Credit Risk Management of Savings and Loans Companies in Ghana

Credit risk has shown to be one of the main forms of risks financial institutions are exposed to due to the very nature of their business operations. The objectives of this study were to identify the credit management practices employed by the banks in its credit management, to evaluate the effect of the bank’s credit risk management practices on its loans performance and finally to assess the bank’s credit risk management policies as against Basel II Accord credit risk management policy. The target population for this study comprised of all the branches of a savings and loans company called Multi-credit. All employees within the credit department of the financial institution constituted the study population. Questionnaire instrument was used as the study’s data collection instrument. Evidently, it was revealed that the studied bank had in place credit administration units whose main responsibilities included preparing of credit documents most especially loans agreement. Equally, it became evident that their credit unit were also required to obtain current financial information about their borrower’s and likewise ensure that their credit document was up to date. Again, it became evident that the studied bank used accounting-based method and subjective analyses to quantify their organization risk exposures. The study also found that the bank’s credit risk management policies were in line with the provision in the Basel II Accord even though further improvement could be made.