Factors Influencing the Level of Credit Risk in the Ethiopian Commercial Banks: The Credit Risk Matrix Conceptual Framework

Abstract

This paper investigates factors influencing credit risk. The study applied both descriptive and econometric model using data from1990-2012.  The study finds that quantity of risk and quality of risk management related variables has got much influence on the credit risk level of Banks. Nevertheless, risk direction related measures, which are mostly external focus, have limited influence on credit risk.  More specifically the variation in the effect of stock and flow measures entails banks to further enhance mostly two of Basel principles:  operating under a sound credit granting process and maintaining an appropriate credit, administration, measurement and monitoring process.