An Assessment of Credit Risk Management Practices of Adansi Rural Bank Limited

74 Pages Posted: 13 Oct 2018

Date Written: September 20, 2018

Abstract

Rural banks in Ghana are not exempted from the risk exposures associated with managing credit. Given their importance to the economy, appropriate measures should be taken to mitigate credit risk exposures of rural banks in the country. The study critically examines the credit risk management practices of rural banks in Ghana making reference from Adansi Rural Bank Limited. The study was carried out to examine the credit management practices, credit policies and strategies for managing overdue loans as well as challenges faced in this practice and to recommend solutions that will mitigate the credit risk exposures of Adansi Rural Bank Limited. The ability of a rural bank to formulate and adhere to credit policies and procedures that improve credit quality and curtail non-performing loans is considered a means by which the rural bank can survive a stiff competition in the banking industry. A rural bank’s inability to create, build up quality loans and credit worthy customers is most likely to lead to credit default and a possible bankruptcy which can hamper the economic growth of a country. The researcher used a purposive sampling technique to select a sample size of forty respondents which comprised of branch managers and credit officers from four branches of the rural bank. The researcher used a well structured questionnaire and a face to face interview to collect primary data for this study. The researcher used primary and secondary data in the study and descriptive statistical tools were employed in analysing the data collected. The study is a descriptive researcher. The researcher discovered that Adansi Rural Bank Limited had implemented a rigorous credit risk management policy. This included loan appraisal, use of collateral and checking the credit history of borrowers. The results of the study showed that, rural banks that have implemented rigorous credit risk management policies were exposed to few challenges in managing credit risk as compared to rural banks with poorly implemented credit risk management policies. In conclusion, a comprehensive credit risk management system should be adopted by rural banks.

Keywords: Credit, Credit Risk, Credit Risk Management Practices, Rural Banks

Suggested Citation

Ayertey Odonkor, Alexander, An Assessment of Credit Risk Management Practices of Adansi Rural Bank Limited (September 20, 2018). Available at SSRN: https://ssrn.com/abstract=3252463 or http://dx.doi.org/10.2139/ssrn.3252463

Alexander Ayertey Odonkor (Contact Author)

KNUST School of Business ( email )

KNUST School of Business
University Post Office
Kumasi
Ghana

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