequently or adversely affecting their normal banking operations. Banks
have sometimes written off their bad loans to reduce non-performing rate and to improve loan

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asset quality. The impacts of non-performing loans are not limited to only a financial institution
loan loss also influences the unemployment rate .

2.5. Non-performing loan management

Non-performing loan management is a process of restoring recovering a doubtful debt through
corrective actions (restructure renewal, cash collection legal measures etc.) with a view to
improving the condition or the capacity of the borrower and to minimize loss to the bank. (NPL
management procedures loan work out). Non-performing loan means loan and advance which
are classified as non-performing loans as per the current national bank of Ethiopia (NPL)
directive.
The problem of non-performing loans mostly controlled by national bank of Ethiopia and
regulatory body out the maximum limit of risk the problem of non-performing loans related to
several internal and external factors comforting the borrowers.
The internal factors are diversion of funds for expansion, diversification or modernizations
taking up new projects helping or promoting associate concerns time or cost over runs during the
relations in appropriate technology products obsolesces etc. The relationship between bank cost
efficiency and non-performing loans they found that increase in NPL decreases in measured cost
efficiency this decrease in measured most efficiency is due to the fact that once the loans become
past due or NPL, the bank begin to expand additional and managerial effort and expense dealing
with bad loans. These extra operating costs include: The additional monitoring of the diligent
borrowers and the value of collateral. The expense of analyzing clerical and stationary cost and
negotiating possible work out arrangement and cost of seizing maintaining and eventually
disposing of collateral.

2.6. Problem of loans and losses

Loans are classified as problem of credit what they can’t be repaid according to the term of the
initial agreement. Loans become problem credit as a result of many factors. The credit analysis
may have been faulty because it was based on in adequate information or in complete analytical

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procedures. Economic conditions may change adversely after the loan is granted so that the
borrower cannot meet debt service requirements.
Alternatively, a borrower may simply choose not to repay if circumstances permit. Problem
loans and loan losses essentially reflect the default risk inherent in borrower’s willingness and
ability to repay all obligations. (Koch, 1995)

2.6.1. Bank credit and lending procedures

Banks and thrifts make three types of loans; industrial loans, consumer loans, and mortgage
loans. Industrial loans are loans to businesses or industrial firms. These are primary short term
working capital loans (loans to finance the purchase of material or labor) or transaction or longer
term loans (loans to purchase machines and equipment). Most banks after a variable rate on these
loans, which means that the interest rate can change over course of the loan. Whether a bank will
make a loan or not depends on credit and loan history of the borrower, the borrowers.
Ability to make scheduled loan payments, the amount of capital the borrower has invested in the
business, the condition of the economy, and the value of the collateral the borrower pledges to
give the bank if the loan payment are not made. (Pandey, 1990)

2.7. Lending procedures

Even if the structure of credit operation of bank varies greatly from bank to bank depending on
the size of bank and economic environment in which the bank operates, some lending procedures
are accepted universally by almost all dashen banks. Some of them are the following.
2.7.1. The interviews
It is the first contact with the manager of Dashen bank and provides an opportunity for the
bankers to explore about applicant beyond the loan application. It should be friendly discussion
in which the banker tries to see through the loan request. It should touch on points like:- the
purpose of loan, the applicants commitments elsewhere, the applicant deposit account for other
branches or banks, the applicant business experience, how he intends you pay off the loan and
the business plan.

2.7.2. Loan application

The loan application should state details of the requested loan clearly and it includes; amount of
loan requested the purpose of the loan, the collateral offered, the duration of the loan in which

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the borrower intends to pay off the debt and the installment if monthly quarterly, in one lump
sum etc.

2.7.3. Financial statement and property estimation

Financial statement audited or provisional including cash flow statements in case of
manufacturing and purchase invoice, receipts, sales or purchase agreements, work order etc to
substantiate the actuality of the requests. The financial statements, like balance sheet, income
statement, cash flow statement are should be carefully analyzed to determine in the financial
soundness of the applicant and assess the repayment capacity.

2.7.4. Insurance and security

All properties pledged to the bank needs to be covered by the insurance against relevant risk and
in all case the insurance policies should be endorsed in the name of the bank so that the proceed
will be directed to the bank for the settlement of the debt in case of damage of the property.
Security is a term used by a bank to represent the collateral in order to offset some unforeseen
out comes or condition that may happen during the life of a loan.

2.8. Credit risk

It is the chance that a borrower will not repay what is owed, in broader way (Rose 1999) defines
credit risk as the probability that some of a bank’s assets, especially loans will decline in value
and perhaps become worthless. Besides, (Koch and Macdonald, 2003) explain credit risk as the
likelihood of default or the potential variation in net income and market value of equity resulting
from non-payment. According to ( Koch and MacDonald, 2003) different types of assets and off
balance sheet activities have different default probabilities. Loans typically exhibit the greatest
credit risk.

2.9. The role of credit analysis in minimizing credit risk

Once information Credit risk analysis is the process of analyzing all available information to
determine whether the loan meets the banks risk return objective. It is essentially default risk
analysis in which a loan offices attempts to evaluate a borrower’s ability and willingness to repay
( Koch and Macdonald 2002 ). Credit analysis involves examining all relevant qualitative and
quantitative data in order to make reasonable assurance that the loan will be repaid. The depth of
credit analysis depends on the size and complexity of the case and the cost benefit factors.

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 Credit analysis for dashen lending involves identifying inherent risks in the operation of
business by generating a list of factors that indicate what could harm a borrower’s ability to pay
examining what managers have done or failed to do in mitigating those risks, and structuring an
acceptable loan agreement and controlling the risk of the bank in the supplying funds. (Koch and
Macdonald, 2000) has been gathered, the firm faces the hard choice of either granting or refusing
credit. Many financial managers use the five “C’'s of Credit" as their guide (Holger M. Muller
2008).

1. Character: Character refers to the borrower’s reputation and the borrower’s willingness
to settle debt obligations. In evaluating character, the borrower’s honesty, integrity and
trustworthiness are assessed. The borrower’s credit history and the commitment of the
owners are also evaluated (Rose, 2000).
A company’s reputation, referring specifically to credit, is based on past performance. A
borrower has built up a good reputation or credit record if past commitments were
promptly met (observed behavior) and repaid timely (Rose, 2002; Koch & McDonald,
2003). Bankers recognize the essential role management plays in a company’s success.
Critically analyzing quality of management has been one of the ways of assessing
character. The history of the business and experience of its management are critical
factors in assessing company’s ability to satisfy its financial obligations. The quality of
management in the specific business is evaluated by taking reputation, integrity,
qualifications, experience and management ability of various business disciplines such as
finance, marketing and labor relations into consideration (Sinkey, 2002;
Nathenson,2004).
2. Capacity: Capacity refers to the business’s ability to generate sufficient cash to repay the
debt. Analysis of the applicant’s businesses plan, management accounts and cash flow
forecasts (demonstrating the need and ability to repay the commitments) will give a good
indication of the capacity to repay (Sinkey, 2002; Koch & MacDonald, 2003). To get a
good understanding of a company’s capacity evaluating the type of business and the
industry in which it operates is also vital. It plays a significant role since each industry is

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 influenced by various internal and external factors. The factors that form the basis of this
analysis includes:
Type of industry, Market share, Quality of products and life cycle, whether the business
is labor or capital intensive, the current economic conditions, seasonal trends, the
bargaining power of buyers and sellers, competition and legislative changes (Koch
&MacDonald, 2003; Nathenson, 2004). Besides, the financial position is also a critical
indication of a business’ capacity. The company’s financial position is evaluated by
assessing past financial performance and projected financial performance. A company’s
past financial performance is reflected in their audited financial statements (Koch &
MacDonald, 2003).

3. Capital: Capital refers to the owner’s level of investment in the business (Sinkey, 2002).
Banks prefer owners to take a proportionate share of the risk. Although there are no hard
and fast rules, a debt/equity ratio of 50:50 would be sufficient to mitigate the bank’s risk
where funding(unsecured) is based on the business’s cash flow to service the funding
(Harris, 2003).
4. Conditions: Conditions are external circumstances that could affect the borrower’s
ability to repay the amount financed. Lenders consider the overall economic and industry
trends, regulatory, legal and liability issues before a decision is made (Sinkey, 2002).
Once finance is approved, it is normally subject to terms and covenants and conditions,
which are specifically related to the compliance of the approved facility (Leply, 2003).
5. Collateral: Collateral (also called security) is the assets that the borrower pledges to the
bank to mitigate the bank’s risk in event of default (Sinkey, 2002) .It is something
valuable which is pledged to the bank by the borrower to support the borrower’s intention
to repay the money advanced. Security is taken to mitigate the bank’s risk in the event of
default and is considered a secondary source of repayment (Koch & MacDonald, 2003).
The purpose of security is to reduce the risk of giving credit by increasing the chances of
the lender recovering the amounts that become due to the borrower. Security increases
the availability of credit and improves the terms on which credit is available. The offer of
security influences the lender’s decision whether or not to lend, and it also changes the
terms on which he is prepared to lend, typically by increasing the amount of the loan, by

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 extending the period for which the loan is granted and by lowering the interest rate
(Norton and Andenas, 1998: 144).

2.10. Empirical Literature

Goldstein and Tumor (1996) stated that the "accumulation of non-performing loan management
is generally attributed to a number of factors, including economic down turns and
macroeconomic volatility terms of traded Teri oration, high interest rate, excessive reliance on
overly high-priced inter-bank borrowings, insider lending and moral hazard".
Boudrigaet al.(2009) investigated on the title “bank specific determinants and the role of the
business and the institutional environment on Problem loans in the Middle East and North Africa
countries” for 2002-2006 periods.
The variables included were credit growth rate, Capital adequacy ratio, real gross domestic
product growth rate, return on asset, and the loan loss reserve to total loan ratio, diversification,
private monitoring and independence of supervision authority on nonperforming loans. The
finding revealed that credit growth rate is negatively related to problem loans. Capital adequacy
ratio is positively significant justifying that highly capitalized banks are not under regulatory
pressures to reduce their credit risk and take more risks. Also return on asset has negative and
statistically significant effect on non-performing loans.
This results supports as greater performance measured in terms of return on asset reduces
nonperforming loans since reduced risk taking in banks exhibiting high levels of
performance.Louziset all(2010) examined the non-performing loans in the Greek financial
sector using dynamic panel data model and found as real gross product growth rate, return on
asset and return on equity had negative whereas lending, unemployment and inflation rate had
positive significant while loan to deposit ratio and capital adequacy ratio had insignificant effect
on non-performing loans
Similarly, Joseph (2011) who conducted study on the title of effects of interest rate spread on the
Level of non-performing assets of commercial banks in Kenya was considered interest rate
spread/cost of loan as independent and non-performing loans ratio as dependent variables. The
study applied descriptive research design. Both primary and secondary data were considered
from Commercial banks in 2010. It was analyzed by the help of Stastical Package for Social
Science software. The finding indicates that cost of loan/lending rate has a positive significant
effect on the occurrences of non-performing loans.

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However, Konfi (2012) who conducted study on the determinants of nonperforming loans on the
operations of SINAPI ABA TRUST microfinance institutions in Ghana found as high interest
rate was not significant factors causing the incidence of non- performing loans. This study
justifies as interest rate is only applicable to loan defaulters who have managed to pay off
outstanding principal and are in default in only interest payment. If a borrower is in default of
both principal and interest, then one cannot assert that high interest rate is the actually the cause
of the loan default.

Besides, the study conducted in Ethiopia by (Wondimagegnehu ,2012) on “the assessment non-
performing loan on commercial banks of Ethiopia” also found as poor credit assessment, failed
loan monitoring, underdeveloped credit culture, lenient credit terms and conditions, aggressive
lending, compromised integrity, weak institutional capacity, unfair competition among banks,
will full defaults by borrower and their knowledge limitation, fund diversion for unexpected
purposes and overdue financing has significant effect on non-performing loans. Besides, the
study of (Wondimagegnehu 2012) considers interest rate as bank specific factors and revealed as
interest rate has no impact on the level of non- performing loans of commercial banks in
Ethiopia.
The study conducted in Ethiopia by on ‘determinants of non-performing loans ‘in commercial
bank the finding revealed as loan to deposit ratio had positive whereas inflation rate had
negative, but insignificant effect on non-performing loans of commercial banks in Ethiopia.
However, bank profitability measured in terms of return on equity, banks capital adequacy ratio
and lending rate had negative and statistically significant effect whereas bank profitability
measured in terms of return on asset and effective tax rate had positive and statistically
significant effect on non-performing loans. The finding of this study is significant since once
identifying the determinants of non-performing loans might enable management body to make
appropriate lending policies that prevent the occurrence of non-loans.

2.11. Research Gap

Some researchers are study on the related title to the assessment of non- performing loan
management in different town and they also give the direction of how to assess non-performing
loan management in their town and they also can serve as bench mark for other studies. But

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there is no enough research that shows the current status of Dashen bank in non-performing loan
management in Arba minch sikella branch. Due to this fact the researcher initiated to conduct
research in Arbaminch town on the title of assessment on non-performing loan management in
management

CHAPTER THREE
3. Research Methodology
3.1. Research design and research approach
The researcher was used descriptive type of research design because the objective of a
descriptive research is to describe the state of affairs as it exists. The study was used both
qualitative and quantitative approach of research because quantitative approach enables to
conduct the study with intent of quantify report and assess multiple realities and evidences based
on actual words of different prospective from individuals and organization itself. And qualitative
in this study consider to as suitable for gaining in depth understanding of reasons and motivation.

3.2. Data source and Method of data collection

The researcher used both primary and secondary source of data because both are necessary for
such study and both are the way to get realistic information from concerned body. Primary data
is first-hand information that collected by researcher through questionnaire and interview
because this two data collection method are the best one. The questionnaire has both open and
closed ended questionnaire. The open-ended questionnaire helps the respondents to express their
ideas in unlimited way and closed ended provide actualized question to respondents. Secondary
data is collected from bank report, and website.

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3.3. Target population and sample size
The target population study is employees of organization specifically who is close to loan
advance and credit management in organization the reason is the researchers assume that those
employees are full awareness about non-performing loan management. The researcher selected
12 employees as sample from 21 total population of organization, those who have an approach to
management of bank / organization/. These researchers selected manager, assistant manager,
loan officer and employees from total of (12) employees.

3.4. Sampling techniques

The research used judgmental sampling technique. Because this type of sampling techniques
enables the researcher to gather accurate and sufficient or required information/ data from
authorized and concerned persons. By using this method, individuals who had belied to have
sufficient knowledge expertise and familiarity with subject matter will be selected

3.4. Method of data analysis

After all relevant data is collected, descriptive analysis used. The analysis indicated the
transformation of raw data in to a form that would make in term easy to understand and interpret
it. To interpret identified data, it is written in the form of tabulation percentage to facilitate
comparison, summation and cumulative of data.

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 CHAPTER FOUR
4. DATA PRESENTATION AND INTERPRETATION
This chapter presents and interpretation non-performing loan management in Dashen bank in
Arba minch District. The primary and secondary data presented and interpretation in descriptive
way. Primary data is collected from Dashen bank in Arba minch District through questionnaires
and interview. The questionnaires are distributed to 12 employees of bank and the interview was
conducted to manager, assistant manager and loan officer of the bank. The secondary data is
from Dashen bank annual report 2017-21.

4.1. Primary data analysis

The primary data is collected from Dashen bank Arba minch District through questionnaires and
interview. The questionnaires were distributed to 12 employees of district and the interview was
conducted to manager, assistant manager and loan officer. The researcher collected all
questionnaires from the respondents and analyzed.
Table. 4.1. Analysis of personal background of respondents
No Item Alternatives Respondent

No Percentage
1 Sex Male 7 58.333

Female 5 41.667

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 Total 12 100
2 Age 20-25 2 16.667

26-30 6 25

31-35 3 21.43

36-40 1 38.333

Above 40 0 0

Total 12 100

3 Marital status Married 4 33.33

Single 6 50

Divorced 2 16.667

Total 12 100
4 Educational status Diploma 0 0
First degree 10 83.83
Masters 2 16.667
Above masters 0 0
Total 12 100
5 Position in bank Manager 1 8.333
Assistant manager 1 8.333
Loan officer 1 8.333
Employee 9 75
Total 12 100

Source: questionnaire survey, 2021

From the data gathered through questionnaires, the researcher gathered different types of data
that are expected to represent the response of all employees in the bank and also the researcher
analyzed as follows:- According to the above table 7 or 58.33% respondents are males and 5 or
41.667% are female respondents. Therefore, more number of employees in bank is males. In the
researcher asked about Age, the respondents answered and analyzed above table shows 2
respondents or 16.667% are aged between 20-25, 6 respondents or 50% are aged between 26-30,
3 respondents or 21.43% are aged between 31-35 and 8.33% of respondents are aged between
36-40 years. No one choose above 40 years. So from this the researcher can conclude that the

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most of respondents are in between 26 and 30. The researcher asked about educational status of
the employees, the respondents answered as follows and analyzed as, Diploma no choose it. 10
respondents or 83.83% of respondents have first degree, one of them has second degree and
none of them has above second degree. 2 respondents or 16.667% from this the researcher can
conclude that most of employees in the bank are 1st degree.
The researcher asked about marital status of the employees, and in according to the table 4.1
above 4 respondents or 33.33% is married, 6 respondents or 50% of respondents are not
married /single and 2(16.667%) of them are divorce. So, from this the researcher can conclude
that most of employees in the bank are unmarried. The researcher asked about respondent
position in the bank, in above table 4.1, 8.33% or 1 respondent is manager, 1 respondents or
8.33% are assistant manager, 8.333% or one respondent is loan officer, 75% of respondents or 9
respondents are employees of bank. So, from this I can conclude that most of the respondents are
employee of bank.

4.2. Advance loan to customer

Table. 4.2. The way in which non-performing loan manage
No Item (activities the bank performs) SA A N DA SD Total
1 Your bank is giving advance loan to 6 6 12
customer
Percentag 50 50% 100%
e %
Source: survey, 2021
The researcher asked to know whether the bank is given loan to customer/clients and in table
4.2.1 6(50%) of respondents choose strongly agree and 6(50%) are agree. So, from this I can
conclude that, the bank is advancing or providing loan to the clients.
Table 4.3. Recognized non-performing loan
No Item (activities the bank performs) SA A N DA SD Total

2 Your bank is recognized any non- 4 5 3 12

performing loan
Percentage 33.33% 41.667 25 100%
% %
Source: survey, 2021

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 The researcher asked to the respondents to know that the bank have recognized ever non-
performing loan. The table 4.2 .2 shows that 4 respondents or 33.33% of respondents said agree
and 5 respondents or 41.67% agree. So, from this the researcher can conclude that the bank has
recognized any non-performing loans.

Table 4.4. cause for non- performing loan

No Item (activities the bank SA A N DA S Total
performs) D
3 The basic cause for
non-performing loan
in your bank are

A Poor performance 4 8 12
performance 33.33% 66.667% 100%
B Political instability 3 6 3 12
Percentage 25% 50% 25% 100%
C Lack of credit policy 2 5 3 2 12
Percentage 16.66% 41.67% 25% 16.667% 100%
D Error in 2 6 4 12
documentation
percentage 16.667 50% 33.33 100%
% %
E Fraudulent practice 3 4 5 12
percentage 25% 33.33% 41.667% 100%
Source: survey and interview, 2021
The researcher asked those who say agree, the reasons/causes of non-performing and
respondents answered: 6 respondents or 50% are responded the poor management, 4 respondents
or 33.33% of respondents answered political instability, 2 respondents or 16.67% answered error
in documentation none of them choose the fraudulent practice and from manager response there
is lack of credit practice lack of effective follow up by the branch, approval of loan without
adequate collateral and absence of employee motivation. So, from this researcher can conclude
that the bank has poor loan management system instability and error in documentation ability
have its part.

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Table 4.5. Make non -performing loan to performing loan
No Item (activities the bank performs) SA A N DA SD Total
4 The bank is tried to make non- 2 2 3 5 12
performing loan to the performing
loan
Percentage 16.6 16.6 25 41.7 100%
% % % %
Source: survey, 2021
The researcher asked to know whether the bank tried to make the loan performing loan back,
according to table 4.2.4 the respondents answered as follows;16.6 % of respondents assured that
strongly agree 16.6% of respondents said agree, 25% are neutral and majority group are said that
disagree. So, from this the researcher can conclude that the bank is not trying to make non-
performing loan to performing loan.
Table 4.6. Working to the management of non-performing loan
No Item (activities the bank performs) SA A N DA SD Total
5 Your bank is working to the management non- - 5 7 12
performing loan
Perce - 41.7% 58.33% 100%
ntage
Source: survey, 2021
From the above table 4.2.5 the major respondent are disagree that is 7(58.33%) and 5(41.7%)
are agree. Therefore, the researcher can conclude that the bank is not working to the
management of non-performing loan.

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Table 4.7. Sequence of procedures when the payment are overdue
No Item (activities the bank SA A N DA SD Total
performs)
6 The borrowers
whose payments are
overdue in
following sequence
of procedures
A Calling,billing, 6 4 2 12
applying to court
Percentage 50% 33,33% 16.667% 100%
B Billing, calling 4 5 3 12
applying to court
Percentage 33.33% 41.7% 25% 100%
C Applying to court 3 5 4
Percentage 25% 41.7% 33.33% 100%
Source: survey, 2021
From the above table 4.2.6 the respondent replied that the payment sequence of procedure start
from calling ,billing, applying to court which is 6(50%) are strongly agree,4(33.33%) are agree
and 2 (16.66%) .Some respondent said that the sequence of payment procedure is start from
billing, calling, applying to court to 4(33.33%) are agree,5(41.7%) are neutral and 3(25%) are
disagree. So, from this the researcher can conclude that the borrowers whose payment are
overdue in the sequence of procedure to calling, billing and applying to court .

4.3. The interview covers

The main objective of conducting interview is to solicit adequate and complete information and
to conduct due diligence on the application immediately after a credit request has been located

24 | P a g e
the credit advisor will conduct a detailed face to face interview with the applicant to obtain full
information pertaining to the credit request the interview. Under this circumstance the interview
with the manager response advance loan to customer is done by receiving all required documents
as per the bank policy and procedure as well as NBE directive for instance; commercial
registration certificate, business license , income statement and balance sheet , collateral and so
on.
In addition to the information document that collect detailed information about the business
activities of the customer from the independent sources to have well detailed customer diligence.
The manager says that the effects from NPL in Dashen bank is very rare cause as per NBE
directive state beyond 5% NPL out of total outstanding loan balance could cause the bank to
suspend granting loan to customer. Once the loan become non-performing the bank officials try
to exert effort in collecting the loan balance. The first step is communicating the borrower
through different means to repay the loan. The first resort is to acquiring the collateral is for
closed acquiring the collateral property is not readily sold in the market the bank has to incur
maintenance and administrative cost thus disposing non-performing loans through sale proceeds
of its collateral is not easily successful. However, these does not help much banks and yet been
proceeding large number of collateral property that should have been sold. Dashn bank Arba
minch District takes NPL measures when borrowers cannot repay the debt, communicate with
borrowers, give advice there by extend the repayment period. However, this adds the loan to be
default. According to answer of respondents, the Bank is working to manage non-performing
loan. However according to question about the performance/degree hard working in managing
NPL the performance in managing is not satisfactory. Some loans are still becoming non-
performing loan. Managements are not running as much as possible to manage non-performing
loans even if they work to recovery the NPL. Therefore there are some loans that are becoming
non-performing in the bank. The researcher asked respondents to know for the non -performance
of the loan who is responsible and accountable, so specifically the responsible person for non-
performing loan is branch manager. The researcher asked to know the length of time to make the
non-performing loan in to performing loan, and most respondents answered that the length of
time to recover or to make it performing the loans that become non-performing is above 3
months.

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4.4. Analysis of the secondary data
The researcher could not secondary data about branch bank, which reveals NPL of branch rather
than primary data. The researcher used secondary data from financial statement reports of
Dashen bank. The researcher mainly used balance sheet and expense status to know portfolios
and its collection as well as trends of NPL. The data were selected from seven years financial
statements, from 2016-2021 years financial statements. And analysis and explanation is given
based on the data believed and concentrated on objective study. The data used for following
analysis is bonded on the back of this paper.

4.4.1. Non-performing loan portfolio

Dashen bank provides loan and advances to different sectors. According to annual reports
Dashen bank provides loan and advances to Agriculture, Loan to customers, Manufactures,
domestic trades, foreign trades, building and construction, personal loans, etc. Total asset of bank
shows incremental. The major account categories that pushed asset balance up were advance and
loans to customers and building construction (condominiums), investment, property.

4.4.2. Trends of loan disbursements and collection

According to 2017-2021 annual report for Dashen bank in Arba minch District in the building
construction the amount of loan disbursed to various economic sectors. i.e. the loan of building
or condominiums was birr 70,699,747.6 million. The total population of 650 for the building
construction for condominiums at NPL in Dashen bank Arba minch District.
The total collection on other hand reached for condominium birr 70,643,747.6 million. The
remaining 56,000 were not collected under the year.
According to 2017-2021 annual report for the Dashen bank Arba minch District the business or
customer sector under 22 customers for NPL was 32,671,689 million.
The total collection on other hand reached for customers birr 31,203,114.2 million. The
remaining 1,468,583.80 not collected under the year.
Generally, non-performing loans have substantial negative impact on existing potential
performance of Dashen bank in particularly and overall economy generally. If bank could not
collect what it has lent, its liquidity position is adversely affected. Non-performing loan also
decreases cost efficiency due to extra operating costs dealing with it. So, the banks need to give a
great attention to non-performing loans.

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 CHAPTER FIVE
5.Conclusion and Recommendation
This chapter deal with conclusion based on primary and secondary finding and finally to make
recommendation to Dashen bank Arba minch District.

5.1. Conclusion
From the analysis part of this research based on the data gathered from primary and secondary
data I conclude that: The bank is advancing or providing loan to customer, manufacturer,
domestic and foreign traders. The bank is using calling, billing and applying to court are an
instrument for collection of non-performing loans from defaults. The basic cause for non-
performing loan are poor performance, political instability, lack of credit policy ,fraudulent
practice, lack of customer awareness, approval of loan without adequate collateral, absence of
employee motivation. The length of time to recover or to make it performing the loans that
become non-performing is above 3 months. There are many types of loan done by the bank
advance to customers: overdraft facilities, term loan merchandize loan import and export trade
finance loan, consumer loan, project or investment loan and guarantee loan. The bank is not
properly working and making follow up on non-performing loans and also has poor
management. On performing loan have substantial negative impact on existing potential
performance of the bank the responsible person in the nonperforming loan is branch manager.

5.2. Recommendation
In addition to having a well-organized credit management system, the bank needs to make
exhaustive effort in implementation as well as for better improvement of handing and controlling
problems of non-performing loan in the further I insist that the following changes and
adjustments could be good for the bank's future career. Frequency and non-performing loans
should be minimized. The bank should have good loan management practice and proper follow
up before loans become NPL.The bank should try to make non-performing to normal loans. The
bank is should properly decide on the non-performing loans. The bank should protect and detect
the problems, cause and consequences of non-performing in the banks operation and
profitability. The manager should take care/great attention on the loans given to the borrower

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References
Ajayi. (1992). journal article on an analysis of default in Residential Mortgages of federal
mortgage bank of Nigeria.
Fofack, H. (.-p.-S.-p.-S. ( Fofack, H, (2005). Non-performing loans in sub-Sahara Africa: causal
analysis, investigated the determinants of non-performing loans2009.).
Fofack, H, (2005). Non-performing loans in sub-Sahara Africa: causal analysis, investigated the
determinants of non-performing loans in sub-Saharan Africans Macroeconomic
statistics, IMF Working paper, and W.
Jems. (n.d.). Financial Intermediation. (http://en.wikipedia.org/wiki/loan): Financial system and
its function (accessed March 15).
Joseph. (2011). Conduct study on effects of interest rate speed on the non -performing loan.
Koch. (1995). Problem of loan and losses become Problem credit as a result of Many factors.
Levees. (2012). Assessment of non -performing loan management. Assessment of non -perform
management.
Millan, M. (n.d.). principle of banking, Indian institute of banking and finance. 2005.
Muller, H. M. (2008). • Holger M. Muller, (2008). bank capital structure and credit decisions,
university of (http: // teach me finance.com); Non-performing loan and its occurrences
(accessed on March 28, 2010), Frankfurt (IMFS), p.295-314.
Muller, H. M. (n.d.). • Holger M. Muller, (2008). bank capital.
Pandy. (1999). financial management, 8th edition, Indian institute management.
Peter S, R. (1992). Loan among the highest yielding. asset a bank can add to its portfolio.
Poser. (1995). Help agriculture by directly Finance agriculture for the Market.
Rose. (1995). Fundamental management and corporative Finance, 3rd edition, mc-grow hill.
s. Mishkin. (1995). Assessment of non-performance loan management. Assessment of non
-performing loan management.
Sinkey. (2002). Capital refers to the level of investment in the business owner.
Tomothy, W. (1995). banking, and money management.3rd edition. New York.
Ttacy.G. Herikk. (1978). bank analysis, 2nd edition wisterias edition.
Wondimu. (2007). Analysis of technical efficiency of banks in loan delivery United Dashen bank
and construction and Business.

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 APPENDIX I

ARBAMINCH UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF BANKING AND FINANCE
Questionnaires to be fill by employees of Dashen bank of Arbaminch District.
Dear Respondent
The aim of conducting these questionnaires is to assess the non-performing loan management in
Dashen bank of Arbaminch District. In addition, it also aims to partially fulfillment of BA degree
in accounting and finance. So, dear respondents you are kindly request to fulfill the following
questionnaire appropriately. The information that you will give keep in secret and will be used
only for academic purpose.
Note: - Make your responses on boxes and write down on spaces provide.
Thank you in advance for your responses.
Personal Back Ground
1. Sex: male female
2. Age: 20-25 26-30 31-35 36-40 above 40
3. Marital statutes: married Unmarried divorced
4. Educational statutes: diploma degree master above master
5. Position in bank: manage assistant manager loan officer other, please
specify________________________________________________________________________
_______________________________________________

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 I. To what extent do you agree or disagree to the following statements about Dashen bank?
Please use 1, strongly agree, 2, agree 3, Neutral, 4, disagree 5, strongly disagree, tick
the boxes according to your reasons.

No Item (activities the bank performs 1 2 3 4 5

1 Your bank is give advance loan to customer
2 Your bank is recognized any non-performing loan
3 The basic causes for nonperforming loan in your bank are
A Poor management
B Political instability
C Lack of credit policy
D Error in documentation
E Fraudulent practice
4 The bank is try to make non-performing loan to performing
loan
5 Your bank is working to manage nonperforming loan
6 The borrowers whose payments are overdue in following
sequence of procedures
A Calling ,billing, applying to court
B Billing ,calling applying to court
C Applying to court

APPENDIX II
INTERVIEW QUESTION
 How do you advance the loan to customers?

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  What are basic causes of non-performing loan in your bank?
 What are effects of non-performing loan on your bank?
 Do you experience any non-performing loan in your bank?
 What are measures taken to deal with non-performing loan?
 How can your bank know that it is managing non-performing loan or not
managing Non performing loan?
 What is your performance regarding to working to manage none performing
loans?
 Who is responsible for non-performing loan?
 What is the length of the time that loan can become Non performing loan in
your branch?
 What type of loan do you advance?
THANK YOU!!!

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