Credit Risk Management in Ghanaian Commercial Banks

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.