Determinants Of Default In Project Finance (the Case Of Commercial Bank Of Ethiopia)

This study intends to assess determinants of default in project finance in the case of CommercialrnBank of Ethiopia. In the study both qualitative and quantitative approach were adopted. Usingrnstructured questionnaires a survey was conducted on Banks’ credit performers who directlyrninvolve in project financing process from beginning to end. In order to obtain more insight onrnthe cases, the study used document review on the Bank record and conducts an in-depthrninterview on senior credit officials in CBE. The findings of the study indicates; poor duerndiligence assessment made by the bank to know the customer, weak credit negotiation, weakrncredit assessment on the feasibility of the project, in adequate skill of the credit performers,rnunder-finance, poor monitoring and follow-up, shortage of foreign currency supply,rnunwillingness of the borrower to disclose truthful information, unplanned and ambitiousrnbusiness expansion, lack of commitment by the project promoter, lack of understanding thernproject by the project promoter, management capacity problem, poor working capitalrnmanagement, willful default, data or information constraint to appraise project loan, inflation,rnforeign currency fluctuation, and poor credit culture in the industry, as a significant cause ofrndefault.

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