ASSESSMENT ON THE DETERMINANTS OF CREDIT MANAGEMENT AND ITS CREDIT DEFAULT RISK IN THE CASE OF COMMERCIAL BANK OF ETHIOPIA, ALAMATA BRANCH

Abstract

The purpose of the study is to look Credit Default Risk and its Determinants of In the case of commercial bank of Ethiopia ,alamata branch . To this end, the researcher employed quantitative approach with explanatory research design where the effect caused by the independent variables on the dependent variable is observed through regression analysis. The purposive sampling techniques have been employed by researcher in order to select 100 sample sizes from commercial banks of Ethiopia. The primary data was collected using structured questionnaire. Then, the result of multiple liner regression showed that five variables such as use of collateral, credit risk identification, credit monitoring, and credit policy and credit analysis have positive and statistically significant effect on credit risk management system. The explanatory variables incorporated in the model have only explained 44.7 % of the model. The remaining 55.3% of changes in the on credit risk management system was explained by other explanatory variables that not included in the model .The quantitative data used for econometric analysis are five financial variable that makes the model fit and relating mainly to commercial bank of Ethiopia credit exposure and lending decision quality. The choice of these ratios is based on a survey of related literature on credit risk determinants Based on the findings of the study, the researcher forwarded possible recommendations for the commercial bank of Ethiopia in the study area to work on statistically significant variables due to fact that they have significant influence in improving credit risk management system. For instance, having sound credit policy enhances the credit risk management system. So, that it is recommended to banks should work on sound credit policy to improve credit risk management system that enables to advance the capacity of commercial bank of Ethiopia to deliver different financial services to the public.