An assessment of credit risk management among savings and loan institutions in Ghana: A case study of Sinapi Aba savings and loans

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Savings and Loan institutions are not exempted from the challenges that come with credit exposure. Given their importance to the economy every effort should be made to help the sector deal with the problem of credit risk. This study therefore examined the credit risk management among savings and loan institutions with the aim of helping the sector address this problem. The study was purposive using both primary and secondary source of data. Data was analyzed with the help of the SPSS. It was found that the bank has recorded an annual increase in its credit supply of more than 18%. The study found a rising trend in loan default from 2010 -2012 but fell sharply in 2013. Default rate was found to have increased from 7.83% in 2010 to15.39% in 2012 but fell again to 7.56% in 2013. It shows therefore that the bank is gradually reducing the rate of default. It was revealed that the most significant contribution is from the SME and Group loan which stood at 25%. It was found that the bank manages risk in its credit supply through its credit policy. Consequently, the bank has maintained significant adherence to formal laid down policies and principles that have been put in places by the board of directors on how to manage credits, including the process of credit granting. Generally, the bank‘s credit standards specify the profile of the minimally acceptable creditworthy customer to be considered for credit. Again, the bank considered collaterals to be very important in the credit granting process. In risk management consequently, the bank exercises the necessary due diligence in assessing collaterals that have been provided by prospective clients or even existing ones. It was found that the bank‘s management of credit risk is confronted by a number of challenges identified to include: the credit complexity, monitoring and reporting as well as managing the credit origination of process. Key recommendations included the need for savings and loan institutions to strengthen and stick to their laid down policies and principles that have been put in place. Again, the necessary due diligence should be undertaken by credit officers to ensure that collateral properties are not the subject of intense litigation. This will help the bank in the event that it has to dispose it off to offset default. Further, there is the need for savings and loans to invest in risk management system that has good capability to maintain and archive the customer static data.
A Thesis submitted to the Department of Accounting and Finance, School of Business. Kwame Nkrumah University of Science and Technology in Partial fulfillment of the requirements for the degree of Master of Busines Administration (Finance) ,