Credit Risk Management in Ghanaian Commercial Banks (PDF)

Master's Thesis from the year 2012 in the subject Business economics - Investment and Finance, grade: B, Methodist University College Ghana, language: English, abstract: This study focused on the challenges of Credit Risk Management in Ghanaian Commercial
Banks with the searchlight on the operations of Barclays Bank Ghana (BBG), Ghana
Commercial Bank (GCB), Zenith Bank Ghana and Merchant Bank Ghana (MBG), all
operating in the Accra Business District. The study essentially had the objective of examining
the loan application appraisal processes of these banks as well as ascertaining the adequacy of
their loan monitoring mechanism.
In conducting the study, the researcher adopted the questionnaire technique as the research
instrument to solicit information from both customers and officials of the banks. Purposive
sampling technique was employed in selecting officials from the banks whose duties centered
on Credit Risk Management. Random sampling technique also helped the researcher in
selecting the sample size for the customers of the banks.
Findings made uncovered the fact that poor sales and exchange rate losses, product
substitutes due to trade liberalization and inability to enter into the foreign market and
account for a chuck of the loan default cases experienced by the banks. It is recommended,
among others, that the Government's information on Venture Capital Trust fund should be
made more accessible to the SMEs sectors through official sponsored workshops whilst the
capacity and logistics of the Eximguaranty Limited are strengthened to alleviate the credit
requirement 'headaches' of SMEs. Conclusions drawn centered on the fact that some banks
minimize risk factors in credit management by entering into some covenants with borrowers'
under which certain figures and ratios are periodically sent to the banks electronically. Most
banks also dispatch their officials to monitor and evaluate the loan disbursement schedules
agreed with the customer to minimize bad debt associated with SMEs.