ASSESSMENT OF CREDIT MANAGEMENT IN

TSEDEY BANK (A Case Study on Tsedey bank in

Dssie Piassa branch)

A Research Paper Submitted to Accounting

Department in the Partial Fulfillment for the
requirement Bachelor of Arts in Accounting

PREPARED BY: SEMIRA SHIMELS

ADVISOR: ATO GETNET M

DEPARTMENT OF ACCOUNTING
UNIVERSITY OF ACCOUNTING AND FAINANS
UNITY UNIVERSITY

June, 2023
DESSIA, ETHIOPIA
 Acknowledgment

First and for most I would like to extend my heart felt gratitude to my creature (ALLAH)
for his in a valuable cares, support, charity and willingness who helped me through my
life, my gratitude thanks goes to my advisor Ato Getnet M for his valuable effort for the
process of my paper and for his constructive and harmonious comments which have give
me a benchmark for his stance with me.

I
 Abstract

This study was conducted on the title of assessment of credit management in Tsedey Bank
in Dessie at pias branch with primary objective of examine the credit management on
Tsedey Bank at branch level. In this study both primary and secondary source of data
used and the researcher would be use open end and close questionnaires and structured
interview to collect data from the employee, customers and management body of the
institutions and was use convenience non probability technique to select customers and
census technique to select target population among employee and management body of
Tsedey Bank . And also the researcher used descriptive method of data analyzing. The
analysis of the data revealed that, there is problem in group borrowing methodology, the
institution doesn’t collect its credit on specified period, rather they mostly after the due
date and also the repayment period is not suitable. Therefore, the institution is advised to
create awareness to the customer, about the time value of money and to improve the
repayment period.

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 Table of content
Acknowledgment ................................................................................................................. I
Abstract ............................................................................................................................... II
Table of content................................................................................................................. III
Abbreviation ...................................................................................................................... V
List of table ....................................................................................................................... VI
Chapter one ......................................................................................................................... 1
1. Introduction ................................................................................................................. 1
1.1. Background of the study ...................................................................................... 1
1.2. Back ground of the organization .......................................................................... 1
1.3. Statement of the problem ..................................................................................... 2
1.4. Objective of the study .......................................................................................... 3
1.4.1. General objective .......................................................................................... 3
1.4.2. Specific objectives ........................................................................................ 3
1.5. Methodology ........................................................................................................ 4
1.5.1. The research Design ......................................................................................... 4
1.5.2. Source of data ............................................................................................... 4
1.5.3. Sample techniques and sample size .............................................................. 4
1.5.4. Method of data collection ............................................................................. 4
1.5.5. Method of data processing ............................................................................ 4
1.5.6. Method of data analysis ................................................................................ 5
1.6. Significance of the study ...................................................................................... 5
1.7. Scope and Limitation of the study........................................................................ 5
1.8. Organization of study ........................................................................................... 5
Chapter Two ........................................................................................................................ 7
2. Literature review ......................................................................................................... 7
2.1. Poverty in Ethiopia ............................................................................................... 7
2.2. Tsedey Bank in Ethiopia ...................................................................................... 7
2.2.1. Tsedey Bank as Anti- Poverty strategy ......................................................... 7
2.2.2. The concept of Tsedey Bank and its objectives ............................................ 9
2.2.3. Mechanism for screening defaulting ............................................................. 9
2.3. Credit management an over view ....................................................................... 10
2.3.1. Presentation appraisal ..................................................................................11
2.3.2. Post sanction control ....................................................................................11
2.4. Credit policy system and procedures .............................................................. 12
2.5. Repayment Ethics ............................................................................................... 13
2.5.1. Over does management ............................................................................... 13
2.5.2. External factors ........................................................................................... 14
2.5.3. Internal factors ............................................................................................ 14
2.6. Empirical review ................................................................................................ 14
CHAPTER THREE .......................................................................................................... 16
3. Data presentation, analysis and interpretation .......................................................... 16
3.1. Loan site of the institution .................................................................................. 24
CHAPTER FOUR ............................................................................................................. 27
4. Summary, Conclusions and Recommendation ......................................................... 27
4.1. Summary ............................................................................................................ 27
4.2. Conclusions ........................................................................................................ 28
4.3. Recommendations .............................................................................................. 29
References ......................................................................................................................... 30
Appendix I ........................................................................................................................ 31
Appendix II ....................................................................................................................... 33
III
Appendix III ...................................................................................................................... 35

IV
 Abbreviation

Mgt = Management
TB= Tsedey Bank
CM= Credit Management

V
 List of table
Table 1: Demographic characteristics of respondents (customers) ................................... 17
Table 2: Sufficiency, training and collection of credits..................................................... 18
Table 3: The repayment period mostly used by customers ............................................. 19
Table 4: Presence of follow up & supervision .................................................................. 19
Table 5: Amount and time to get loan ............................................................................... 20
Table 6: Purpose and agreement of loan and group lending. .......................................... 21
Table 7: Characteristics of respondents (employees)...................................................... 22
Table 8: Level of Education. ........................................................................................... 22
Table 9: Criterion ............................................................................................................ 22
Table 10: Disbursement and group lending method ......................................................... 23
Table 11: Loan site of the institution............................................................................... 24
Table 12: Policy, procedure and repayment ................................................................... 24
Table 13 : Loan repayment period .................................................................................... 25
Table 14: Supervision on the loan ..................................................................................... 25
Table 15: Not paying debt ................................................................................................. 26
Table 16: Final measures .................................................................................................. 26

VI
 Chapter one
1. Introduction
1.1. Background of the study
According to Hulme, (1991) Tsedey Bank was first started in 1980, by professor
Mohammed Yenus in Bangladesh. He led the way with pilot group lending scheme for
the land less people, finally this become Grameen Bank which is used as model for many
countries in the world. When we come to Ethiopia the government appreciate and support
Tsedey Bank, According to proclamation number 40/1996 of the federal government of
Ethiopia, Tsedey Bank business means an activates, that extending credit, in cash or in
kind to peasant (Abinet, 2007).
To under take proper mobilization of funds, Tsedey Bank practices credit management
activities. Credit management involves many activities ranging from credit investigation
to contract with borrowers, appraisal review and follow- up, documentation nursing,
recovery and write offs, having two main functions: Those are credit sanction
(Provisions) and credit follow up functions which are valuable in managing credit it
risks, improves return from credit and making proper credit decision of the institution
(Yaregal, 2007).
Currently there are around 30 licensed Tsedey Bank in Ethiopia working both rural and
urban areas so this study would be conducted on Piasa Tsedey Bank which was
established in 1995 (CIMMISA, 2010). Therefore, this study tries to examine the issue of
credit management in Tsedey Bank on Dessie Piasa branch

1.2. Back ground of the organization

Tsedey Bank is recognized as an effective tool to fight poverty by providing financial
services to those who do not have access to or are neglected by the commercial banks and
financial institutions finances service provided by Tsedey Bank generally include saving
and credit. According to an estimate, currently 67.6 million people around the world have
access toTsedey Bank(www.Aemfi-Ethiopia.org).
Tsedey Bank Operates with in Dessie Destrict more than 70 branches. Tsedey Bank was
established in 1995 being named Amhara Rural credit and saving scammed development.
After 7 years of operation in November 11, 2002 Dessie Piasa branch of Tsedey Bank

1
was established. To reach out its services to the other parts of the country, there is a plan
to establish its branches in all over the Amhara region.

1.3. Statement of the problem

Tsedey Bank in Ethiopia has been established in Accordance with the proclamation
issued by the national bank of Ethiopia in 1996.Tsedey Bank is one of the financial
institutions that provides loans to clients to help them engage in productive activities and
to raise their small business. Most of Tsedey Bank approve loans for productive purpose,
because income increment is positively indicator to which all development activities are
addressed (Daniel, 2010).
Credit management is the most important activities Tsedey Bank.An attending credit
management policies and procedures makes it sound at the time of managing credit risk
and credit decisions. Mulat (2003) argues that if you not follow the credit management
policies and procedures one can not think of managing credit risk and at the same time
credit decision will be come arbitrary subject to individual discrimination and judgment.
The group base lending method is not effective in achieving the Tsedey Bank objective,
because due to default payment is made by the group members. In addition the
beneficiaries who use this method also face a problem in the repayment of loan, the rest
who pay regularly were enforced to pay the default amount (Meaza, 2010). The
researcher observes most customers did not show progress and some of them become rent
suckers. This makes me to propose for study. Even though some of them show progress
and change to high level. So what would be the source for this? Is that due to
ineffectiveness of credit management of Tsedey Bank or not?
Therefore, the researcher motivated to study related to credit management practice in
Tsedey Bank by answering the following basic questions.
1. What are the activities practiced in credit management of Tsedey Bank in Piasa
branch?
2. What method the institutions use to follow up the loan?
3. What polices and procedures the institution follows?
4. What are the monitoring mechanisms to collect credit in the institution?

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 1.4. Objective of the study
1.4.1. General objective
The main objective of the study is to examine the credit management of credit
management in Tsedey Bank in Dessie Piasa branch.

1.4.2. Specific objectives

1. To assess the activities practiced credit management of the institution.
2. To assess the effectiveness of polices and procedure the institution follows in
providing loans.
3. To assess the methods of the institution uses to follow up loan.
4. To identify the monitoring mechanism used by the institutions to collect
credit.

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 1.5. Methodology

1.5.1. The research Design

The study would be focuses on the assessment of credit management on Tsedey Bank in
case of in Dessie piasa branch. The study was used both qualitative and quantitative
research approaches in order to achieve the research objective.

1.5.2. Source of data

In order to get sufficient and relevant information for the study the researcher was use
both primary and secondary data. The primary data would be collected from customers,
employees of the institution and management on the current situation of the institutions
and performance of employee and secondary data would be collected from books,
manuals and reports.

1.5.3. Sample techniques and sample size

Since the number of employee in the organization is 12, the judgmental sampling method
would be used to collect data because this method avoids bias and allow the researcher to
get real information for each and every employee. But for the customers the researcher
used convenient non probability sampling technique because there was no complete list
of customers.

1.5.4. Method of data collection

Primary data would be collected using structural interview from credit mangers because,
to get relevant data and by using questioners from customers and employees. In the
questioners, the researcher was use both close- end and open- end questions in such away
that they should generate important information on credit management system of Tsedey
Bank.

1.5.5. Method of data processing

The process would be carried out in clear way to reach the objective of the study after
the necessary primary and secondary data have been collected and would be started by
editing and classifying the collected data to more meaning full and relevant data editing
means the process of examining the collected data would be Identify error and omission

4
and to correct them regarding data classification the collected data would be arranged and
grouped in to similar categorist.

1.5.6. Method of data analysis

The collected data would be analyzed by using descriptive analysis method according,
percentage and frequency count would be analyzed and interpret the data collect form the
sample respondent.

1.6. Significance of the study

The importance of this study is to enhance the competitive position of Tsedey Bank
finding ways that improve the credit management system of the institutions. The
researcher also believes that the result of this study was pave the way for the clients of
the institutions, also for the institutions and additionally serves as reference for other
researcher.
Also the study was provides additional knowledge to credit managers in designing new
credit management and for planning and controlling procedures in credit activities and it
helps the clients of the institution by informing necessity of paying credit according to
agreements, in preventing un necessary payments.
Finally, the study helps for further researchers as reference who want to conduct study on
the area of credit management of financial institutions particularly Tsedey Bank.

1.7. Scope and Limitation of the study

Because of no sufficient time and no enough budget to conduct study on wide area the
study is limited, Tsedey Bank in Dessie piasa Branch . carry out this study, there were
certain obstacle, such as the data collected was no sufficient because there were lack of
secondary data and the same time some of the respondent are not willing to fill the
questioner.

1.8. Organization of study

This research contain four chapters. The first chapter contains an introduction to the study
which as different parts. Background of the organization and the study; statement of the
problem objectives of the study; research methodology ,research design ,source of data,
sampling teachings and sample size, method of data collections ,method of data analysis,

5
significance of the study; scope of the study; limitation of the study and organization of
the paper. The second chapter contains literature review on credit management.
The chapter three contains data analysis, interpretation, and chapter four contain
recommendation and conclusion.

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 Chapter Two

2. Literature review
2.1. Poverty in Ethiopia
Ethiopia is one of the poorest countries in the world with annual per/capital
income of $ 170. The United Nations development program’s human development report
for 2007- 2008 ranked Ethiopia as 169th out of 177 countries on the Human development
Index the average life expectancy after birth is 48 years. Infant, mortality and
malnutrition rate are among the highest in the world while access to education has
increased in recent years, the overall adult literacy rates is low compared to the sub-
Saharan African standards roughly 44% of the population lives below marked differences
between rural and urban areas. Most rural households live on a daily per capital income
of less than$ 0.50
Generally, rural households have less access to most essential assessment, overall
progress in reducing poverty since 1992 falls short of what is required of meet 190G 1 by
2015 as result high variability in agricultural GDP and rapid population growth. Most
rural households are finding if increasingly difficult to service without resource to
seasonal or permanent urban migrations search of wage employment (http;//www.rvral
poverty portal.org).

2.2. Tsedey Bank in Ethiopia

Formally in Ethiopia stated in 1994 -95, in particular, the licensing and supervision of
institution proclamation of the government encouraged the spread of institution
proclamation of the government encouraged the spread of insinuation currently, there are
29 licensed Tsedey Bank reaching about 2.2 million actives borrowers with are
outstanding loan of a portfolio of a approximately 4.6 billion concerned the potential
demand, particularly in rural areas, this satisfies only on insignificant proportion (WWW.
aemfi- Ethiopia. org)

2.2.1. Tsedey Bank as Anti- Poverty strategy

The recent definition of poverty by the roared bank extended the conceptual dimension
beyond the conventionally held idea of permanent income/ consumption of lack of

7
income) assets, sense of noiselessness and strategies not only need to create income
earning opportunities, but also must empowerment of the poor in the sphere of state
social in situations, and security against variety of shocker. Tsedey Bank is believed to be
one important entry point to addressing many of them. But services are limited in some
urban areas, neglecting the majority of the poor. In Ethiopia, for example, the
development bank the commercial bank of Ethiopians, having their branches in urban and
semi urban, provide virtually no access to the rural population, private banks. Through
growing in number don’t engage themselves in this raids. According to an earlier study.
In rural Ethiopia as a whole, less than 1% of the population has access to this source
consequently, accessing credit for small scale and informal operators continue to pose a
major constraint to growth of the sector. The alternative is the “informal” financial sector,
mainly the individual money lenders. In this case, borrowers are required to provide
guarantors and the interest rate is ext. remedy high, varying from 50% to 120% that the
errata interest can 90 high as 400% in some instances. And this exploitive interest rate of
the informal sector diminishes potential reform to factors of production, and is a
constraint to diversity economic activities of the rural sector. The feeder government of
Ethiopia has taken several economic reform measures to address poverty in its every
aspect. Thus, while trying to fulfill the basic needs of the population, it also embarks up
on economic reform measures conductive for free market competition and employment
creation which includes the promotion of policies that will encourage saving, private
investment, increasing income earning opportunities and promotion of small –scale in
dustiest in the informal sectors among others. The five-year development program
document emphasizes, among others, credit as a means to increase small holder
production (EPR DR, 1992E.C). fanatical markets are considered by the regional
governmental as a good entry point in achieving food security objectives as the will allow
rural households in both food secure and in secure area to explore their “ comparative
advantage” in the market place and to create (AEMFI, 2000). Thus, in addition to
promoting provision of credit through government channels, the program encourages
Tsedey Bank to prone the services of credit provision and saving mobilization. However,
even of policies aimed at changing the regulatory environment were expected to pave the
way for increased fellows of resources to rural and informal sectors, Tsedey Bank
Services are very in adequate still.

8
(http:// www.Ruralpovertyportal.org.web.gues)

2.2.2. The concept of Tsedey Bank and its objectives

Tsedey Bank referred to as small scale financial services render to the rural and urban
poor, providing credit for self-employment, and small business, and includes saving and
technical assistance Tsedey Bank schemes have recently aroused interest among policy
makes sand researches as vehicles of poverty mitigation. Pioneered by the German bank
in Bangladesh, most Tsedey Bank program required the poor to from groups and repay
the loan in small and periodic installments under Tsedey Bank service, concept of money.
Lending has been institutionalized, rationalized and reformed for the sustainability of
both borrowers and lender 5.2t may encompass the provision of financial and other
support services like savings, collateral free credit, insurance to the poor and it addresses
the issues relating to poverty; and unemployment; Tsedey Bank have been established in
accordance with the proclamation issued by the national bank of Ethiopia in 1996. there
are about 30 Tsedey Bank. All of them are share companies administered by their
respective board of directors. The central objective of these financial institution is to
provide Tsedey Bank services to the poor. Tsedey Bank with gentilities whose cash
requirements are small. The Tsedey Bank lending program has many objectives. Among
these, some of the objectives are: to provide credit facilities for those urban and rural
poor people from paying high interest rates to the informal money lender, improve the
economic capacity of women and the saving habit of the people, vitality and use the local
material effectively and enhance investment and income of the society (Daniel, 2010)

2.2.3. Mechanism for screening defaulting

Market interest rate is commonly used for screening borrowers. This technique has the
objective of encouraging loan taking on the basis of prospective returns, and not to
capture subsides. Self-selection is another mechanism used to avoid defaulter borrowers.
In using this mechanism, prospective members are asked to form groups by them solves,
and screen in favor of those they believe will repay the loan. The group lending
methodology removers the main entry barriers for those with no collateral, limited
literacy, weak technical knowledge and narrow prior money management experience. The
other mechanism is character reference this is the use of officials or power structure to
approve loan applications. This may have negative effect on screening out of the poor but

9
may be used effectively in areas where the power structure in the community is defined
and strong. The poor are usually excluded because of the fear that they can’t their loan
repayment obligations. However, there are mechanisms for ensuring the repayment of
loan on time by poor borrowers with out. These me charismas in dude intensive
supervision, peer group monitoring, and provision of incentives to borrowers and staff of
the institution. Intensive supervision is concerned with the regular meetings of credit
officers in or near the homes of borrowers, though if may be costly to the institution.
Frequent follow up on the borrower and their activities has significant impact on the
repayment of the loans. One effective strategy is to place the credit officer within the
borrowing community or opening a one man satellite office from where the cordite
officer can easily follow-up why a particular member failed to meet his/her obligation.
Faure to repay in front of the public also creates psychological pressure on the borrower
there by forcing him to meet obligations. Moreover, borrower incentives can be
provided in the form of rebate of interest on loans repaid early, in addition staff.
Incentives can be related of the amount of loans repayment under this arrangement, the
TB staff may receive financial bonuses. Directly recanted to the repayment performance
of their clients over a given period of time progressive lending is also a mechanism under
which borrowers are able to gain repeated access to liens if they repay on time. Finally,
borrowers can beleaguered to make compulsory saving in which a small amount is
contributed regularity in to a group saving fund that provides insurance or collateral for
the loans of all group members. In case of repayment failure, the saving can be used for
covering,. At least some portion of the loans the may be defaulted. This is also practiced
by most TB. Some TB require clients to save ascertain proportion before they are granted
the loan. This shows the commitment of the borrowers provided that they continue with
regular saving after the loan. The above mechanisms are more or less conventional and
are practiced by many TB in Ethiopia. However, TB, need to be innovative and creative
experimenting with new approach cinder their own contexts (Daniel, 2010).

2.3. Credit management an over view

CM is one of the major functions, which financial institutions undertake for proper
mobilization of funds the credit management function includes loans and advances it
also involves a large number of activities ranging form credit investigation to contract
with borrowers, appraisal, review, and follow- up, documentation nursing, recovery and

10
write offs. Safety of a financial institution loan or advance is advance is directly to the
basis on which decision to and is taken, the type and quantum of or credit to be provided
and the terms and condition on which the loan will be made available consequently, a two
pronged approach is required to be followed to ensure the safety of each loan.
 Presentation appraisal to determine the acceptability of each loan proposal and
 Post sanctions control to ensure proper documentation, follow-up and
supervision (Daniel, 2010).

2.3.1. Presentation appraisal

Is concerned with the measurement of the riskiness of a loan proposal not only financial
data relating to the past and projected working results are required but, a detailed credit
report is compiled on the borrower, If any, based in information collected from the
borrower, market reports, final audited accounts, income tax and wealth tax returns.
Assessments for orders and confidential information called for from other lenders and
financial insinuations with whom the parties have clearing the credit report has to be up
dated periodically. It is important sources of reliable information of preparing the risk
profile of the borrower and for preparing the risk profile of the borrower and for
finalizing the credit rating of the borrower. The credit report reveals the personal details
of the prospector, partner or calibrators of the firm as well as his/their assets and
liabilities including indebtedness to other parties such as lenders and financial
institutions. The CR as a personal profile of the borrower if kept up to date is particularly
use full when the borrower /safety is financially embarrassed and the bank makes efforts
to have his personal assets attached. (IBID).

2.3.2. Post sanction control

To a large extent, it depends up on the findings of the pre- sanction appraisal. The post –
control involve proper documentation of the facility, and the after care or follow up and
supervision through monitoring of transaction in the lean amount, security of procedural
statements submitted by the borrower, physical inspection of the securities and books of
account of the borrower, periodical reviews and renewals etc. successful lending thus
depends up on careful selection of the customer, proper appraisal of his credit needs and
adequate control to insure that his dealing with the lender are above board and that he/she

11
is complying with the terms and conditions on which credit has been sanctioned to him.
In this post sanction approach the credit manager has the following functions
 Assessing of credit standing both new and existing customers.
 Establishment of terms having regard to the risk involved and the potential
profit.
 Maintaining of the sales ledger
 Monitoring and controlling customer balance
 Collection of payment as close to terms as possible without jeopardizing
future business.

2.4. Credit policy system and procedures

Policy is a general rule to guide each Decision. A well-developed credit risk management
policy ensures the success of financial institution in addition a well-conceived credit
management policies are essential for financial institution to perform their functions
effectively and minimize the risk inherent in any extension of credit. Financial
institutions need policies specifying how much of what kind of loans will be made, of
whom and under what circumstances (determining the site of loan portfolio, specifying
the types of loans and policies affecting loan firms) (Daniel, 2010).
Many people believe that well developed credit policy has the following advantages
 They set objectives standards and parameters to officers who grant loans and manager
loan portfolio.
 They are a basis for evaluating lenders credit performance guide lender management.
 If they properly formulated, they enable lender mgt to maintain proper credit
standards, avoid excessive risks and evaluate business opportunities properly.
 They also have great contribution to good CR management, advance policy reduces
alternative coarsest of /actions and simplest the decision making process.
 A sound policy contributes to a lender’s success by supporting prompt credit
decision.
 It provides the frame work for the entire credit management process.
 Well-designed credit policy has also its own objectives to meet necessary directions
in credit dispensation. The policy is subject to review periodically depending up on
the changes that may take place in the financial market in particular the banking

12
 sector and the need with in the bank to build up quality assets. The procedure and
system laid down in the loan policy has to be followed consistently at all hierarchical
levels in the institution to ensure that canons of sound lending are uniformly adopted
with a view to consistently improve and maintain the quality of the credit portfolio of
the bank, it is there for imperative that all the institution staff is fully conversed with
the loan policy and its implications.
Some financial analysis advice that lender should establish an appropriate credit
environment on the basis of the 3 principles below.
1) The board of directors should have responsibility for approving and periodically
reviewing the CR strategy and significant CR policies of the institution. The strategy
should reflect the lenders to learn for risk and the level of profitability the institution
expects to achieve for incurring various CR.
2) Senior management should have responsibility for implementing the CR strategy
approved by the board of directors and for developing policies and procedures for
identifying measuring monitoring and controlling CR such policies and procedures
should address credit risk in all of the lenders activities.
3) Lender should identify and manage CR inherent in all products and activities new to
them are subjects to adequate procedures and controls before being introduced or under
taken and approved by other board of direction.

2.5. Repayment Ethics

In a country where a large proportion of people are very conservative and orthodox in
their thinking, taking loan form money lenders. Banks is considered to be grave risk. If
person dies without repaying his debts, his sons and heirs feel their duty do so or the
father’s soul will not rest in peace. Also, the father of non-repayment of debts due to
exorbitant interstates, could lead to alienation of property rights (Danielk, 2010)

2.5.1. Over does management

Overdoes arise due to nonpayment of loan installments on due dates willful default is
mainly due to the inadequate and ineffective organization efforts of banks to receive dues.
Clearly over does, can result from external or internal factors. (IBID)

13
 2.5.2. External factors
There are factors over which the banks have no operational or demonstrative control,
such as: (Daniel K, 2010)
 Natural calamites like foods, drought and earth quakes.
 Political and government in interference cropping pattern changes not adopted by
farmers.
 Cropping pattern changes not adopted by farmers.
 Costs of in puts and prices of farm produce with out price support.

2.5.3. Internal factors

There are factors related to organizational deficiencies and administrative ineffectiveness,
such as (Daniek, 2010)
 Reflective Loaning policies procedures
 In effective supervision machinery over loan utilization.
 Lack of efforts for recovery and inadequate system for recovery.
There are other causes lending to loan over does, such as:
 Under financing /over financing.
 In fructuous investments

2.6. Empirical review

Anchalem Ayalew, Foziya Jabir, and Liya Abiyu were worked
researcher paper in 2013 on the title of credit management of TB.
The object of the paper would to assess the short term and long
term debt and procedures to identify the problem that the credit
management of TB fails during managing cash premium and client
benefit. Based on the objectives of researcher to conclude the
insurance company was no problem in fulfillment the minimum
requirement and the cash asset was be increasing over year.Biruk
Abebe, Tewodros Girma, Yirga Melsachew, Kidist Tsegaye and
Efrem Ermiyas were worked proposal paper in 2007 on the title of
assessment of credit management inTB.

14
The object of the paper was to identify strength and weakness of TB
cash budget preparation process provide summary of ledger finding
and forward recommendation.Conclude the paper line TB prepare
cash budget for improving the efficient and effective utilization of
cash and was development planning and budgeting service
department which prepare the overall plans and budget for the
company.
Afefayne Wudajo and Yohans Fiseha are were work a proposal
paper in 2009 an assessment internal control over cash.The object
of these paper was asset the control environment and monitoring
system of the firm discover the risk detection practices of the
organization evaluate the control activity of the firm. To conclude
the researcher was only maintain and explain the weakness side of
the company.

15
 CHAPTER THREE

3. Data presentation, analysis and interpretation

The sample survey covered respondents which were selected conveniently from the
customer of the institution and were use judgmental sampling for employee of the
organization. Out of 100 samples size, what i could get was only 58. Thus, the study tried
to analyze and interpreted the data based on the 58 customers and the fives (5)
employees.
Description on respondents back ground the age, sex, education level, type of occupation
and marital status are some of the characteristics of sample respondents.

16
 Demographic characteristics of respondents (customers)
Table 1:
Frequency of responses
No Item No %
1. Age
< 20 4 7
21-30 12 21
31-40 36 62
Over 40 6 10
Total 58 100
2. Sex
Female 42 72
Male 16 28
Total 58 100
3. Marital status
Married 38 66
Unmarried 20 34
Total 58 100
4. Level of education
Illiterate 30 52
Primary education (1-8) 17 29
Secondary education (9-10) 4 7
Preparatory (11-12) 1 2
12 complete 4 7
Technical & vocational 2 3
Higher education 0 0

Total 58 100
5. Occupation
Tailor 3 5
Construction work 0 0
retailer 31 54
Other 24 41

Total 58 100
Sources: survey questionnaire 2012.
Table 1 item 1 shows 36(62.06%) customers are between the age of 31 and 40,
12(20.68%) of customers are in the age of 21-30, 6(10.34%) customers are above the age
of 40 and there are only 4(6.89) customers item 2 depict that whose age are less than 20.
42(72.4) of the customers are female. Item 3 shows us that 38(65.52) of the customers are
married while the other are unmarried. Item 4 tells us that most of the customers. i.e.

17
30(51.72%) are illiterate, 17(29.31) are primary education level, 4(6.89%) of them
reached secondary education, 1(1.72%) customer reached for preparatory education
12(6.9%) customers have completed grade 12, 2(3.44%) of them are technique and
vocational students.
Generally the above table indicates us that Tsedey Bank are not able to lend money for
those who want to engage in business activities that require huge amount of money such
as for construction because that TB can have a relatively higher capital such as
construction the finding in this study suggested they are not offering sud a loan, the
reason for this is mainly the single borrower loan limit as national bank of Ethiopia
directives is only birr 5000.

Analysis of data and interpretation

Loan disbursement and collection:- most of the customers in the Tsedey Bank are
above 30 years old and illiterate who don’t have enough knowledge regarding the value
of timely disbursement of loan and time value of money. So, in the following sections it
is possible to know the problems regarding the efforts of timely collection of loan and
related aspects.
Table 2: Sufficiency, training and collection of credits
Frequency of response
No Item No %
1. Do you think the loan given to
you is enough to handle a business
you are running?
A. Yes 44 76
B. No 14 24
Total 58 100
2. Do you get any training how to
use the loan?
A. Yes 42 72
B. No 16 28
Total 58 100
3. Does the institution collect its
credit given to customers with in
the specified period?
A. Yes 22 38
B. No 36 62
Sources: survey questionnaire 2012.

18
Table 2 item 1 shows that 44(76%) respondents stated that the loan is enough to handle a
business, and 14(24%) disagree this. Table 2 item 2 depicts that 42(72%) respondents
agreed the presence of training but the minority i.e. 16(28%) said that there is no training.
Table 2 item 3 shows that 22(38%) of the respondents witnessed that the institution
collects its credits on the specified time, were as 36(62%) said the reverse. From item 1
we can infer that the majority of the customer engaged in small business activities from
item 2 we can infer that the institution doesn’t worm about how the customers use the
loan. From item 3 we can understand that the constitution give priority for leading than
collecting.
Table 3: The repayment period mostly used by customers
Frequency of response
No Item No %
1. Which period is being used by
you?
A. The repayment period 8 14
B. After the due date 37 64
C. Both 13 22
Total 58 100
Sources: survey questionnaire 2012.
From table 3 item 1 we can observe that only 8(14%) of the respondents repay their share
of loans within the repayment period and the majority 37(64%) repay after the due date
and 13(22%) of the respondents use alternatively the result indicates that the repayment
period could be short.
Table 4: Presence of follow up & supervision

Frequency of response
No Item No %
1. Is there any follow up and
supervision?
A. Yes 49 84
B. No 9 16
Total 58 100
Sources: survey questionnaire 2012.
In table 4 it is indicated that 49(84%) of the respondents said that there be presence of
follow up and supervision where as 9(16%) of respondents said that there is no follow up
and supervision. From this we can infer that the institution not relying on the group
pressure does focus on the follow up and supervision activities.

19
 Table 5: Amount and time to get loan
Frequency of response
No Item No %
1. Amount borrowed from the
institution.
A. < 3000 birr 30 52
B. 3001 = 6000 16 28
C. 6001-90,000 12 20
D. > 90,000 0 0
Total 58 100
2. How long did it take you, to get
loan?
A. < 5 days 16 28
B. 5 - 10 days 30 52
C. 11-15 days 12 20
D. Above 15 days 0 0
Total 58 100
3. For how many months did you
borrow?
A. < 12 months 58 100
B. 13-24 months 0 0
C. 25-26 months 0 0
D. O > 36 months 0 0
Total 58 100
Sources: survey questionnaire 2012.
As depicted in table 5 all employee said that there is a possibility for group member to be
responsible and going to court.
Table 5 item 1 shows 30(51.72%) borrowed less than birr 3000. Then next large number
of borrowers took amount between 3000 birr & 6000 birr and this constitutes 27.59% and
the others constitute 20.89% of total borrowers. There was no customer who borrowers
90,000 birr. Table 5 item 2 indicated that 16(27.59%) customers took less than 5 days to
get loan most of the customers 30(51.72%) between 11 and 15 days no one took above 15

20
days. Table 5 item 3 depicts us that there is no any customer who borrowed for more than
12 months repayment. This implies that the institution doesn’t give loans for more than
one year.
Table 6: Purpose and agreement of loan and group lending.
Frequency of response
No Item No %
1. Purpose the loan?
A. business 55 95
B. consumption 3 5
Total 58 100
2. What was the agreement
regarding the repayment
A. monthly 58 100
B. quarterly - -
C. Yearly - -
Total 58 100
3. Do you think that there is problem
in group lending?
A. Yes 36 62
B. No 22 38

Total 58 100
Sources: survey questionnaire 2012.
Table 6 item 1 shows 55(94.8%) of sample respondents used the loan for business and
3(5.2%) used for consumption purpose. This implies that the Tsedey Bank croisnvenient
for traders. Table 6 item 2 shows 58(100%) of respondents agreed to pay back monthly.
From this it can be implied that could enable them more or less to pay a proportion of
their loans monthly. Item 3 shows 36(62%) of customer are happy about the group
lending method, on the other hand 22(38%) of the respondent feel the reverse.
Here since the majority of the customers are unhappy, it can be implied that group
lending method creates conflicts among customers as human behavior is different and
different people for the repayments of the loan as a result for the settlement of repetitive
wastage of time happens in addition the group members was face to cover the share of the
defaulted individual.
Therefore, because of the above points and other reasons group members are not happy
about it.

21
Demographic characteristics of respondents (employee). The employee of the institution
are 12 and since of them have given their responses, the analysis and interpretation are
based on the five respondents.
Table 7: Characteristics of respondents (employees).
Frequency of response
No Item No %
1. Sex
Female 1 20
Male 4 80
Total 5 100
2. Marital status
Married 2 40
Un married 3 60
Total 5 100
Sources: survey questionnaire 2012.
Table 7 item 1 shows that 1 (20%) of respondents is female and 4(80%) of respondents
are male.
Table 7 item 2 depicts about marital status and 2(40%) the respondents are married where
as 3(60%) of them are unmarried.
Table 8: Level of Education.
Frequency of response
No Item No %
1. Level of education
A. 12 completed 0 -
B. Diplomas 4 80
C. Degree 1 20
Total 5 100
Sources: survey questionnaire 2012.
Table 8 item 1 indicates that 4 (80%) of employee are holder of diploma and 1 (20%)
15 hold degree. This indicates that to undertake the risk and they conduct with work
at the same time to satisfy the customer.
Table 9: Criterion
Frequency of response
No Item No %
1. Do all the customers full fill the
criterions?
A. yes 4 80
B. No 1 20
Total 58 100
Sources: survey questionnaire 2012.

22
In table 9 item 1 it is depicted that 4(80%) of the employees witnessed that the customers
knows all the criterion were as only one said that all the customers don’t fulfill all the
criterion. This indicates that the most of the customers 80% have fulfilled the criterion
but some of them don’t, because of different reasons. For example, since the institution
uses social collateral or group lending method, the institution expected positive pressures
of customers over the other customer.
Table 10: Disbursement and group lending method
Frequency of response
No Item No %

1. Are the loans that are disbursed

enough to the customers to run
their business?
A. yes 4 80
B. No 1 20
Total 5 100
2. Do you think that there is problem
in group lending method?
A. Yes 3 60
B. No 2 40
Total 5 100
Sources: survey questionnaire 2012.
Table 10 item 1 shows 4(80%) of the employee said that the loan disbursed is enough,
because almost all of the customers are engaged in Tsedey business activities, where as
1(20%) employee said that the loan disbursed is not enough. This is because there are
some customer who are engaged in business activities that require finance of above the
maximum amount of the loan by the institution. Moreover, some customers use some
amount of the loan for consumption.
Table 10 item 2 depicts that 3(60%) of employee said that group leading method does
have problem because there are some customers who are not loyal. This means when they
are delegated to deliver back to the institution by the group, they use it for them selves.

23
 3.1. Loan site of the institution
The feasibility of the project is given the prime importance by the institution.
Table 11: Loan site of the institution
For existing customer
Item Description For new customer
1 Individuals 2000 Up to 10,000
2. Cooperatives Number of customers Depends on the number of the
members
3. Edirs By agreement On agreement
Source: secondary data
Table 11 items 1 depicts that the institution gives 2000 birr for one new customer but it
also gives 10,000 birr time customers would be well acquainted with the employees and
this creates confidence for the employees to give more loans for customers. For
cooperatives if depends on the number of the member and Edirs are loand on agreement
with the institution. This implies that Edirs are credible by the institution.
Table 12: Policy, procedure and repayment
Frequency of response
No Item No %
1. Are the employee well informed
about the policy and procedure of
the institution?
A. yes 5 100
B. No 0 -
Total 5 100
2. What do you thing about the
repayment of the loan?
A. Loan is timely repaid - -
B. Loan is not timely repaid 5 100
Total 5 100
Sources: survey questionnaire 2012.
Table 12 item 1 depicts us that all employees are well informed about the policy and
procedure of the institution. Therefore, it can be implied the employee of the
institution are educated and have good working experience table 12 item 2 indicates
that all witnessed the timely repayment of the loan. This implies that, the employees
have no question or dread about repayment by their customers.

24
 Table 13 : Loan repayment period
Frequency of response
No Item No %
1. What is there payment period?
A. Monthly - -
B. Quarterly 5 100
C. Yearly - -
Total 5 100
2. Is the repayment period suitable?
A. Yes - -
B. No 5 100
Total 5 100
Sources: survey questionnaire 2012.
Item 1 shows as that the repayment period is monthly. This implies that the policy of
the institution requiring repayment is one month. Item 2 depicts us that the repayment
period is witnessed by the employees to be suitable. This implies that the repayment
period is exactly in line with their desires.
Table 14: Supervision on the loan
Frequency of response
No Item No %
1. Is there any supervision on the
debilitation?
A. Yes 5 100
B. No 0 -
Total 5 100
2. Is the supervision on both the loan
utilization and repayment
adequate?
A. Yes 2 40
B. No 3 60
Total 5 100
Sources: survey questionnaire 2012.
Table 14 item 1 shows that there is supervision on the loan utilization. Item 2
indicates that the adequateness of the supervision is witnessed only by 2(40%) of the
employee, whereas 3(60%) of the respondents disagree by the adequateness of the
supervision.

25
 If implies that even though there supervision it is rarely done. So this indicates that
the employee of the institution focus on the lending activity than what aids happening
after loan.
Table 15: Not paying debt
Frequency of response
No Item No %
1. What if a member of a group disappears with
out paying back his debt?
A. Group members’ 11 b responsible - -
B. Going to court - -
C. Waiting him/her fill comes - -
D. A & B 5 100
Total 5 100
Sources: survey questionnaire 2012.
As depicted in table 15 all employees said that there is a possibility for good member
to be responsible and going to court.
Table 16: Final measures
Frequency of response
No Item No %
1. What is the final measure for the
defaulter?
A. Going to court - -
B. Snatching his property 5 100
C. Fathers - -
Total 58 100
Sources: survey questionnaire 2012.
As show in table 16 the final measure over the defaulter is accusing the defaulter. This
implies that the Tsedey Bank (OCSSC) doesn’t use any collateral for lending.

26
 CHAPTER FOUR

4. Summary, Conclusions and Recommendation

4.1. Summary
The purpose of this paper is to identify the Tsedey Bank findings of this study indicates
that
 Since the loan amount is small, Tsedey Bank lending amount doesn’t invite
business persons who want to engage themselves in butter business activities than
retailing, tailoring and soon.
 The institution has problem of giving training how to use the loan.
 The institution doesn’t mostly collect its credits on the specified time period;
rather it mostly collects after the due date.
 The institution doesn’t lend for more than one year.
 All the employee are well informed about the policy and procedure of the
organization.
 According to employee loans is not timely repaid.
 According to employee most of the customers fulfill the criterion required to
taken loan.
 The majority of customer are between the age of 31-40, female, married, illiterate
and are engaged in retailing activities.
 Most of the customers borrow more than 10,000 birr.
 Almost all of the customers use the loan for business.
 The specified time period for repayment is one month.
 Most of the customers said that there is problem in group borrowing.
 The loan amount for one new customer is only 5000 birr.
 The maximum loan amount of existing customer is only 30,000 birr.
 The group lending method is effective from the point of view of the institution.
 According to employees the repayment period is not suitable.
 If a borrower disappears with out paying back his debt members of group would
be responsible.
 The final measure of the institution over defaulters is accusation.

27
 4.2. Conclusions
As it has been pointed out in the findings, the institution has different problems. These
problems undoubtedly will have negative impact on its performance.
 The institution has problem of giving training for its customers how to use the
loan, but since the majority of its customers are illiterate, they need repeated
training so, the institution is advised to do this.
 It has problem of follow and supervision in little beet since the reason for this
problem me is due to shortage of employee it is advised to employee additional
employees.
 The institution doesn’t mostly collect on the specified time period, rather it mostly
collects mechanisms that encourages that encourages it customer to pay on the
specified time period. Example by giving prizes at the end of the loan payments.
 It takes 5 – 10 days to allow loan. This is long when compared with other
institution. Therefore, it should try to shorten this.
 The specified time period for repayment is one month and many customers are
not happy by this, therefore, the institution is advised to consider this because the
customers’ complain may have negative impact especially for potential
customers.
 Since the loan amount is mall, the lending amount of the institution doesn’t invite
business persons who want to engage themselves in better business activities than
retailing, tailoring and soon.
 Generally Tsedey Bank activities have significant importance in the economy of
developing countries. The sector contributes a lot by minimizing un employment
by providing jobs opportunities for those who are actively seeking jobs.
Therefore, even though the operation is danger unless otherwise it strengthens its
follow up and supervision on the activities of the customers rather than relying on
group members or court procedures.

28
 4.3. Recommendations
Since Tsedey Bank in Dessie Piasa Branchi it must create its own core competency and
must improve its credit management system to attract more customers than competitors.
According to the findings the following possible recommendations are presented.
 Even if the credit is not collected with the specified period, the institution must be
ready to make change like;
 Increasing the grace period of those activities which require longer period and
sale the product e.g. Metal works wood works.
 Appreciating customer, which pay on time, by giving them a discount and having
strict follow up for those customers, which do not pay on time at the same time
the institution should train and create awareness on its customers about the time
value of money.
 Since the group lending method has problems ask for social guarantee for those
who are suspected based on experience. For example for those young customer
and illiterate customers.
 It should lend for more than one year and try to lend for individual who are not
grouped
 If the institution starts lending above 10,000 birr for those whose business
activities are attractive and profitable, it can increase its customer as well as its
objectives.

29
 References
Abinet Luseged. 2007. Credit Management in Tsedey Bank in Ethiopia, unity university,
Addis Ababa, Ethiopia.
Aemfi,. 2008. Tsedey Bank development review profile of
yearly bullet No2.
CIMMISA. 2010. Tsedey Bank, written manuals and pamphlets, Addis Ababa
Daniel Kassa. 2010. Credit Management in Tsedey Bank in Ethiopia, Arbaminch
University, Arba Minch, Ethiopia.
Federal Government of Ethiopia, proclamation No/40/1996, Addis Ababa, Ethiopia
Meaza L,. 2010. Loan management and credit facilities, Jimma University,
Jimma, Ethiopia.
Mulatu Demeke. 2000. Association of Ethiopia Tsedey Bank Wello University,
Ethiopia.
Yaregal Abegaz. 2007. Fundamental of financial management, first edition, Ethiopia
Accounting Society of Ethiopia.
(http://www. rvral poverty portal. Org, Goggle, search,” poverty in Ethiopia.
(www. Aemfi – Ethiopia. Org).
(www.ruralpovertyportal/org/web/gues), “Ahandolet in credit management.

30
 Appendix I
Unity University
Department of Accounting

Dear Respondents:
First of all I’d like to extend my sincere gratitude for helping me by filling this
questionnaire. The purpose of this questionnaire is to collected data to be used in first
degree research project attitude credit management of Tsedey bank in Dessie piasa
branch. All information you provide here after will be used at most confidentiality as part
of over all response, there fore please fell free to provide your value able response that
will make this research project successful,
Note: - No need to write your name
- Please put “X” in space provided
Questionnaire for employee
Part – one General questions
1. Sex male  Female 
2. Marital status Married Un married 
3. Level of education
a) 12 completed  B) Diploma 
C) Degree  D) Above 
Part two data on micro finance activity
1) Do all the customers fulfill the criterion?
A) Yes  B) No 
2) Are the loans that are disbursed enough to the customers to run their business?
3) Is the any problem in group lending method?
A) Yes  B) No 
4) If yes, Q/3 specify them
a) _______________________
b) _______________________
c) ______________________
d) _________________________

31
5) Are all employee well informed about the policy and procedure of the institution?
A) Yes  b) No 
6) What do you think about the Re- payment of the loan issued?
a) Loan issued was timely re- paid 
b) Loan issued was not timely re- paid
7) If not timely re- paid what are the reasons of delay
a) _______________________________
b) _______________________________
c) _________________________________
8) Is the repayment period suitable?
A) Yes  b) No 
9) If no, (Q18) specify and recommend on the repayment period?
a) _______________________________
b) _______________________________
c) _________________________________
10) Is there any follow- up and supervision
A) Yes  b) No 
11) If yes (Q/10) Specify?
a) _______________________________
b) _______________________________
c) _________________________________
12) If No (Q/10) why?
a) _______________________________
b) _______________________________
c) _________________________________

32
 Appendix II
Questioner for customer
Part –two General question
1. Age
2. Sex male  Female 
3. Marital status Married  Unmarried 
4. Level of education
 Literate 
 Primary education (1-8) 
 Secondary educations (9-10) 
 12 compete 
 Technique and vocational
 Degree and above 
5) Occupation
A) Tailor B) Construction work C) Retailer D) other specify ___________
6) Do you think that the loan give to you is enough to handle of business you are
running? A) Yes  b) No 
7) If no, (Q/16) How you are running the business?
a) _______________________________
b) _______________________________
c) _________________________________
8) Do you get any training to use the loan?
) Yes  b) No 
9) If yes, (Q/18) when?
a) Before you get the loan 
b) After you get the loan 
10) If yes, (Q/18) by what interval?
a) Once in a month 
b) Twice in a month 
c) Once in a year 
d) Once in 6 month 

33
11) Does the institution collect its credit given to customers within the specified period?
A) Yes  No 
12) If no (Q/11) why?
a) _______________________________
b) _______________________________
c) ________________________________
13) Is there any follow- up and supervision by institution?
A) Yes  No 
14) For what purpose did you take the loan?
a) Business B) Consumption
15) What are the agreement regarding the repayment
a) Monthly  b) quarterly) Yearly 
16) What is the problem in group Borrowing?
a) Yes  b) No 
17) If yes (Q/16), specify?
a) _______________________________
b) _______________________________
c) ________________________________
18) How long did it take you to get loan?
a) <5 days  b) 5 -10 days 
c) 11 -15 days  d) above 15 days 

34
 Appendix III
INTERVIEW FOR MANAGEMENT BODY

Part three general question

1. Age
2. Sex Male  Female 
3. Marital Status Married  Un married 
4. Level of education
a) Diploma 
b) Degree 
c) Above 
Data related to Tsedey bank
1. What are the services that customer get from the institution?
2. Is there any training the institution gives to the customer? Also by what interval
and when?
3. Is there any follow- up and supervision the customer by institution?
4. What are the problems in group lending?
5. Are all employee and customer are well informed the policy and procedure of the
institution?

35