This study intends to assess the project finance appraisal practice of financial institutions; specifically focusing onrnDashen Bank S.C. The challenges exist throughout the appraisal process are also assessed and identified. The projectrnappraisal practice was evaluated; whether or not it encompasses measurement parameters concerning Technical,rnFinancial, Market, Managerial, and risk aspects of a proposed project. Primary data was used throughout thernresearch. Quantitative and qualitative data were employed. The quantitative data was collected through a structuredrnquestionnaire and the qualitative using an in-depth interview. Since the appraisal process is undertaken on tworndepartments at Head office, the 48credit related staffs of these departments were taken as a population and censusrnmethod was employed. About 77% or 37 questionnaires were filled and returned. Frequency, percentage, mean andrnstandard deviation ware used to analyze the data. The findings of the research revealed that from the technicalrndimension the appraisal practice is good enough in addressing aptness of the project schedule, choice of appropriaterntechnology and scale of operation. However plant layout and selection of scale of operation were not well considered.rnThe Bank uses cash flow estimation to forecast the cost-benefit of the proposed project. Payback period, accountingrnrate of return and net present value (NPV) are the widely used methods of estimation while other alternative methodsrnare not popular in the Bank. In the process, the management aspect got little attention despite the significantrncontribution it has on project success/failure. Regarding the marketing aspect, Demand-supply gap analysis is the onlyrnused to identify the demand for the product of the proposed project defining distribution channels and pricing of thernproduct got little consideration. Project related risk is assessed solely using sensitivity analysis leaving apartrnqualitative risk analysis and probabilistic risk analysis. The Bank has no defined risk prevention and mitigationrnstrategy specifically for project risks. The restraining factors of the project appraisal process are identified as; lowrnlevel of quality and completeness of project feasibility study, unavailability of reliable, quality and up to daterninformation, low level of knowledge and skill of project appraiser, lack of well trained and experienced consultants onrnthe specific project, external pressure, management intervention.