Assessment on Loan Recovery Performance in Case of Oromia International Bank Nekemte Branch Wollega University

Abstract

This study was carried out in Oromia International Bank, Nekemte branch. It was based on primary data collected through questionnaire survey from 21 employees working in loaning unit of the Bank. The study also used secondary data collected from financial statements, quarterly reports, annual reports, credit policy and procedure. Descriptive research methods were employed to identify the loan recovery performance of the Bank. The assessment result showed that the loan repayment period, assessment of customer credit history, collateral estimation, project follow up, monitoring and controlling system, delays to decide on non-performing loans h a v e affected the loan recovery performance of the Bank. The study was very importance to measure whether OIB have adequate policies & procedure manuals, whether the credit unit verifies outstanding liabilities of the borrowers before additional and new loans are granted, the existence & adequacy of feasibility study, whether the bank has a proper way of gathering credit information internally & externally. Inadequate credit policies and procedure manuals, unrealistic loan repayment period, inefficient analyses of customers’ financial statement and absence of welldesigned project follow up system were the major finding of the study. Based on these findings, I recommended the bank to exert maximum efforts to be updated & review the credit policies & procedures manual frequently as the policies & procedures of the bank are outdated and do not consider the current situation, Furthermore, the bank loan repayment period should consider the nature and cash flow of the project in order to collect the loan as per the repayment schedule instead of performing based on assumption and in terms of loans period. The study will help to enhance the efficiency and effectiveness of loan administration operation & provide different methods and ways to safe guard asset (primarily loans), adequacy, and accuracy of its loan review function; promote to comply with management policy, procedure, applicable laws, and regulation