Professional Documents
Culture Documents
JUNE 2012
DIRE DAWA
ETHIOPIA
Acknowledgement
First and for most I would like to thanks my god for
endowing me the endurance and courage of going all ups
and downs to reach the stage where I am now. Then, I
would like to take express my advisor Mr. Gedion M (MCS)
for his technical and professional guidance in writing this
paper. Next my best thanks goes to Ato Teshome, the
manager of development bank of Ethiopia, Dire Dawa
branch and the employees of that organization for their
corporation and unreserved help.
Finally, I would like to thanks my father Ato Dugassa
Ararso and my mother w/r Sogide Taressa who support me
financially to accomplish this research paper.
Abstract
This research paper has been entitled the loan recovery
performance of development bank of Ethiopia Dire Dawa
branch.
This paper has been included introduction, statement of
problem, objective of the study, significance of the study,
scope and limitation of the study, literature review and
research design and recommendation. Under the objective
of the study, the researcher question that the researchers
where emphasized to answer has been raised. The
literature part which are directly related to loan recovery
performance has been reviewed from several source.
Finally, for data analysis purpose, source of data, method
of data collection and sampling techniques has been stated.
Then based on analyzed data appropriate conclusion and
recommendation have been suggested.
Chapter 1
Introduction
The above table 3.1.1 shows that about 75% of the respondents of the
organization employees are male and remaining 25% of the employees
are female. From the above table 3.1.1 the researcher concludes that
most of the respondents are male.
Table 3.1.2 Educational level of the respondents
Educational level No of respondents Percentage %
Above degree 1 12.5%
Degree 4 50%
Diploma 3 37.5%
Certificate - -
Total 8 100%
Table 3.1.2 reveals that 50% of the banks employees are degree holder,
while 37.5% and 12.5% are diploma and above degree holders
respectively on the other hand there are no employees who are holders of
certificate. So this implies that the employees are competent to carry out
their responsibilities or duties.
Table 3.1.3 responses given by respondents
No of respondents
Percentage %
No Question who say
Yes No Yes No
DBE examine
1 8 - 100 -
the potentiality
of the clients
before giving
the loan
Does the
organization
collect and
2 6 2 75 25
recover all
loans at due
date?
Are there
factors
3 responsible for 8 - 100 -
non payment
of loan?
As shown on table 3.1.3 above, for item number question out of eight
respondents all of them responded by saying yes. This implies that the
organization or the bank examine the potentiality of customer before
giving the loan. Similarity to this, besides the respondents mentioned
some of the criteria’s such as trade license, master plan, kind of project,
professional experience, legal registration certificate, sire plan, 5cs such
as character, capacity, capital, collateral and condition of the clients and
the like that the bank provide for evaluation of clients back payment
capabilities.
Based on the above information the researcher suggested that the bank
holders a collateral, which is at least equivalent to disbursed amount.
According to the above table 3.1.3, for item number two question 75% of
respondents replied that the bank collects and recovers all loans on the
due date. Contrasting to this, the remaining 25% of the respondents
responded that the bank does not collect all loans on the due date. Based
on the above responses the researcher concludes that the bank collects
and recovers the loans on the due date.
As indicated on the table 3.1.3 for item number three question 100%
implies or reveals that all of the respondents responded that there is
factors responsible non repayment of loan.
As the respondents explain that the main factors responsible for non
repayment of loan are spending of the loan an intended project,
incremental of the price of the raw materials, lack of raw material on the
market, internal problem of the organization, an for seen occurrence and
negligence of the clients because most of the loan provided to customers
are long term loan.
Generally, the respondent’s responses which are mentioned above
indicate that as there are different bottlenecks on the collection and
recovery of the loan against disbursement.
1.total
274,650.000 26,091,750 300,741,750 1,413,997,000 134,329,715 1,548,326,715 1,282,557,000 121,842,915 1,404,399,915
disbursement
2.recovery
against 154,243,440 11,436,014 157,468,380 1,364,365,704 77,951,534 1,326,451,497 1,070,422,072 115,373,056 1,246,264,485
disbursement
3. recovery
56.16% 43.83% 52.36% 96.49% 58.03% 85.67% 83.46% 94.69% 88.74%
rate
4. balance in
120,406,560 14,655,736 143,273,370 49,631,295 56,378,181 221,875,218 164,295,552 6,469,859 158,135,430
arrears
5. percentage
in arrears to
43.84% 56.17% 47.64% 3.51% 41.97% 14.33% 12.81% 5.31% 11.26%
total
disbursement
Table 3.3.1 overall credit recovery performance of DBE
2010/2011 Total(2008/2009-2010/2011
Description
Principal Interest Total Principal Interes
1.total
252,737,000 24,010,015 276,747,015 3,223,941,000 306,27
disbursement
2.recovery
against 191,928,478 16,780,599 209,110,045 2,780,959,694 198,49
disbursement
3. recovery rate 75.94% 69.89% 75.56% 63.38% 64.81%
4. balance in
60,808,522 7,229,416 676,370 1,180,607,194 107,77
arrears
5. percentage in
arrears to total 24.06% 30.11% 24.44% 16.62% 35.19%
disbursement
Figure 3.3.2 DBE’s average recovery ration trends from year 2007/2008
to 2010/2011
As shown in table 3.3.2 above total disbursement for the period under
review 2007/2008 -2010/11 was about birr 3,530,215,395 of which birr
3,002,500,897 was recovered. The over all average recovery rate during
the four year was only 63.67%. Apportioning this figure in to principal
and interest, the average recovery rates comes about 63.38% and 64.81%
respectively.
The total disbursement shows a various trend for period to period.
Principal disbursement was increasing through out the period. Interest
disbursement for the period shows a fluctuation trend. From the period
2008/09 – 2009/10 and 2009/10 shows declination.
As indicate in figure 3.3.2 and table 3.3.2 above recovery rate was
increasing except in the period of 2010/11, similarly to the recovery rate
the interest rate was also indicate an increasing trend with the exception
of the 2010/11.
Constructing to recovery rate and interest rate amount in arrears rate
was decreasing continuously for the first three years except for the period
2010/11 the principal recovery rate was increasing through out the four
year.
This implies that the recovery performance of the bank in its principal,
interest and the total recovery rate shows an improvement performance
during the period 2007/08 – 2010/11 indicated decline for interest rate
and recovery rate.
Credit recovery performance of the agricultural sector
to understand the recovery performance of the DBE it is important to see
its loan recovery rate by sector the following table shows the recovery
performance of the development bank of Ethiopia Dire Dawa branch in
the agricultural sector.
Table 3.4.1 credit recovery performance of the agricultural sector
Description 2007/2008 2008/2009 2009/2010 2010/2011 Total
1.total
960,00 85,000 4,705,000 600,000 6,350,000
disbursement
2.recovery
against 415,000 46,248 566,482 193,200 1,220,930
disbursement
3. recovery
43.23% 54.41% 12.04% 32.20% 31.46%
rate
4. balance in
545,000 38,752 620,118 406,800 1,610,670
arrears
5. percentage
in arrears to
56.77% 45.59% 87.96% 67.80% 68.54%
total
disbursement
As shown in table 3.4.1 the total disbursement for the period 2007/2008
to 2010/2011 was about birr 6,350,000 of which birr 1,220,930 was
recovered. The total disbursement for agricultural loans indicates a
fluctuating trend the total disbursement for agricultural was increasing
except in the period of 2009/2010.
The recovery against disbursement for this sector shown as an
increasing through out the whole studied period, the recovery rate of this
sector indicates an increasing trend from 2007/2008 to 2008/2009 and
decline in the period of 2009/2010 but it increase in the subsequent year.
In the specified year that is 2009/2010ther was an inflation and other
related bottlenecks in the country. Due to this factors the recovery rate of
the bank was declined however due to the interference of the governance
in to the market in the following subsequent years the inflation reduced
and the market partially become stabilized. So this indicates that the
recovery performance of the agricultural sector is rises and the bank
shows an improvement performance.
3.5 Credit recovery performance of Industry sector
The development banks provide loans for financing the establishment
and expansion of industrial sector for the national economy. The
following table indicates the recovery performance of the industrial sector
with in the development bank of Ethiopia Dire Dawa branch.
3. Educational status
Diploma Certificates
Degree above
Degree
4. What are the sources of capital for the organization to give a loan to
clients? _______________________________________
5. What are the major factor of the bank concerning to loan service?
_________________________
6. What kind of loan service can the DBE gives to the customer?
Short term Medium
term
7. DBE examines the potentiality of the clients before giving the loan?
Yes No
8. If you say yes for the Q.8 what criteria’s does the DBE use to evaluate
them?
______________________________________________________________
9. Does the organization collection and recover all loans at the due date?
Yes No
10. If you answer for Q.10 is no what are the reason for non collectivity?
______________________________________________________________
11. Which sectors are more effective in returning of their debt?
12. Are there factors responsible for non repayment of loan?
Yes No
13. If your response for Q.13 is yes, what are the factors? Please state
that.
________________________________________________________________________
________
6 comments:
1.
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Replies
1.
MikiasJune 3, 2013 at 4:08 AM
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2.
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3.
You have described literally everything about loan. Every bank is in business to make money. When it lends
money it wants to ensure that it will be paid back. That says everything else pretty well. Thank you for this
informative post.
Regards,
Apoorva
HCBL Bank - Tathastu
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