AN ASSESSMENT OF THE MANAGEMENT OF CREDIT RISK IN FINANCIAL INSTITUTIONS IN GHANA: A CASE STUDY OF ECOBANK GHANA LIMITED

ABSTRACT The general objective of the study was to assess the credit risk management practices in financial institutions. Along this general objective, there were some specific purposes to help achieve the overall goal of the study. They include; examining the credit management practices of Ecobank Ghana Limited; to find out whether Ecobank Ghana Limited complies with central bank regulations on credit management and to identify the problems encountered in recovery of loans granted by Ecobank Ghana Limited. Based on this both purposive and convenience sampling techniques were used to select from the different categories of personnel. The same questionnaires were administered to the management; senior staff and staff from the credit department (operations department) were interviewed and transcribed as part of responses which were used in the analysis. Other authors work relevant to the study were also considered and used. The main findings of the study indicated that the bank sometimes faces some difficulties in loan recovery, especially, clients whose repayments cannot be deducted at source. However, some measures have been installed to mitigate such difficulties. They outlined some of the problems as; the bank insures every loan that is granted to clients, the bank constantly visits and befriends its clients, and taking of collateral security to secure the loan should any default occur. The implementation of these debt recovery strategies has lead to the improvement of loan recovery over the years. The study concludes that the bank should always plan its credit programme in such a way that its interest rates will not be fluctuating any time the central bank reviews its monetary policy, even though the policy rate is beyond the control of the bank and again the credit procedures should be innovative to accommodate varied loan applications since each loan may have different requirements. It is, therefore, recommended that Management needs to ensure that the bank works within the applicable framework set by the Bank of Ghana on deposit ratios to help solve liquidity challenges, credit officers of the bank should be given more training to enable them to properly evaluate the creditworthiness of clients before loans are disbursed to them and the management of the bank should come up with a credit management policy that is geared towards the granting of current loans while cutting down drastically the approval of loans that have the potential of becoming doubtful or bad in the long run.