This document summarizes a research paper on assessing the loan and advance processing practice of Abay Bank in Debre Markos, Ethiopia. The paper includes an introduction outlining the background and objectives of the study. It also reviews relevant literature on banking history, types of banks and loans, loan processing procedures, and challenges associated with lending. The research methodology is described as a descriptive study using primary and secondary data collected from the bank. The findings of the data analysis are presented in tables covering topics like types of loans offered, problems in processing, evaluation criteria, and loan performance. The conclusion recommends ways to improve the bank's loan processing and monitoring practices.
This document is a research paper assessing the loan and advance processing practice of Abay Bank in Debre Markos, Ethiopia. It includes an introduction outlining the background and objectives of the study. The first chapter provides context on banking and loans. It identifies problems with Abay Bank's loan processing and non-performing loans. The second chapter reviews relevant literature on banking history, types of banks and loans. It explores Abay Bank's functions and types of loan accounts. The research methodology and data analysis plan are described. In conclusion, the study aims to evaluate Abay Bank's loan processing practices and identify ways to improve effectiveness and reduce non-performing loans.
This document provides an overview of different types of documentary credits used in international trade. It defines a documentary credit as a conditional payment guarantee from an importer's bank to an exporter. There are several types of credits described, including standby credits, transferable credits, deferred payment credits, revolving credits, back-to-back credits, red clause credits, green clause credits, transit credits, and omnibus credits. Each type has distinct features regarding payment terms, collateral requirements, parties involved, and applicable regulations.
The document outlines the 10 step process for opening a letter of credit. It begins with the importer selecting a legal product and supplier. They then negotiate an agreement and apply to an issuing bank, providing documents like a contract and purchase order. If approved, the bank issues the letter of credit to an advising bank. The supplier then ships goods if the terms are met and presents documents to receive payment from the issuing bank once verified. The letter of credit must contain essential details like amounts, dates, parties and transport terms to legally facilitate international trade payments.
This document discusses documentary collections, which involve banks carrying out instructions to pay for goods under financial and commercial documents. There are two main types: documentary against payment (D/P), where the buyer does not get goods until paying, and documentary against acceptance (D/A), which allows a credit period. For exporters, documentary collections ensure payment before releasing goods, though buyers could refuse documents and banks assume no risk. For importers, they ensure shipment of goods before requiring payment. The process involves instructions between remitting, collecting, and presenting banks according to international rules.
This document discusses various payment methods including cheques, credit cards, debit cards, and cash cards. It describes the key characteristics of cheques such as being drawn on a banker, payable on demand, and containing a certain money amount. It also discusses crossed and open cheques, components of a bill of exchange, protections provided to paying and collecting bankers, negotiation of cheques, dishonor of cheques due to insufficient funds, and the different types of cards including their distinguishing features.
Cheque truncation is a system of cheque clearing and settlement between banks based on electronic cheque images instead of physical cheques. It allows for faster cheque processing and settlement. Under cheque truncation, when a cheque is deposited, the physical cheque is truncated and replaced with digital images. These images are sent electronically between banks to clear payment. This reduces clearing time from days to just one day and lowers processing costs for banks and customers. It enables innovative banking services and faster funds availability.
Factoring is a financial transaction where a business sells its accounts receivable (invoices) to a third party called a factor at a discount in exchange for immediate money. This allows the business to finance continued operations. Factoring differs from loans in that it involves the purchase of a financial asset rather than assessing creditworthiness, and it involves three parties rather than two. There are various types of factoring including recourse, non-recourse, maturity, and invoice factoring. Factoring provides businesses with financing, accounts receivable maintenance, collection services, and advisory services.
methods of payment in international tradedeepak gupta
The document discusses various payment methods in international trade, including cash-in-advance, letters of credit, and documentary collections. Cash-in-advance requires upfront payment but provides no risk to exporters. Letters of credit involve banks and shift risk between buyers and sellers. Documentary collections are less complex than letters of credit but provide limited recourse if payment is not made. The key methods, their characteristics, and transaction flows are outlined.
This document is a research paper assessing the loan and advance processing practice of Abay Bank in Debre Markos, Ethiopia. It includes an introduction outlining the background and objectives of the study. The first chapter provides context on banking and loans. It identifies problems with Abay Bank's loan processing and non-performing loans. The second chapter reviews relevant literature on banking history, types of banks and loans. It explores Abay Bank's functions and types of loan accounts. The research methodology and data analysis plan are described. In conclusion, the study aims to evaluate Abay Bank's loan processing practices and identify ways to improve effectiveness and reduce non-performing loans.
This document provides an overview of different types of documentary credits used in international trade. It defines a documentary credit as a conditional payment guarantee from an importer's bank to an exporter. There are several types of credits described, including standby credits, transferable credits, deferred payment credits, revolving credits, back-to-back credits, red clause credits, green clause credits, transit credits, and omnibus credits. Each type has distinct features regarding payment terms, collateral requirements, parties involved, and applicable regulations.
The document outlines the 10 step process for opening a letter of credit. It begins with the importer selecting a legal product and supplier. They then negotiate an agreement and apply to an issuing bank, providing documents like a contract and purchase order. If approved, the bank issues the letter of credit to an advising bank. The supplier then ships goods if the terms are met and presents documents to receive payment from the issuing bank once verified. The letter of credit must contain essential details like amounts, dates, parties and transport terms to legally facilitate international trade payments.
This document discusses documentary collections, which involve banks carrying out instructions to pay for goods under financial and commercial documents. There are two main types: documentary against payment (D/P), where the buyer does not get goods until paying, and documentary against acceptance (D/A), which allows a credit period. For exporters, documentary collections ensure payment before releasing goods, though buyers could refuse documents and banks assume no risk. For importers, they ensure shipment of goods before requiring payment. The process involves instructions between remitting, collecting, and presenting banks according to international rules.
This document discusses various payment methods including cheques, credit cards, debit cards, and cash cards. It describes the key characteristics of cheques such as being drawn on a banker, payable on demand, and containing a certain money amount. It also discusses crossed and open cheques, components of a bill of exchange, protections provided to paying and collecting bankers, negotiation of cheques, dishonor of cheques due to insufficient funds, and the different types of cards including their distinguishing features.
Cheque truncation is a system of cheque clearing and settlement between banks based on electronic cheque images instead of physical cheques. It allows for faster cheque processing and settlement. Under cheque truncation, when a cheque is deposited, the physical cheque is truncated and replaced with digital images. These images are sent electronically between banks to clear payment. This reduces clearing time from days to just one day and lowers processing costs for banks and customers. It enables innovative banking services and faster funds availability.
Factoring is a financial transaction where a business sells its accounts receivable (invoices) to a third party called a factor at a discount in exchange for immediate money. This allows the business to finance continued operations. Factoring differs from loans in that it involves the purchase of a financial asset rather than assessing creditworthiness, and it involves three parties rather than two. There are various types of factoring including recourse, non-recourse, maturity, and invoice factoring. Factoring provides businesses with financing, accounts receivable maintenance, collection services, and advisory services.
methods of payment in international tradedeepak gupta
The document discusses various payment methods in international trade, including cash-in-advance, letters of credit, and documentary collections. Cash-in-advance requires upfront payment but provides no risk to exporters. Letters of credit involve banks and shift risk between buyers and sellers. Documentary collections are less complex than letters of credit but provide limited recourse if payment is not made. The key methods, their characteristics, and transaction flows are outlined.
This document provides an overview of letters of credit (LCs), including:
1) LCs originated from French and Latin words related to trust and guaranteeing payment.
2) An LC is an arrangement where a bank guarantees payment to a seller upon presenting specified documents to the issuing bank.
3) Key elements of an LC include a payment undertaking by a bank on behalf of a buyer to pay a seller a specified amount upon presenting conforming documents within set time limits.
This document provides an overview and guidelines regarding the import of goods and services into India. It notes that import trade is regulated by DGFT under the Ministry of Commerce and that authorized dealer Category-I banks must ensure imports comply with foreign trade policy. The document then outlines general guidelines for imports, including requirements for import licenses, time limits for settlement of import payments, and regulations regarding import of foreign exchange and third party payments for import transactions.
The document provides an overview of letters of credit (LC), including:
- Definition of an LC as a written instrument from a bank promising payment to an exporter for goods if documents are presented as stipulated.
- Key parties in an LC transaction including applicant, beneficiary, issuing bank, advising bank, confirming bank, and negotiating bank.
- The basic mechanism of an LC transaction with 9 steps from contract to goods delivery and payment.
- Additional details on confirmed LCs and how the LC process works in practice.
This document discusses various methods for financing international trade transactions, including letters of credit, standby letters of credit, and alternative performance guarantees. Letters of credit are issued by banks to guarantee payment by the buyer or performance by the seller. The Uniform Customs and Practices for Documentary Credits provide standard rules for letters of credit. Standby letters of credit are used to secure contractual obligations. Alternative guarantees include performance bonds, bid bonds, and credit sureties. Sources of trade finance include commercial banks, export financing programs, and government assistance agencies.
This document discusses letters of credit and their role in international trade. It defines a letter of credit as a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. If the buyer is unable to pay, the bank will cover the amount. Letters of credit have become important in international trade due to factors like distance between trading partners and differing laws in countries.
The document then outlines the key parties in a letter of credit transaction, including the applicant/buyer, issuing bank, beneficiary/seller, advising bank, confirming bank, nominated bank, reimbursing bank, and second beneficiary. It provides a brief description of the role of each party. Finally
This guide outlines the common techniques of export financing
and provides an overview of the solutions Silicon Valley Bank
provides for our clients selling overseas.
This document appears to be a powerpoint presentation about bronchiectasis. It includes 14 pages with information on the definition, anatomy, causes, types, diagnosis, radiologic features and differentials of bronchiectasis. Images are provided showing examples of cylindrical, varicose and cystic bronchiectasis on chest x-rays and CT scans. Mechanisms of bronchiectasis including bronchial obstruction, wall damage and parenchymal fibrosis are discussed.
This document is Kate Nelson's transcript from Michigan State University. It summarizes her educational history, including her undergraduate degree in International Studies with a specialization in African Studies and an additional major in Global and Area Studies-Social Science with a specialization in International Development, which she obtained in 2012 with high honors. It lists the courses she took each semester, her grades, grade point averages, academic honors received, and degrees granted.
The document provides information about bank reconciliation statements including:
- Definitions of cash book, bank statement, and bank reconciliation statement
- Differences that can arise between cash book and bank statement balances due to timing or errors
- Features and importance of preparing bank reconciliation statements
- Examples of bank reconciliation statements that reconcile the cash book and bank statement balances through adjustments for outstanding transactions and errors
Types of letter of credits on 11 09 2012Sanjeev Patel
This document discusses different types of letters of credit (LCs). It begins by defining an LC as a written instrument issued by a bank at a customer's request to pay an exporter for goods or services provided the exporter presents the required documents.
The document then outlines various types of LCs: revocable LCs can be amended or cancelled at any time; irrevocable LCs constitute a definite undertaking by the issuing bank to pay provided documents are presented; confirmed LCs add the confirmation of the confirming bank; LCs can be with or without recourse for the bank; acceptance credits require drafts to be accepted; transferable LCs allow transfer of payments to other parties; back-to-back L
The document discusses the functions and importance of an accounts office. It explains that an accounts office is responsible for maintaining accounting records, processing financial transactions like payroll and bank accounts, and preparing documents for audits. It also discusses the roles of credit control, collecting payments, issuing debit/credit notes, and working with common bank account types like savings, current, and fixed deposit accounts. Maintaining accurate financial records is crucial for businesses.
This document provides an overview of documentary credits (letters of credit) including:
- The key parties involved are the applicant (buyer), beneficiary (seller), issuing bank, advising bank, and confirming bank.
- There are different types of letters of credit including revocable/irrevocable, confirmed/unconfirmed, fixed/installment credits.
- The stages in performing a letter of credit include opening, mailing, examination, amendments, shipment, document collection/presentation, payment settlement.
- Standard documents include commercial invoices, packing lists, transport documents, certificates, bills of exchange, and insurance documents.
- The Uniform Customs and Practices for Documentary Credits
Congenital heart disease and vascular abnormality(x-ray findings)z2jeetendra
This document provides an overview of various congenital heart diseases and vascular abnormalities, describing their characteristics and classic radiographic signs. It defines common conditions like transposition of the great vessels, total anomalous pulmonary venous return, partial anomalous pulmonary venous return, endocardial cushion defects, tetralogy of Fallot, aortic coarctation, Ebstein's anomaly. For each condition, it explains the anatomical features and identifies signature radiographic patterns seen on chest x-rays, like the "egg on string sign" and "snowman sign".
The import procedure involves 10 steps: 1) gathering information about exporters, 2) obtaining an import license, 3) securing foreign exchange, 4) placing an order, 5) obtaining a letter of credit, 6) arranging financing, 7) receiving shipment advice, 8) retiring import documents, 9) receiving goods arrival notification, and 10) clearing customs and releasing the goods.
This document discusses various methods of payment used in international trade. It describes five common methods: open account, bills of exchange, cash in advance, letter of credit, and documentary collection.
For open account, payment is due 30-90 days after shipment, providing credit but also risk if the importer does not pay. Bills of exchange involve a draft directing payment, allowing credit while establishing debt evidence. Cash in advance requires full payment before shipment, eliminating risk for exporters but being unattractive to importers. Letter of credit and documentary collection both involve banks and documents to facilitate trade while mitigating risks for both parties.
The document discusses various methods for financing international trade: open account, letter of credit, bills for collection, and advance payment. It provides details on each method, including how they work, their level of risk for the exporter, and the role of banks. A letter of credit issued by a bank is the safest method, as it guarantees payment for the exporter if documents are presented as stated in the letter. Bills for collection are less safe since payment depends on the importer. Advance payment is the safest for exporters but may not be practical in all cases.
This document provides information on import and export procedures and documentation in India. It discusses the key steps in the import process, including trade enquiry, obtaining an import license, acquiring foreign exchange, opening a letter of credit, obtaining necessary documents, customs formalities, payment, and closing the transaction. Similarly, it outlines the export process and various pre-shipment documents, shipping documents, regulatory documents, and other auxiliary documents involved. The document aims to explain the standardized documentation requirements and procedures for imports and exports according to Indian laws and regulations.
The document outlines various export documentation requirements. It discusses both commercial documents and regulatory documents. Commercial documents include invoices, packing lists, bills of lading, certificates of origin, and insurance documents. Regulatory documents include forms for customs, port authorities, and foreign exchange controls. In total there are around 15 commercial documents, with 8 considered principal documents, and 7 regulatory documents required for export.
Radiological and Clinical features of diffuse lung diseases.
Especially, HRCT features and some pathognomonic findings of diffuse lung disease.
Cystic lung diseases, Nodular lung diseases, Fibrotic lung diseases, Smoking related lung diseases,
This document is a research paper assessing the loan and advance processing practices of Abay Bank in Debre Markos, Ethiopia. The paper was submitted in partial fulfillment of a BA degree in accounting and finance. The study uses descriptive analysis to evaluate Abay Bank's loan processing effectiveness and follow-up activities. Primary data was collected through interviews and questionnaires. The findings show Abay Bank's loan processing and follow-up effectiveness is medium. The bank needs to improve these areas. The research aims to help Abay Bank strengthen its loan processing practices.
Comparative Study of Loans and Advances of Commercial Banks.docxNoaman Akbar
This document discusses loans and advances provided by commercial banks. It begins by introducing the important role of banks in economic development and defines key terms like loans, advances, borrowing and lending. It then discusses the main differences between loans and advances - loans must be paid back over a set period of time according to an agreed schedule, while advances can be repaid in full within a year. The objectives are to find the key differences between loans and advances and discuss their advantages and disadvantages. The study will focus on two commercial banks over five years to analyze their loan amounts, interest rates, and procedures.
This document provides an overview of letters of credit (LCs), including:
1) LCs originated from French and Latin words related to trust and guaranteeing payment.
2) An LC is an arrangement where a bank guarantees payment to a seller upon presenting specified documents to the issuing bank.
3) Key elements of an LC include a payment undertaking by a bank on behalf of a buyer to pay a seller a specified amount upon presenting conforming documents within set time limits.
This document provides an overview and guidelines regarding the import of goods and services into India. It notes that import trade is regulated by DGFT under the Ministry of Commerce and that authorized dealer Category-I banks must ensure imports comply with foreign trade policy. The document then outlines general guidelines for imports, including requirements for import licenses, time limits for settlement of import payments, and regulations regarding import of foreign exchange and third party payments for import transactions.
The document provides an overview of letters of credit (LC), including:
- Definition of an LC as a written instrument from a bank promising payment to an exporter for goods if documents are presented as stipulated.
- Key parties in an LC transaction including applicant, beneficiary, issuing bank, advising bank, confirming bank, and negotiating bank.
- The basic mechanism of an LC transaction with 9 steps from contract to goods delivery and payment.
- Additional details on confirmed LCs and how the LC process works in practice.
This document discusses various methods for financing international trade transactions, including letters of credit, standby letters of credit, and alternative performance guarantees. Letters of credit are issued by banks to guarantee payment by the buyer or performance by the seller. The Uniform Customs and Practices for Documentary Credits provide standard rules for letters of credit. Standby letters of credit are used to secure contractual obligations. Alternative guarantees include performance bonds, bid bonds, and credit sureties. Sources of trade finance include commercial banks, export financing programs, and government assistance agencies.
This document discusses letters of credit and their role in international trade. It defines a letter of credit as a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. If the buyer is unable to pay, the bank will cover the amount. Letters of credit have become important in international trade due to factors like distance between trading partners and differing laws in countries.
The document then outlines the key parties in a letter of credit transaction, including the applicant/buyer, issuing bank, beneficiary/seller, advising bank, confirming bank, nominated bank, reimbursing bank, and second beneficiary. It provides a brief description of the role of each party. Finally
This guide outlines the common techniques of export financing
and provides an overview of the solutions Silicon Valley Bank
provides for our clients selling overseas.
This document appears to be a powerpoint presentation about bronchiectasis. It includes 14 pages with information on the definition, anatomy, causes, types, diagnosis, radiologic features and differentials of bronchiectasis. Images are provided showing examples of cylindrical, varicose and cystic bronchiectasis on chest x-rays and CT scans. Mechanisms of bronchiectasis including bronchial obstruction, wall damage and parenchymal fibrosis are discussed.
This document is Kate Nelson's transcript from Michigan State University. It summarizes her educational history, including her undergraduate degree in International Studies with a specialization in African Studies and an additional major in Global and Area Studies-Social Science with a specialization in International Development, which she obtained in 2012 with high honors. It lists the courses she took each semester, her grades, grade point averages, academic honors received, and degrees granted.
The document provides information about bank reconciliation statements including:
- Definitions of cash book, bank statement, and bank reconciliation statement
- Differences that can arise between cash book and bank statement balances due to timing or errors
- Features and importance of preparing bank reconciliation statements
- Examples of bank reconciliation statements that reconcile the cash book and bank statement balances through adjustments for outstanding transactions and errors
Types of letter of credits on 11 09 2012Sanjeev Patel
This document discusses different types of letters of credit (LCs). It begins by defining an LC as a written instrument issued by a bank at a customer's request to pay an exporter for goods or services provided the exporter presents the required documents.
The document then outlines various types of LCs: revocable LCs can be amended or cancelled at any time; irrevocable LCs constitute a definite undertaking by the issuing bank to pay provided documents are presented; confirmed LCs add the confirmation of the confirming bank; LCs can be with or without recourse for the bank; acceptance credits require drafts to be accepted; transferable LCs allow transfer of payments to other parties; back-to-back L
The document discusses the functions and importance of an accounts office. It explains that an accounts office is responsible for maintaining accounting records, processing financial transactions like payroll and bank accounts, and preparing documents for audits. It also discusses the roles of credit control, collecting payments, issuing debit/credit notes, and working with common bank account types like savings, current, and fixed deposit accounts. Maintaining accurate financial records is crucial for businesses.
This document provides an overview of documentary credits (letters of credit) including:
- The key parties involved are the applicant (buyer), beneficiary (seller), issuing bank, advising bank, and confirming bank.
- There are different types of letters of credit including revocable/irrevocable, confirmed/unconfirmed, fixed/installment credits.
- The stages in performing a letter of credit include opening, mailing, examination, amendments, shipment, document collection/presentation, payment settlement.
- Standard documents include commercial invoices, packing lists, transport documents, certificates, bills of exchange, and insurance documents.
- The Uniform Customs and Practices for Documentary Credits
Congenital heart disease and vascular abnormality(x-ray findings)z2jeetendra
This document provides an overview of various congenital heart diseases and vascular abnormalities, describing their characteristics and classic radiographic signs. It defines common conditions like transposition of the great vessels, total anomalous pulmonary venous return, partial anomalous pulmonary venous return, endocardial cushion defects, tetralogy of Fallot, aortic coarctation, Ebstein's anomaly. For each condition, it explains the anatomical features and identifies signature radiographic patterns seen on chest x-rays, like the "egg on string sign" and "snowman sign".
The import procedure involves 10 steps: 1) gathering information about exporters, 2) obtaining an import license, 3) securing foreign exchange, 4) placing an order, 5) obtaining a letter of credit, 6) arranging financing, 7) receiving shipment advice, 8) retiring import documents, 9) receiving goods arrival notification, and 10) clearing customs and releasing the goods.
This document discusses various methods of payment used in international trade. It describes five common methods: open account, bills of exchange, cash in advance, letter of credit, and documentary collection.
For open account, payment is due 30-90 days after shipment, providing credit but also risk if the importer does not pay. Bills of exchange involve a draft directing payment, allowing credit while establishing debt evidence. Cash in advance requires full payment before shipment, eliminating risk for exporters but being unattractive to importers. Letter of credit and documentary collection both involve banks and documents to facilitate trade while mitigating risks for both parties.
The document discusses various methods for financing international trade: open account, letter of credit, bills for collection, and advance payment. It provides details on each method, including how they work, their level of risk for the exporter, and the role of banks. A letter of credit issued by a bank is the safest method, as it guarantees payment for the exporter if documents are presented as stated in the letter. Bills for collection are less safe since payment depends on the importer. Advance payment is the safest for exporters but may not be practical in all cases.
This document provides information on import and export procedures and documentation in India. It discusses the key steps in the import process, including trade enquiry, obtaining an import license, acquiring foreign exchange, opening a letter of credit, obtaining necessary documents, customs formalities, payment, and closing the transaction. Similarly, it outlines the export process and various pre-shipment documents, shipping documents, regulatory documents, and other auxiliary documents involved. The document aims to explain the standardized documentation requirements and procedures for imports and exports according to Indian laws and regulations.
The document outlines various export documentation requirements. It discusses both commercial documents and regulatory documents. Commercial documents include invoices, packing lists, bills of lading, certificates of origin, and insurance documents. Regulatory documents include forms for customs, port authorities, and foreign exchange controls. In total there are around 15 commercial documents, with 8 considered principal documents, and 7 regulatory documents required for export.
Radiological and Clinical features of diffuse lung diseases.
Especially, HRCT features and some pathognomonic findings of diffuse lung disease.
Cystic lung diseases, Nodular lung diseases, Fibrotic lung diseases, Smoking related lung diseases,
This document is a research paper assessing the loan and advance processing practices of Abay Bank in Debre Markos, Ethiopia. The paper was submitted in partial fulfillment of a BA degree in accounting and finance. The study uses descriptive analysis to evaluate Abay Bank's loan processing effectiveness and follow-up activities. Primary data was collected through interviews and questionnaires. The findings show Abay Bank's loan processing and follow-up effectiveness is medium. The bank needs to improve these areas. The research aims to help Abay Bank strengthen its loan processing practices.
Comparative Study of Loans and Advances of Commercial Banks.docxNoaman Akbar
This document discusses loans and advances provided by commercial banks. It begins by introducing the important role of banks in economic development and defines key terms like loans, advances, borrowing and lending. It then discusses the main differences between loans and advances - loans must be paid back over a set period of time according to an agreed schedule, while advances can be repaid in full within a year. The objectives are to find the key differences between loans and advances and discuss their advantages and disadvantages. The study will focus on two commercial banks over five years to analyze their loan amounts, interest rates, and procedures.
The globalization of economy, technological advancement, and complexity of business and allegations of fraudulent financial reporting have recently sharpened the ever increasing attention to internal control and internal auditing (Karagiorgos et al. 2016). The developing role of the internal auditing is also reflected in its current definition, i.e. internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined The globalization of economy, technological advancement, and complexity of business and allegations of fraudulent financial reporting have recently sharpened the ever increasing attention to internal control and internal auditing (Karagiorgos et al. 2016). The developing role of the internal auditing is also reflected in its current definition, i.e. internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined
The globalization of economy, technological advancement, and complexity of business and allegations of fraudulent financial reporting have recently sharpened the ever increasing attention to internal control and internal auditing (Karagiorgos et al. 2016). The developing role of the internal auditing is also reflected in its current definition, i.e. internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined
The globalization of economy, technological advancement, and complexity of business and allegations of fraudulent financial reporting have recently sharpened the ever increasing attention to internal control and internal auditing (Karagiorgos et al. 2016). The developing role of the internal auditing is also reflected in its current definition, i.e. internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined
The globalization of economy, technological advancement, and complexity of business and allegations of fraudulent financial reporting have recently sharpened the ever increasing attention to internal control and internal auditing (Karagiorgos et al. 2016). The developing role of the internal auditing is also reflected in its current definition, i.e. internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined
The globalization of economy, technological advancement, and comp
The document is a student's project on loan syndication. It includes a declaration by the student that the information submitted is true and original. It also includes a certificate from the student's project guide. The acknowledgements section thanks various individuals who provided guidance and support. The index lists the contents of the project, which covers topics such as the meaning of loan syndication, the syndication process, reasons for syndicated lending, and the role of parties involved. It also includes an overview of ICICI Bank and its syndication services.
Indian Overseas Bank provides various types of loans and advances to customers. These include secured loans like term loans which are granted against assets and can be paid back over longer periods. They also offer unsecured loans like demand loans which are repayable on demand. The bank aims to meet business needs through flexible financing options like cash credits while ensuring safety of funds through security and assessing borrower creditworthiness. A study of IOB's Ashoknagar branch found that term loans contribute significantly to advances and customers appreciate the bank's service, suggesting they focus on faster loan processing and financial education.
The document provides an overview of loan syndication. It begins by defining loan syndication as the process where a group of lenders come together to provide a loan that is larger than any single lender is willing to provide alone. This allows risk to be distributed across multiple lenders.
It then discusses some key aspects of loan syndication including the roles of various parties like the lead arranger who organizes the syndicate and ensures documentation is completed. Borrowers benefit from loan syndication through access to larger amounts of funding, more flexible terms, and lower interest rates due to risk being distributed.
Finally, it briefly touches on how loan syndication has grown to become a dominant financing mechanism particularly for large projects
This project report has been prepared as per the requirement of the syllabus of
MBA course structure under which the students are the required to undertake
project.
It was a first hand experience for us as that we were exposed to the professional
set-up and were facing the market, which was really a great experience.
During project period, I had very touching experiences. When business is involved,
experiences counts a lot, as we know, experience are an instrument, which leads
towards success.
The document provides information about a winter project submitted by Gohil Priti Ramji Bhai on credit risk management at Varachha Co-Operative Bank. It includes an executive summary that discusses credit risk management and how it is important to regain confidence through better risk-adjusted pricing and returns. The researcher aims to understand credit risk management practices at Varachha Bank, including what risks they face, how they issue and recover loans, and how to measure non-performing assets. The document also includes declarations, acknowledgements and an index of topics to be covered in the project report.
This document discusses parameters for analyzing loan applications at State Bank of India. It includes an introduction to loans and advances, the bank's profile, procedures for granting loans, required documentation and interest rates. Key financial parameters considered before granting loans are analyzed, including the applicant's character, capacity to repay, and available collateral or security. The document contains statistical techniques, a research methodology, data collection limitations, data analysis, findings, suggestions and bibliography.
This document is a research paper submitted for a BA degree in accounting and finance at Debre Markos University. It assesses the loan and advance processing practices of Abay Bank in Debre Markos, Ethiopia. The paper uses surveys and interviews to analyze Abay Bank's loan approval process, types of loans offered, use of collateral, and effectiveness of loan follow-up activities. It finds that the bank's loan processing and follow-up efforts are moderately effective. It concludes by recommending areas where the bank can improve its loan practices.
UCO Bank analyzed using CAMELS framework. CAMELS assesses capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk. Analysis of UCO Bank from 2006-2010 showed capital adequacy ratio improved from 11.12% to 13.21% while debt-equity ratio increased significantly, indicating greater reliance on debt than equity. Asset quality also assessed - gross NPA to net advances declined from 3.23% to 2.1% from 2008-2010, showing improved ability to recover loans. Total investments to total assets ranged from 27-32%, demonstrating a conservative investment strategy focused on safety.
Here are the key objectives of the study:
1. To gain practical knowledge about the overall banking system and operations of NCC Bank Ltd.
2. To understand the various products and services offered by NCC Bank to its customers.
3. To analyze the different banking activities performed at NCC Bank such as account opening, remittance, loans and advances, foreign exchange etc.
4. To identify the strengths and weaknesses of NCC Bank in delivering quality banking services.
5. To provide recommendations for improvement based on findings from the study.
The overall aim is to learn about real-world banking practices through this internship experience at NCC Bank and prepare an informative report on the bank's
The document discusses bad debts in the banking sector and their impact. It outlines factors that can lead to bad loans, such as lending to questionable borrowers or lack of collateral. Bad debts reduce bank profits. The document then recommends strategies for banks to address bad debts, such as improving risk analysis and credit controls, selecting professional lawyers, and establishing debt collection agencies.
"Credit Performance of a Branch for Export Import Bank Bangladesh Limited,’Md. Sabbir Ali
The document provides an overview and background of Export Import Bank of Bangladesh Limited (EXIM Bank). It discusses the bank's functions, organizational structure, management, branches, and strategic goals. EXIM Bank was established in 1999 and initially operated as a conventional bank before migrating to an Islamic banking model in 2004. The document outlines the bank's mission to provide superior customer service and contribute to the national economy through ethical and transparent practices. It also presents details on the bank's capital structure, credit ratings, and board of directors to provide context on the organization.
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Credit Analysis and Risk Management of Standard Bank LimitedAriful Saimon
An Internship Report
On
“Credit Analysis and Risk Management of Standard Bank Limited”
Submitted to:
Mrs. Tanbina Tabassum
Assistant Professor
Department of Finance
Faculty of Business Studies
Premier University, Chittagong.
Submitted by:
Md. Shahadat Hossain
ID: 1502220802160
Major: Finance
Program: MBA (1 year), Batch: 22nd
Premier University
Date of Submission:
Assume that you recently graduated with a degree in finance and have.pdfaajitelectricals
Assume that you recently graduated with a degree in finance and have just reported to work as an
investment adviser at the firm of Balik and Kiefer Inc. Your first assignment is to explain the
roles financial intermediaries play in the U.S. banking system to Michelle Delatorre, a
professional tennis player who has just come to the United States from Chile. Delatorre is a
highly ranked tennis player who expects to invest substantial amounts of money through Balik
and Kiefer. She is also extremely bright, and, therefore, she would like to understand in general
terms what will happen to her money. Your boss has developed the following questions, which
you must answer to help explain the nature of financial intermediaries and the U.S. banking
system to Ms. Delatorre. a) What is a financial intermediary? What is the financial
intermediation process? b) What roles do financial intermediaries fulfill? c) What are the
different types of financial intermediaries? Give some characteristics that differentiate the
various types of intermediaries. d) Describe the banking system found in the United States. e)
What role does the Federal Reserve play in the U.S. banking system?
Solution
a) Financial intermediary isan institution, such as a bank, building society, or unit-trust company,
that holds funds from lenders in order to make loans to borrowers.
A financial intermediary is typically an institution that facilitates the channeling of funds
between lenders and borrowers indirectly. That is, savers (lenders) give funds to an intermediary
institution (such as a bank), and that institution gives those funds to spenders (borrowers).
b) There are two main roles in the financial intermediation process:borrowers, also known as
spenders andsavers, also called lenders. Let\'s look at borrowers first. Borrowers need money for
various reasons: to purchase a home, start a business, pay for business expenses and fund
programs. They need money to spend. Borrowers include individuals, companies and the
government. All three have a need to borrow money.
The second role in the process is savers. Savers have money, which is why they\'re also called
lenders. They have the money to lend. Savers not only have money in savings accounts, they
have money deposited in other interest earning products, such as retirement accounts and
certificate of deposits. Savers include individuals, companies and the government.
The mechanism whereby surplus funds from ultimate savers are matched to deficits incurred by
ultimate borrowers.The process by which ultimate savers are matched to ultimate borrowers.
c) The following institutions are or can act as financial intermediaries:
d) In 1913, the Federal Reserve Bank (the U.S. central bank, also known as “the Fed”) was
established, and given monopoly powers over member-bank policies and U.S. monetary policies
with the intendedpurpose of stabilizing short-term interest rates and preventing economic
downturns by providing as much liquidity as nec.
This document provides an overview of key accounting concepts:
1) Accounting is an information system that records and reports on economic events of an organization to internal and external users.
2) Key concepts include the double-entry system, transactions, journals, ledgers, trial balances, and the accounting equation.
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A bank is formed as a corporate entity with stockholders who delegate management powers to a board of directors. The board oversees committees that handle administration, loans, investments, trusts, and examinations. Directors are responsible for protecting depositors, compensating stockholders, and complying with regulations. Officers include the president, vice presidents, cashier, comptroller, and auditor who handle executive duties, teller functions, record keeping, and ensuring efficient administration.
This document provides an overview of commercial banking. It introduces the group members presenting on this topic and defines commercial banking as products and services designed for businesses, with deposit taking and loan making as the main functions. It then lists some primary functions like accepting deposits and advancing loans, secondary functions such as overdraft facilities, and various services offered by commercial banks such as agency, general utility, and overseas trading services.
The document provides information on loan conditions from Commercial Banks in Ethiopia, including the Commercial Bank of Ethiopia (CBE). It details CBE's loan products like short, medium, and long term loans; overdraft loans; merchandise loans; agricultural loans; letters of credit; and export credit guarantees. It outlines eligibility requirements, accepted collateral, interest rates, processing times, and basic application documents. CBE offers savings products like savings accounts, time deposit accounts, and current accounts. Overall, the document aims to inform small businesses on accessing finance from Ethiopia's major commercial banks.
This document provides tax planning tips and strategies for an individual or business to consider before the end of the year. It outlines 10 areas of focus for sales, 10 areas for costs and expenses, and 3 general tips. Some key recommendations include deferring cash receipts, reviewing depreciation of fixed assets, ensuring stock counts match book values, utilizing tax loss carry forwards, and distributing retained profits or converting them to capital to avoid further tax liabilities. The document emphasizes having proper documentation to support tax strategies and addressing any potential "red flags" to be on the safe side for a tax review. It also provides contact information for an accounting firm that can help implement appropriate tax planning options.
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IFRS 8 requires entities to disclose segment information to help users understand its business activities and operating results. It applies to public entities or those filing financial statements. Operating segments are components regularly reviewed by management to allocate resources and assess performance. Reportable segments meet certain quantitative thresholds or are otherwise determined to be reportable by management. The standard outlines requirements for identifying segments, reportable segments, disclosing segment information, and entity-wide disclosures.
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The Influence of Marketing Strategy and Market Competition on Business Perfor...
Eshetie mekonene research paper
1. ASSESSEMENT OF LOAN AND ADVANCE PROCESSING PRACTICE IN CASE STUDY
ON ABAY BANK DEBRE MARKOS BRANCH
RESEARCH PAPER SUBMITTED FOR THE PARITAL FULFILLMENT OF THE
REQUREMENT OF BA DEGREE IN ACCOUNTING AND FINANCE
PREPARED BY: ESHETIE MEKONENE
ADVISOR: TADESSE.Y (MSC)
DEBRE MARKOS UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF ACCOUNTING AND FINANCE
JUNE, 2016
DEBRE MARKOAS,
ETHIOPIA
2. i
Abstract
This research was conducted on the assessment of loan and advance processing practice in Abay
Bank debre markos branch. The objective of the study was to assess the loan and advance
processing practice Abay Bank in debre markos branch. The researcher used descriptive data
analysis method. This study was used census of data of data collection technique to obtain
primary and secondary data. The data analysis are carried out based on tabulation and
percentage method and interpreted accordingly. The primary data have been collected through
interview and questionnaires, and the secondary data have been collected from the manual or
pamphlets of the bank. The effectiveness of Abay Bank in loan processing and follow up activities
are medium. And the bank shall work more for the effectiveness of loan processing and follow up
activities. Finally, the researcher believes that the study are helps to improving the loan and
advance processing practice of Abay Bank.
3. ii
ACKNOWLEGEMENT
First of all I would like to thanks God and his mother st. merry for helping me in every aspect of
my life. Next I would like to thanks my advisor instructor Tadesse .Y (MSC) for his
encouragement, constructive comments, suggestions, and guidance that made this work as much
as possible. Thirdly I am gladly full thanking to my parents for their financial and moral support
throughout my objective. Fourthly I would like to thank Abay Bank officials (managers and
employees) in debre markos branch who give me valuable information. Finally I would like to
thank all of my friends who contribute kindly advice and suggestions.
4. iii
TABLE OF CONTENTS
Title page
Chapterone
Introduction
1.1 Back groundof study…………………………………………………………………………………………………………………1
1.2 Back groundof the organization………………………………………………………………………………………………..2
1.3 Statementof the problem……………………………………………………………………......................................3
1.4 Objective of the study……………………………………………………………………………………………………………….4
1.4.1General objective…………………………………………………………………………………………………………………….4
1.4.2Specificobjective of the study…………………………………………………………………………………………………4
1.5 Significance the study……………………………………………………..…………………………………………………………4
1.6 scope the study………………………………………………………………………………………………………………………...4
1.7 limitationof the study………………………………………………………………………………………….......................5
1.8 Organizationof the paper………………………………………………………………………………………………………….5
Chapter two
2.Reviewrelatedliterature……………………………………………………………………………………………………………..6
2.1 Historyof banking…………………………………………………………………………………………………………………....6
2.2 typesof banks………………………………………………………………………………………………………………………....6
2.3 functionof Abaybank……………………………………………………………………….........................................6
2.4 loanaccount…………………………………………………………………………………............................................7
2.4.1 Diasporabanking…………………………………………………………………………………………………………………..8
2.4.2 Diasporamortgage loan………………………………………………………………………………………………………..8
2.4.3 Loan and advance…………………………………………………………………………..........................................8
2.4.4 Loan processing…………………………………………………………………………………………………………………….9
2.4.5 Typesof loan………………………………………………………………………………………………………………………..10
2.4.6 Loan basedon purpose………………………………………………………………………………………………………..10
2.4.7 Overdrawl…………………………………………………………………………………………………………………………..11
2.4.8 Loan approval form…………………………………………………………………………………………………………….12
2.4.9 Loan settlement……………………………………………………………………………………………………………………12
2.4.10 overdraftfacility……………………………………………………………………………………………………………….12
5. iv
2.5 loanfacilities……………………………………………………………………………................................................12
2.6 Riskassociatedwithlending…………………………………………………………………………………………………….14
2.7 workingcapital financingandprojectfinancingloan……………………………………………………………..14
2.8 creditanalysis………………………………………………………………………………………………………………………..15
2.9 loancommitments………………………………………………………………………………………………………………….16
2.10 Establishingawrittenloanpolicy………………………………………………………………………………………...16
Chapterthree
3.Researchmethodology……………………………………………………………………………………………………………..18
3.1 researchdesign………………………………………………………………………………………………………………………18
3.2 data source…………………………………………………………………………………............................................18
3.3 methodof data collection………………………………………………………………………………………………………18
3.4 Target populationandsample size………………………………………………………………………………………..18
3.5 methoddata analysis…………………………………………………………………………………………………………….18
18 Chapterfour
4.Data analysisandinterpretation………………………………………………………………………………………………19
Chapterfive
5.Conclusionandrecommendation………………………………………………………………………………………………32
5.1 conclusion……………………………………………………………………………………………………………………………..32
5.2 recommendation…………………………………………………………………………….........................................34
Reference …………………..……………………………………………………………………………………………………………….35
Appendix ………………………………………………………………………………………………………………………………….....37
List of tables
Table 4.1 profile of the respondents…………………………………………………………………………………………….19
Table 4.2 typesof loan……………………………………………………………………………………………………………….21
Table 4.3 creditcommittee of the bankapprovedcreditfacilities……………………………………………22
Table 4.4 problemsfacinginloanprocessing………………………………………………………………………………22
Table 4.5 willingnessof the customerstodisclose anyinformationneedforloanandadvance
processingpractice…………………………………………………………………………………………………………………..….23
Table 4.6 loanfacilitiesavailable inAbaybank……………………………………………………………………………..24
Table 4.7 collateral evaluationcriteria…………………………………………………………………………………...…..24
7. 1
IChapter one
1. Introduction
1.1. Background of the study
Financial institutions are one of the most heavily regulated of all business in the world .Around
the globe the service firms face stringent government rule committing the service they can offer
the territories they can enter or not enter the makeup of their portfolios of assets, liabilities and
capital and even how they price and deliver the service to the public (peter.s rose, 2010).
Banking occupies one of the most important positions in the modern economic world .Is
necessary for trade and industry .Hence it is one of the greatest agencies of commerce .Is the
financial institutions that accepts deposit of money from the public and keep the main its custody
for safely (kc shekar, 2005).
Loan: is an amount of money advanced to borrower to be repaid at the later date, usually with
interest. Legally a loan is a contract between borrower and lender, enforceable under commercial
code in most states. The terms and conditions for re- payment of a loan, specified in a loan may
be payable on demand or demand loan in equal monthly installments (lekshmy and shekhar,
2005).
It is generated for a definite period and borrower is given the facility to repay it in one lump sum
or installments. It also defined as when a lender gives money or property or repays the borrowed
money along with interest at agreement determined date in the future .According to the shaker
(2005) loan is do maintaining asset holdings and generates the largest share of operating income
at most banks .As far as Banks is concerned , the operating cost of a loan is lower as compared to
a cash credit or an overdraft ,this method of granting and advance has the advantage of
strengthening the financial discipline in the use of the Bank credit could be more effective in the
case of loan as compared to cash credit. In follow up and supervision or control of Bank loans,
the three basic types of loans are pure discount, interest only loan and amortized loan.
8. 2
1. Interest only loan: a types of loan repayment plan calls for the borrower to pay interest each
period and to repay the entire principal (original loan amount at some point in the future.
2. Amortized loan: with a pure discount loan or interest only loan, the principal is repaid all at
once.
3.pure discount loan: is the simplest of a loan with a such loan ,the borrower receives money
today ,and repay a single lump sum at some time in the future(Rose,2006).
1.2. Background of the organization
Abay Bank was founded in November 2009 and it was legally registered and obtained its license
from National Bank of Ethiopia to set up a Bank and was officially established on July 14,2010
and started fully fledged Banking operation on November 3,2010 with subscribed capital of
Ethiopian Birr 147.5million with 823 founding share holders and it has now 91 Branches in the
country .Currently the paid up capital of the bank is Birr 550 million as of June 30,2015 and the
number of share holder is over 3000.Since its establishment the Bank has achieved encouraging
achievements in all standards .Its sphere of operation has expanded all over the country and the
total number of branches 104 just with in less than five years of operation and it has more than
175,000 account holders. Abay Bank in Debre markos branch the total number of loonies are
103. Source: manual of Abay Bank.
9. 3
1.3 statement of the problem
Banking industry from its nature is a bit wide and modern which has various functions within its
structure such as lending, deposit and remittance. Therefore the profitability of the banks is
affected by the loan and advance system. Lending activities require Banks to make judgment
related the credit worthiness of borrowers .Because Banks face accredit risks when the borrowers
fails to meet the terms of a loan agreement (Jhingan, 2012).Abay Bank is one of the strong
private commercial Banks playing important role in the country’s Banking industry and
economic development .Among the services provided by the Bank loan extending would be one
of the principal activity in the Banking industry .Abay Bank has a better share in the financial
market .But many problems faced that the bank reasons to fail the single most important reasons
assed by the prior studies is non- performing loan(NPL) but this study primarily focused on
assessing both the non-performing loans and credit risks associated with lending problems in
loan and advance processing practice .The borrowers of Abay Bank may be either in default or
close to being default .Although has been working for the better position of non-performing
loans .It still needs great attention .This is because of two reasons .The first one is loan is the
ultimate source of profit for Banking and the second one is Banking in one country economy is
used as a channel for the conversion of saving in the capital market(Gary smith, 1991). Due to
this the researcher will assess the loan and advance processing practice in Abay Bank Debre
markos branch. This study will try to answers the following research questions
What are the types of loan and advance Abay bank provide?
What are the problems faced by the bank and borrowers with loan and advance?
How the bank evaluate loan and advance process?
Is there loan and advance processing practice contributed to non-performing loan?
10. 4
1.4. Objective of the study
1.4.1. General objective
The general objective of the study is to assess the loan and advance processing practice of Abay
Bank in Debre markos branch.
1.4.2 Specific objective of the study
✓ To identify the types of loan and advance practice of the Bank
✓ To examine the problem faced by the Bank and borrowers in loan and advance
✓ To assess the loan and advance evaluation practice of the Bank
✓ To assess whether the loan and advance processing practice contributed to non –
performing loan or not
1.5. Significance of the study
This study will be contributed to solve the problems that observed in the loan and advance
processing practice of Abay bank .And it gives a possible solution so as to how credit officers
should process potential healthy loans during loan and advance processing system .This research
will increase the knowledge and understanding of the researcher .And it will be helps to other
researchers as a source document who are interested deal with in loan and advance processing
practice .Generally it helps as a guideline to the concerned managers of banks with regard to how
they properly address the credit need of their customers.
1.6 .Scope of the study
Abay Bank is a huge company having 104 branches in all parts of the country .In this case this
study might be more attractive and important if it was conducted on country level Abay Banks
.However it might be quite difficult to have that information from all branches .Due to this the
researcher would be forced to delimit the scope of the study only to assess loan and advance
processing practice of Abay Bank in Debre markos branch.
11. 5
1.7. Limitation of the study
The following problems was faced when the researcher conducted the study the major problems
that are hinder the smooth running of the study ,in adequate computer access, reference book,
and lack of depth knowledge and analytical ability for writing a research analysis part.
1.8. Organization of the paper
The research paper was organized within five chapters. The first chapter are include the
introductory parts such as back ground of the study ,historical background of the organization
(case area), statement of the problem ,objective of the study ,significant of the study ,
delimitation of the study (scope),limitation of the study ,and organization of the paper .The
second chapter deals with review of related literature , third chapter contain research
methodology ,the fourth chapter include data presentation , interpretation and analysis ,and the
fifth chapter deals with conclusion and recommendation.
12. 6
Chapter two
2. Review related literature
2.1. History of Banking
As we seen the history of Bank the word” Bank” is derived from “Banc us’’ or” Banque or
Bane” all terms however mean branch up on which the medieval European money lenders or
money lenders or money changers used to carry on their monetary transactions. The term Bank
or” Banking” is generally used in every broad sense including the capitalist, the financiers, the
stock brokers, the corporations. Banking company which carries on as its principal business the
accepting of the deposit of money on current account or subject to withdrawal by cheque
(T.N.HAJELA, 2015).
2.2 Types of banks
Broadly speaking there are different types of Banks these are, Commercial Banks, Industrial
Banks, Agricultural Banks, and Foreign exchange Banks .The responsibility function of
commercial Banks generally advance short term loan to business men and traders, because their
deposits are only for short period. Generally these Banks give loans for a period extending from
six months to six months. Industrial Banks these are special types of as the name itself suggests.
They extended long term loans to industries. They also help industrial firms in selling and
purchasing debentures and shares. Agricultural Banks for meeting the requirements of
agricultural community, special types of Banks have been set up in predominantly agricultural
countries. The agriculturalists and peasants require short term loan to purchase various inputs
like seeds, fertilizers etc. Foreign exchange Banks these Banks specialize in financing foreign
trade by making international payments through the purchase and sale of foreign exchange bills
(T.N.HAJELA, 2015).
2.3. Function of Abay Bank
Function of Abay Bank has to perform variety of function which is common in either developed
and underdeveloped country or nation. Those are:
13. 7
A. Saving deposit account: saving deposit account is an interest bearing deposit which can be
opened with a minimum acceptable of Birr 25:00.
B. Special saving deposit account (SSDA): A special saving deposit account is a non interest
bearing account. The account is opened similar to that of a savings account. Source: manual of
Abay Bank.
C. Child trust account: The account is opened for under –aged individual (minor) by the
parents or guardians of the minor, or by a court order.
D. Provident fund account: This account is opened for administration of provident fund
accounts.
E. Zero-balance account: This account maintains a disbursing account at “zero” by transferring
funds from a saving account.
F. Demand or current account: A demand deposit account (current or chequing account) is a
non –interest bearing account. The minimum amount of money required for individual trade
operators is Birr250:00 while for private limited companies and other it is Birr 500:. The account
is operated by cheque.
G. Fixed time deposit account: It’s a deposit received for a certain period of time it provides an
attractive and higher interest rate. The minimum balance for a fixed time deposit is Birr
25000:00.
H. Foreign currency account: A foreign currency account is an account whose source of fund
is overseas and can be maintained in hard currency or in Birr. Major types of foreign currency
accounts: Non-resident Non -transferable foreign currency and Diaspora accounts. Source:
manual of Abay Bank.
2.4. Loan account
Abay Bank provides a range of credit services that are supposed to fit the existing and future
demands the customers .The Bank loan services include: overdraft, overdraw, merchandise loan,
14. 8
import letter of credit, import letter of credit settlement loan advance bills ,term loan for various
sectors etc. source: manual of Abay Bank.
2.4.1. Diaspora Banking
In line with our objective of “Banking “for all”, we have extended our service to Ethiopian
Diaspora that suits their Banking needs while they are living and working abroad. Using Abay
Bank Diaspora banking services, you are guaranteed to easily access; Diaspora accounts, credit
facilities, Diaspora mortgage loan, Diaspora investment loan etc. source: manual of Abay Bank.
2.4.2 Diaspora mortgage loan
This service is unique in its kind in the sector in which the Bank pays as a facilitator and
arranges the mortgage loan scheme to Diaspora customers to own their dream house by saving
50%of the cost in the foreign currency. Source: manual of Abay Bank.
2.4.3 Loan and advance
Loans and advances are financial instruments originated by the Bank by providing money to the
debtors. The loan and advance are stated at cost less impairment losses. Impairment losses
comprise specific provision against debits identified as bad and doubtful and general provisions
against losses when are likely to be presented in only loans and advance portfolio. The Bank
follows the national bank of Ethiopia supervision of banking business directive number
SSB43/2007 .In determining the extent of provision for impairment losses. The directive
classifies loans and advances in to the following.
1. Pass loan: loans and advances in this category are fully protected by the current financial and
paying capacity of the borrower and are not subject to criticism. In general loans and advances
which are fully secured both as to principal and interest by or cash substitutes are classified
under this category regardless of past due status or other adverse credit factor.
2. Special mention: any loan or advance past due 30 days or more but less than 90 days is
classified under this category
15. 9
Sub standard: Non-performing loan or advance past due 90 days or more but less than 180 days
is classified under this category.
3.Doubtful: Non –performing loans or advances past due 180 days or more but less than 360
days is classified as doubtful.
4. Loss: Non –performing loan or advance past due 360 days is classified a loss.
According to the National Bank of Ethiopia’s directives number SSB43/2008 and international
practice the Non-performing loan of any bank should be below 5%of its total loan. Source:
manual of Abay Bank.
2.4.4 Loan processing
Entire sequence of steps from the time a loan application is received (a loan offer is accepted) to
the time loan is closed. Steps involved in loan processing 1st Borrowers must first contact the
clients’ guidance and advisory of loan division 2nd for detailed discussions on loan application
the project idea background, equity contribution etc 3rd the department may either accept or
reject the application at primafacie consideration based on policy or technical contents of
application form grounds 4th appraisal work is carried out by the loan division, checked by the
general manager, commented on by loan committee and forwarded to the board of management
for approval (Christine peter,2004)
Required loan processing document
For a loan application accepted based on the interview the customer relationship officer collect
all processing documents based on the check list. The statements may be actual and or projected
in the following manner.
A. All business established as share companies should submit audited financial statements
regardless of the requested loan type and amount.
16. 10
B. All business established a private limited companies sole proprietor ship that has been in
business for a year or above and whose total exposure exceeds Birr 5000,000 should submit
audited financial statements.
C. All business established as private limited companies whose total exposure is less than Birr
5000,000 must present provisional financial statements for at least three consecutive fiscal years.
Source: manual of Abay bank.
2.4.5 Types of loan
Banks make a wide variety of loans of loans to a wide variety of customers in order to address
the credit need of the business society. Bank divides their loan in to different groups for different
purpose. These are based on purpose and maturity (Rose, 2002).
2.4.6 Loan based on purpose
Bank loans can be classified according to the purpose for which is borrowed, for example:
.Commercial loan : are provided to large or small companies who use the funds provided to
make purchases or make payroll and pay back to the lender over an agreed up on time ,
usually for a short term (from 30days to one year). Loan given for trading activities such as
purchasing inventories.
Industrial loan : loans given for industrial activities
Consumer loan: An amount of money lent to an individual, usually on a non secured basis
for personal family house hold purpose
Mortgage loans: loans advanced for purchase of residential houses and commercial
buildings are classified under this category.
Construction loan: is relatively short term credit that repaid when the builder obtains long
term credit are repaid (Rose, 2002).
17. 11
● Requirements to be considered for mortgage loan
1. The maximum term of the loan should not exceed 5 (five) years.
2. The source of repayment towards the loan could be either from monthly salary for employed
personnel or income from business for business people.
3.Disbursement should be effected directly to the supplier /seller after transfer of ownership (title
deeds) in the name of the borrower is completed and submitted to the bank and also up on
registration of the same with the appropriate government authority. Further written and signed
consent of the borrower should be obtained prior to disbursement.
4. Borrower should offer primarily the building to be purchased as collateral for the loan and /or
other acceptable collateral: source Abay Bank manual.
2.4.7 over drawl
a).An over drawl is a temporary facility that grants a customer the right to with draw a specified
amount of fund over and above the over draft limit in order to meet unexpected cash shortage.
b).In principle the Bank does not encourage an over drawl ,but in a certain circumstances.,
depending on the relationship with the customer ,over draw may be allowed for a maximum
period of two months (60days) and may be approved only once in a(12) twelve month period.
c).The over draw amount should not exceed 25% of the approved over draft limit or Birr five
million whichever is lower.
2.4.8 Loan approval form
Loan approval form: is the principal of credit decision document on which relevant information
the loan request, recommendations and the credit decision of the credit approving team
individuals are to record. The loan application form includes: amount of loan requested, loan
term, purpose of loan, sources of funds recover loan and types of collateral needed etc (Christine
peter, 2004).
18. 12
2.4.9 Loan settlement
Settlement document prepared by lending institution and presented to the borrower at the loan
time showing the amount and frequency of the settlements for the loan repayment.
(www.business dictionary.com).
2.4.10 over draft facility
An overdraft is a form of credit facility by which a customer may be allowed to draw beyond
the deposits of its current accounts for the sole purpose of the day to day operational needs of
a viable an ongoing business. The outstanding balance of the over draft is re payable on
demand by the Bank. It is financed for a limited duration normally for six months and in
exceptional cases for one year.
Based on strict and continuous follow up the Bank shall call back the outstanding over draft
loan balance at any time when its performance is un satisfactory unless considered
exceptionally.
Over draft facility shall be reviewed every six months unless the Bank demands it to be
reviewed by the credit approving team for any remedial action when the performance of the
account is deteriorating.
Interest is charged on the over draft facility’s outstanding balance on daily basis. Source:
credit manual of Abay Bank.
2.5. Loan facilities
Abay Bank currently offers services for diverse credit needs with flexible borrowing options. An
arrangement where a person or organization can borrow money up to a particular amount if and
when they need it.
1. Merchandise loan facility: merchandise refers to a specific product or group of products
goods manufactured or acquired by a trading business for purpose of sale. A merchandise loan is
a short term credit facility provided by the Bank against which the merchandise or document,
19. 13
evidence (railway receipt, ware house receipt and air way bills held as a pledged or collateral for
the loan). The purpose of merchandise loan facility is to relieve customer from cash flow
problems arising from money being up in the merchandise. Merchandise loan facility shall be
renewed every year. The amount of merchandise loan facility has to be up to maximum of 80%of
advance rate, depending on the type of merchandise, customer satisfaction and credit risk grade
level. Source: credit manual of Abay Bank.
2. Staff consumer loans: staff members can enjoy consumer credit facility, however details
governing this arrangement are provided separately in the human resource policy of the Bank.
3. Building construction loan: are loans to be advanced to individuals and enterprises to
partially cover construction or renovation cost of residential and non residential buildings
● Eligibility criteria
To obtain credit facilities from the Bank applicant should at least full fill the following criteria.
1) Applicants should be legally licensed and have been in the captioned business to be financed.
2) Applicants should be able to present any document required from them for the smooth
processing of the loan.
3) Applicants should not have any prior record of loan defaulting in any Banks.
4. Construction machinery loans: Construction machinery loan is a loan for the purchase of
construction machinery such as dozer, graders, loaders, excavators etc.
❖ Eligibility criteria.
A. Applicants should be legally licensed and have been in the captioned business to be financed.
B. Applicants should be able to present any document required from them for the smooth
processing of the loan.
C. Applicants should not have any prior record of loan defaulting in any Banks. Source: credit
manual of Abay Bank.
20. 14
2.6 Risks associated with lending
Banks accept risk in order to earn profit. They must balance alternative strategies in terms of
their risk / return characteristics with the goal of maximizing share holders wealth .the office of
comptroller of the country. Lists nine risk for purposes of Bank supervision, some of them
1) Financial risk: Does intern comprise two types of risk.
Pure risk: includes liquidity credit and solvency risks which can be result in losses for a Bank if
they are properly managed. (Peter, s rose, 1999). Speculative risk: are based on financial
arbitrage and can result in a profit if the arbitrage is correct or loss if it is in correct. The main
categories of speculative risk are interest rate risk, currency risk, and market price risk.
2) Operational risk: are related to a Banks over all business strategy, organization functioning
of internal systems including computer related and other technologies. Complain with Bank
policies and procedures.
3) Business risk: are associated with Banks business environment including macroeconomic and
legal regulatory factors.
4) Credit risk: the risk that a firm’s customer and the parties to which it has lent money will fail
to make promised payment is known as credit risk.
5) Default risk: is the probability that promised payment of interest and principal will not be
made on the time (peter, s rose, 1999).
2.7 General features of term (working capital and project financing loan)
Working capital financing loan: provide business with short term credit, lasting from a few
days to about one year. Working capital loans are most often used to fund the purchase of
inventories or raw materials.
Project financing loan: the most risky of all business loans are project loans-credit to
finance the construction of fixed assets designed to generate a flow of revenue in future
21. 15
periods. Prominent examples include oil refineries and power plants (Sylvia c, hundgins,
2010).
✓ A term loan: is a loan granted to customers to be repaid within a specific period of time
with interest. The Bank extends short, medium, and long term loan.
● Short term loan: is a loan extended by the Bank to finance the working capital needs,
and or to address other short term financial constraints of the borrowers business. The
maturity period of short term loan must not exceed one year from the date of signing the loan
contract. Repayment period is quarterly and semi-annually based on the cash flow generating
capacity of the business.
● Medium term loan: is a loan which has a maturity period exceeding one year but less
than or equal to five years from the date of signing the loan contract.
● Long term loan: is a loan which has a maturity period longer than five years but not
exceeding a maximum period of fifteen (15) years with periodic installment purpose of the
loan is to finance new projects and to meet working capital needs. Repayment period is
quarterly, semi-annually and yearly. Source: credit manual of Abay Bank.
2.8 credit analysis
Credit analysis: is the evaluation of borrower’s capacity of properly servicing the loan proper
credit analysis the core part of quality loan in a Bank in doing this. The five basic credit factors
(5C, s) to be evaluated; character, capacity, capital, collateral, and condition.
Character: refers to the borrowers’ reputation and the borrower’s willingness to meet credit
obligations. In evaluating character the borrower’s honesty, integrity, and trust worthiness are
assed.
Capacity: refers to the business ability to generate sufficient cash to repay the debt. The
customer’s ability to meet credit obligation out of operating cash flows.
22. 16
Capital: refers to the owner’s level of investment in the business. The customer’s financial
reserves.
Collateral: also called security is the assets that the borrower pledges to the Bank to mitigate the
Banks risk in event of default.
Condition: general economic conditions in the customers line of business. Are external
circumstances that could affect the borrower’s ability to repay the amount financed (timothy w.
Koch, 2006).
2.9 Loan commitments
These days most commercial and industrial loans are made by firms that take down (or borrower
against) p renegotiated line of credit or loan commitments rather than borrow spot loans. Spot
loans are made by the financial institutions and the borrower uses or takes down the entire loan
amount immediately. Loan commitments agreement is a contractual commitment by a financial
institution to lend to a firm a certain maximum amount at given interest rate (Anthony Saunders,
2010).
2.10 Establishing a written loan policy
One of the most important ways of a lending institution can make sure its loans meet regulatory
standards and are profitable is to establish a written loan policy. Such as a policy gives loan
officers and management specific guidelines in making individual loan decisions and in shaping
the overall loan portfolio. The actual makeup of lender's loan portfolio should reflect what its
loan policy says. Otherwise, the loan policy is not functioning effectively and should be either
revised or more strongly enforced. What should a loan policy contain? The most important
element of a will written loan policy. These elements include.
1. A loan statement for the loan portfolio (i.e. statement of the characteristics of a good loan
portfolio in terms of types, maturities, sizes, and quality of loans).
23. 17
2. Specification of the lending authority given to each loan officer and loan committee
(measuring the maximum amount and types of loan that each employee and committee can
approve and what signatures of approval are required).
3. Lines of responsibility in making assignments and reporting information.
4. Operating procedures for soliciting, evaluating, and making decisions on customer loan
applications.
5. The required documentation that is to accompany each loan application and what must be kept
in the lender's files (financial statements, security agreements etc.).
6. Guidelines for taking, evaluating, and perfecting loan collateral. (Peter S. Rose).
24. 18
Chapter three
3. Researchmethodology
3. 1 Researchdesign
The research designs are descriptive types of research design. Because this study was describe
and summarizes the data about a particular events and helps to describe about what has happened
or what is happing.
3.2 Data source
To make the research reliable, the researchers are used both primary and secondary data sources.
The primary data are collected through questionnaires and personal interview, from bank
manager. And the secondary data from bank manuals and books.
3.3 Method of data collection
The data mainly collected from both primary and secondary sources. Primary data was collected
by way of discussion with bank officials, mainly with bank manager, and through questionnaires.
Secondary data that were collected through published materials like pamphlets, and from bank
credit manual.
3.4 Target population and sample size
The target population of the study was employees of Abay Bank, Debre Markos branch. In Abay
Bank Debre Markos branch there are 10 employees including manager that the researcher was
used a census method of data collection through questionnaires, because the size of the
population is small.
3.5 Data analysis
25. 19
After collecting the necessary data the researcher was analyzed the data using through
appropriate tools. The data collected through structured interview and was analyzed by the
qualitative analysis method, and the data collected through questionnaires were analyzed and
interpreted by using quantitative techniques such as percentage and tabulation
CHAPTER FOUR
4. Data analysis and interpretation
This chapter deals with the interpretation of data, the data analysis tried to answer the assessment
of loan and advance processing practice of Abay Bank in Debre markos branch. To do the
analysis the researcher had distributed questionnaires to employees of Abay Bank Debre Markos
branch and conducted with the branch manager for interview. The analysis part has been
supported by percentage (%) and tables.
Table 4.1 personal information of the respondent
No Item Frequency %
1. Sex Male 8 80
Female 2 20
Total 10 100
2. Education level Certificate
Diploma 2 20
BA Degree 8 80
Above BA Degree - -
Total 10 100
3. Work experience 1-2 years 5 50
3-5 years 4 40
5-10 years 1 10
Above 10 years - -
26. 20
Total 10 100
4. Current position in the branch Item Frequency %
Loan officer 1 10
Credit analyst - -
Section head (loan) - -
Cashier 1 10
Assistant branch
manager
- -
Branch manager 1 10
Auditor 1 10
Division head(loan) - -
Accountant 1 10
Customer service
officer
1 10
Taller 4 40
Total 10 100
Source: compiled from primary data, 2016
As shown in the above table 80% of the respondents are male, and 20% of the respondents are
female. Interims of education level shown that 20% of the respondents are diploma holder, 80%
of the respondents are BA degree holder. Regarding to work experience 50% of the respondents
says that served the institution between 1-2years, 40% of the respondents served the institution
between 3-5 years, 10% of the respondents served in the bank between 5-10 years. In the case of
current position in the branch the data shows 10% of the respondents that the current position in
the branch are loan officer , cashier personnel ,branch manager, auditor, accountant, customer
service officer, and 40% the respondents are taller. Therefore in the above table most of the
respondents are male and their work experiences are between 1-2 years served in the bank loan
and advance processing practice it shows little experiences in loan and advance processing
practice of Abay Bank in Debre Markos branch.
27. 21
Table 4.2 loan provided by Abay Bank.
Which term loan provided by Abay bank? Frequency %
Construction loan
Agricultural loan
Consumer loan
Domestic trade and service
Transport
Import and export
Manufacturing
All 6 60
All except B 3 30
All except F 1 10
Total 10 100
Source: compiled from primary data, 2016
As shown in the above table 60% of the respondents respond that the types of loan are all. 30%
of the respondents respond that the types of loan are all except “B”,(agricultural loan) 10% of the
respondents are respond that the types of loan are all except “F”(import export). Generally most
of the respondents said that all types of loan are available in our branch based on the above
information which exerted from the bank employees as well as managers of the bank.
Table 4.3 credit committee of the bank approved credit facility in the prospective borrowers in
loan processing follow up activity.
Which credit committee of the bank approved credit facility Frequency %
28. 22
request by the prospective borrowers?
Branch credit committee 2 20
Manager credit committee - -
Executive management credit committee 1 10
Board committee
All 2 20
All except D 5 50
Total 10 100
Source: compiled from primary data, 2016
The above table shows that 20% of the respondents respond that branch credit committee
approved the credit facility requested by the prospective borrowers, 10% of the respondents
respond that executive management credit committee approved the credit facility, 20% of the
respondents respond that all credit committee approve the credit facility, 50% of the respondents
respond that all except “D” (board committee) approves the credit facility of the borrowers.
Therefore most of the respondents respond that all of the credit committee approved credit
facility in the prospective borrowers except the executive management credit committee.
Table 4.4 Problems facing in loan processing practice.
What are the main problems that the bank currently facing in loan
processing activity?
Frequency
%
Adverse economic condition 2 20
Lack of information about customer
Lack of qualified staff - -
Government regulation policy 4 40
Competitors entrance in the industry 1 10
All except Band C 2 20
All except C 1 10
Total 10 100
Source: compiled from primary data, 2016
29. 23
According to the above table 20% of the respondents respond that the problems facing in loan
processing activity are adverse economic condition, 40% of the respondents respond that that the
problems facing in loan processing activity of the bank are government regulation policy,10% of
the respondents respond that problems facing currently in the loan processing activity are
competitors entrance in the industry,20% of the respondents respond that problems currently
facing in the loan processing activity are all except “B “and “C “(lack of information about
customer and lack of qualified staff), 10% of the respondents respond that problems currently
facing in the loan processing activity of the bank are all except “C”(lack of qualified staff).
As per the respondent’s response Abay Bank currently facing the following problems. These
are: government regulation policy, adverse economic condition, competitor’s entrance in the
industry this also leads to affect the effectiveness of the bank in loan processing practice accord
ding to the finding
Table 4.5 willingness of the customers to disclose any information need for loan and advance
processing practice.
Are the customers willing to disclose any information
that useful for loan and advance processing?
Frequency
%
Yes 10 10
No -
Total 10 100
Source: compiled from primary data, 2016.
The above table shows that the bank respondents said that 100% of the respondents said yes
meaning that: there is no an information barrier between the customers and the staff employees
of Abay bank, because all customers disclose any information which is useful for the bank’s loan
and advance processing practice.
30. 24
Table 4.6 loan facilities available in Abay bank.
Which loan facilities available in Abay bank? Frequency %
Over draft
Guarantees
Term loan
Over drawl
All 3 30
All except D 7 70
Total 10 100
Source: compiled from primary data, 2016
As per the above table 70% of the respondents respond that loan facilities in Abay bank are all
except “D” (over drawl ),30% of the respondents respond that all(overdraft ,guarantees, term
loan, and over drawl). Therefore most of the respondents said that the loan facilities which are
available in Abay Bank are all types of credit facilities except overdraw credit facility.
Table 4.7 collateral evaluation criteria.
Does Abay bank has a collateral evaluation criteria? Frequency %
Yes 10 100
No - -
Total 10 100
[
Source: compiled from primary data, 2016.
The above table shows that 100% of the respondents said that Abay bank has collateral
evaluation criteria. As per the respondents of Abay bank are set and applies a collateral
evaluation criterion and other requirements to give any loan for the customers. As a result from
31. 25
the data Bank has well performed the credit evaluation criteria which are helps to more
creditable in the smooth running of loan processing practice.
Table 4.8 assets used as in collateral in loan processing practice.
What assets the bank would accept as a collateral? Frequency %
Building
Inventory
Vehicle
Machinery
All 6 60
All except B 4 40
Total 10 100
Source: compiled from primary data, 2016.
As per the above table 60% of the respondents respond that assets used as a collateral in loan
processing practice are all (building, inventory, vehicle, and machinery), 40% of the respondents
respond that are all except “B” (inventory).it can be concluded that the major assets used as a
collateral in Abay bank are building, vehicle, and machinery but inventories are less significant
according to the respondents response.
Table 4.9 evaluates the effectiveness of loan follow up activity in loan processing practice of
Abay Bank.
How do you evaluate the effectiveness of Abay bank loan
processing and follow up activity?
Frequency %
High 7 70
Medium 3 30
Low - -
Total 10 100
32. 26
Source: compiled from primary data, 2016.
The above table shows that 70% of the respondents respond that the effectiveness of loan
evaluation activity are high :it implies the bank applicable an effective loan evaluation follow up
activity in loan processing practice 30% of the respondents respond that in loan evaluation
follow up are medium. Generally which implies the loan follow up activity of the in loan
processing practice are excellent. Because most of the respondents give an answer in the form of
primary data.
Table 4.10 objectives of Abay bank in relation to loan processing.
Do youthinkAbaybank achieve itsobjectivesinrelationto
loanprocessing?
Frequency %
Yes 10 100
No - -
Total 10 100
Source: compiled by primary data, 2016.
According to the above table 100% of the respondents respond that the objectives of Abay bank
in relation to loan processing are yes, so that meet its objective in relation to loan processing. As
per the respondents Abay bank has well trend objective in relation to loan processing practice
and the bank has already meets its objective in loan processing practice.
Table 4.11 effort to create to customer awareness about loan.
Is there any effort exerted by Abay bank to create customer
awareness about loan?
Frequency %
Yes 10 100
No - -
Total 10 100
Source: compiled from primary data, 2016.
33. 27
The above table shows that 100% of the respondents respond that there is an effort exerted by
Abay bank to create customer awareness about loan in order to for the smooth running of the
loan processing practice. Therefore the has play a vital role by creating an awareness related with
loan processing practice.
Table 4.12 loan agreement properly documented.
Is the loan agreement properly documented? Frequency %
Yes 10 100
No - -
Total 10 100
Source: compiled from primary data, 2016
Based on the above table 100%of the respondents respond that the loan agreement can be
properly documented. This shows the loan agreement can be properly documented for the
smooth running of loan processing practice. It helps to reduce the banks credit risk as well as
operational risk in general and useful for the smooth running of the loan in particular.
Table 4.13 types of non-performing loan.
What types of non-performing loan does Abay bank faces? Frequency %
Subs standard 4 40
Doubtful - -
Loss - -
Substandard and doubtful 2 20
Doubtful and loss 1 10
All 3 30
Total 10 100
Source: compiled from primary data, 2016
The above table shows that 40% of the respondents respond that the types of non-performing
loans are sub-standard, 20%of the respondents respond that the types of non-performing loan are
34. 28
doubtful and sub-standard 30% of the respondents are respond that the types of non-performing
loan are all (sub-standard, doubtful, and loss), and 10% 0f the respondents are the types of non-
performing loan are doubtful and loss. Therefore nonperforming loan has a problem in the
bank’s loan and advance processing practice of the bank.
Table 4.14 know your customer principle (kyc)
Does Abay bank applies know your customer principle? Frequency %
Yes 10 100
No - -
Total 10 100
Source: compiled from primary data, 2016
The above table shows 100% of the respondents respond that know your customer principle
(kyc) is applicable in Abay bank because all respondents say yes. Which are helps to for banks
healthy loan processing practice by reducing default risk which can be created in related with
loan and advance processing practice.
Table 4.15 loan to collateral ratio
How much is loan to collateral ratio of the bank? Frequency %
40%
50%
60%
80% 5 50
All 4 40
All except A 1 10
Total 10 100
The above table shows that 50% of the respondents respond that the loan to collateral ratio of the
bank are 80%,and 40% of the respondents respond that loan to collateral ratio of the bank are
all(40%,50%,60%,80%) when we say all the respondents said that it depends on the condition
35. 29
but the maximum limit is 80%. And 10% of the respondents respond that are loan to collateral
ratio of the bank are except “A” (40%), but it depends on the condition. As per the respondents
respond that most of the respondents said that the loan to collateral ratio of the bank are 80%
which is the maximum limit of collateral that the bank which is received from the applicants or
borrowers.
Table 4.16 loan portfolio management
Does Abay bank apply loan portfolio management? Frequency %
Yes 10 100
No - -
Total 10 100
Source: compiled from primary data, 2016
The above table shows 100% of the respondents respond that Abay bank applies loan portfolio
management in loan processing. Therefore the bank already applies loan portfolio management
in good manner which is important to minimize a risk which is related with loan and advance
processing practice of the bank.
Table 4.17 working capital financing loan and project financing loan
Is there having the bank working capital financing loan and
project financing loan?
Frequency %
Yes 10 100
No - -
Total 10 100
Source: compiled from primary data, 2016
The above table shows 100% of the respondents respond that in Abay bank they have a capital
financing loan and project financing loan in the loan processing practice of the bank. Generally
the bank allocates both project financing loan and working financing loan in their loan and
advance processing practice.
36. 30
Table 4.18 term loan available in Abay bank
Which term loan available in Abay bank? Frequency %
Short 1 10
Short and medium 1 10
Medium and long 1 10
Medium - -
Long - -
All 7 70
Total 10 100
Source complied from primary data, 2016
The above table shows 30% of the respondents respond that term loan which is available in Abay
bank are short term, short and medium term, medium and long term, and 70% of the respondents
respond that the term loan which is available in Abay bank are all (short term, medium term, and
long term. Therefore the bank provide all most all types of term loan which are important to meet
the customers demand and also important for in their own loan and advance processing practice
of the bank.
Analysis of interview question collected from bank manager. What are Requirements
expected from the applicant to get loan from the bank.
General documents required from customers during loan request:
-Written application that clearly indicates, among others, the amount
, and purpose of the loan requested
-License as appropriate
Financial statements (audited as necessary)
-A business plan
-An ownership certificate for assets or merchandise offered as
Collateral
-Memorandum and Articles of Association (for legally established
37. 31
Companies)
-Name and address of the borrower; purchase plan; production plan;
-Projected income statement; projected balance sheet; projected cash flow
Statement.
-proper insurance coverage of all collaterals
2. The major problems facing the banks with regard to loan processing.
As per the responses of the manager, the major problems of Abay bank relating to loan
processing are:
Liquidity problems that loan to deposit ratio restricted by the national bank and their
needs to reserve. Sometimes due to amount restricted it needs approval from head office
and regional offices, so there is a time gap between that the customer needs and
disbursed.
Most of the customers forward a loan request to our bank without SWOT analysis, so
there is a problem in re-payment of loan.
Operational risk: This is the risk of losses stemming from inadequate or failed internal
processes, people and systems or from external events.
Competitor entrance in the banking industry.
3. The bank evaluates the credit worthiness of the customers.
By assessing credit information of borrowers (applicants) from NBE , this enable to
know the pervious trends of the customer
By assessing the applicants business in related to credit analysis by using 5 C’ s i.e.
collateral, condition , character, capacity, and capital.
4. The impact of non-performing loan on loan processing practice.
As per the responses from Abay bank manager non- performing loan (NPL) has not a significant
effect on the bank financial, liquidity, operational, and in any other loan processing activity.
38. 32
Chapter five
5. Conclusion and recommendation
5.1 conclusions
Generally this chapter gives a conclusion in relationship with the assessment of loan and advance
processing practice of Abay bank S.C debre markos branch. Based on the result of analysis and
discussion issue of the research in the previous chapter the following conclusion and
recommendation were given.
Abay bank provides almost all types of loan based on the customers wants borrow the loan,
such as agricultural loan construction loan, consumer loan, domestic trade and services,
transport, manufacturing loan, and import and export, and the bank also gives all types of
term loan(short, medium, and long term loan).
The major problems of Abay bank currently facing in loan and advance processing practices
are government regulation policy, adverse economic condition, and competitors’ entrance in
the banking industry.
Abay bank set a collateral evaluation criterion to give any types of loan to customers; the
major assets that the bank accepted as collateral from borrowers are building and machinery.
But according to the situation the bank accept other assets such as, inventory and vehicle.
The effectiveness of Abay bank in loan processing and follow up activities are high, and
medium.
The bank achieves its objective relation to loan and advance processing practice, Abay bank
.In Abay bank the loan agreement are properly documented and excellent loan portfolio
management. The maximum loan to collateral ratio of the bank is 80% but depending on the
39. 33
condition the loan to collateral ratio is less than 80%. Working capital financing project
financing and other credit facilities are available in the bank.
The credit committee of the bank approved a credit facilities requested by the prospective
borrowers are branch credit committee and board committee. This indicates that 0-150,000
is approved by branch credit committee and 150,000 up to the maximum limit approved by
board committee.
Abay bank create a customer awareness about loan, and the bank apply know your customer
principle. The bank evaluate the credit worthiness of the customers by assessing credit
information of borrowers (applicants) from national bank of Ethiopia this enables to know
the previous trends of the customer, by assessing the applicants business in related to credit
analysis by using 5c,s i.e. collateral, condition, character, capacity .and capital.
The major problem of the bank with regard to loan processing, as per the responses of the
manager are: liquidity problem that loan to deposit ratio restricted by the national bank and
their needs to reserve. Sometimes due to the amount restricted it needs approval from head
office and regional offices, so there is a time gap the customer needs and disbursed. Most of
the customers forward a loan request to our bank without SOWT analysis, so there is a
problem in repayment of loan, and operational risk also another problem in the loan
processing practice, which is the risk of losses stemming from power interruption, through
internal process /system and the capacity of persons.
40. 34
5.2 Recommendation
Based on the finding of available data the following recommendations are forwarded to Abay
bank which will be helpful for the betterment the bank performance in loan and advance
processing practice.
The bank should be use as much as possible latest /new soft ware application in order to
reduce operational risk related with the existing system.
The bank should be always apply know your customer principle in order to solve the problem
related with default risk and also use an appropriate collateral evaluation criteria depending
on the situation.
They should be improving its internal efficiency and effectiveness so as to attract potential
customers as well as encourage the existing once.
The bank should be assess the credit worthiness of the customers in order to meet the
smooth running of the loan processing practice by reducing the probability of default risk.
Abay bank should be providing different types of loans in order to meet the customers
demand, because loan is one source of revenue for the bank.
They should be always apply good loan portfolio management and hiring well trained
personnel in order to create a favorable environment in loan and advance processing practice
.
The bank should communicate openly with the customers and give suggestion with respect to
the banking loan processing practice, so they can help in facilitating the loan processing
practice.
41. 35
Financial position of the borrowers must be assessed properly, and proper documentation is
important in ensuring the safety of banks advances.
Reference
Anthony Saunders, (2011) financial institution management, international edition, 7th
edition
Christine peter, (2004) Ethiopian business development services Net work, Addis Ababa
Ethiopia
Gary, (1991) money banking and financial intermediation Addiso-wesely publishing company.
Jhingan m.l, (2012), money banking international trade and public finance vrinda
publications’ltd, 8th edition
Peter s. Rose, (2010), commercial banking management USA Irwin/ mc graw, hill 8th. Edition
Shekher, kc, (2005) banking theory and practice, New Delhi vkas publication.
Sylvia c.hundgins, (2010) banking management and financial service, published by mc graw –
hill, international edition, 8th. Edition
T.N hajela, (2015) money banking and international trade, published by ane books private
limited company, 8th edition
Timothy w.koch, (2006) banking management, printed in United States of America 6th edition
www.abay bank.et.com.
www.business dictionary .com.
42. 36
Appendix
DEBRE MARKOS UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF ACCOUNTING AND FINANCE
DEAR ABAY BANK MANAGERS AND EMPLOYESS
This questionnaire is designed for the purpose of collecting data to assessment of loan and
advance processing practice which is required for senior essay as an integral part of my study.
Your organization increases the credibility of this paper and it become at most confidentiality.
The data that will be collected from you is used for the academic purpose only .Therefore, I
request you to help me in answering these questions below. Your response has a great value to
the soundness as well as the validity of the study findings.
Note:
No need of writing your name.
Pease put (x) mark on the box which is correspondent to your answer.
Thank you for your cooperation in advance.
Background of the respondent
1. Sex A. male B. female
2. Educational level
A. Diploma C.BA Degree
B. Certificate D. above BA Degree
43. 37
3. Indicate your work experience in Bank credit process.
A. below 1 year B. 1-2 years C. 3-5 years
D. 5-10 years E. Above ten years
4. Your current position in the branch
A. Loan officer B. Branch manager C. division head (loan)
D. Section head (loan) E. Credit analyst
Objective related question
5. Which types of loan provided by Abay Bank?
A. Construction loan E. transport
B. Agricultural loan F. Import export
C. Consumer loan G. Manufacturing loan
D. Domestic trade and service
6. What are the main problems that the Bank is currently facing in loan processing
activity?
A. Adverse economic condition
B. Lack of information about customer
C .Lack of qualified staff
D. Government regulation policy
E. Competitors entrance in the industry
7. Are the customers willing to disclose any information the bank need for loan and
advance processing?
A. yes B. No
44. 38
8. Which loan facilities available in Abay Bank?
A. Overdraft C. Term loan
B. guarantees D. Over drawl
9. Which department of the Bank approved credit facility request by prospective
borrowers?
A. Branch credit committee
B. Manager Credit committee
C. Executive management Credit committee
D. Board committee
10. Does Abay Bank has collateral evaluation criteria?
A. yes B. No
11. What assets the Bank would accept as collateral?
A. Building D. Machinery
B. Inventory C. Vehicle
12. How do you evaluate the effectiveness of Abay Bank loan processing and follow up
activity?
A. High B. Medium C. Low
13. Do you think Abay Bank achieve its objective in relation to loan processing?
A. Yes B. No
14. Is there any effort exerted by Abay Bank to create customer awareness about loan?
45. 39
A. Yes B. No
15. Is the loan agreement properly documented?
A. Yes B. No
16. What types of Non-performing loan does Abay Bank faces?
A. Sub standard B. Doubtful C. Loss
17. Does the Bank applies know your customer principle?
A. Yes B. No
18. How much is loan to collateral ratio of the Bank?
A. 40 % B. 50 % C. 60% D. 80%
19. Does Abay Bank applies loan portfolio management?
A. Yes B. No
20. Is there have the Bank working capital financing loan and project financing loan?
A. Yes B. No
21. Which term loan available in Abay bank?
A. Short B. medium C. Long
INTERVIEW QUESTIONS
1. What are the requirements expected from the applicant to get loan from the bank?
2. What are the major problems facing the bank with regard to loan processing?
3. In your opinion what is the impact of loan processing practice on non-performing loan?
4. How does the bank evaluate the credit worthiness of the customer?