Treasury and Risk Management in an International Context Assignment

Treasury and Risk Management in an International Context - Assignment Example Exchange rate system shows the arrangement in which an authority controls value of different currencies in foreign exchange market with respect to other currencies. There are mainly two types of exchange rate systems such as fixed and floating exchange rates. Fixed exchange rate system aims to fix the value of a currency against the value of a stronger currency, a basket of currencies or other measurements like gold. The system is better known as pegged exchange rate because it triggers to stabilize the value of a currency through pegging it with a steadier and internationally recognized currency. Hence, trading opportunities become more stabilized and predictable, especially for economies in which external trade is held responsible for a large chunk of Gross Domestic Product (Ghosh, A, M. G. Wolf and H. C. Wolf, 2002). Though, according to the theory, fixed exchange rate leads to establish greater economic stability and helps the multinational firms to forecast future currency rates so that risks associated with international pricing can be managed by them, in reality, devaluation or revaluation of currencies driven by inflation, interest rate, and other economic variables do not allow currencies to remain fixed forever (Caves, 2007). Hence, the policymakers have adopted a resolution of fixing currency with a portfolio of a number of currencies with different weights such as euro, yen, British pound etc. This type of exchange rate is less susceptible to the economic occurrences of a particular country. For instance, increase in inflation rate will directly impact on a currency pegged with US dollar; however, if the currency is pegged with a basket of currencies, the effect of increasing inflation in the US will be diluted by the presence of other currencies and will have less impact on the pegged currency.

Michael Sandels Designer Babies Essay Example | Topics and Well Written Essays - 750 words - 2

Michael Sandels Designer Babies - Essay Example The title of the essay, Designer Babies, can elicit reader’s interest and maintain it throughout the article as they strive to comprehend the circumstances surrounding designing of babies. The article is logically organized into introduction, body, and conclusion, with captivating subtitles that are crucial elements of a well-structured essay. The thesis statement is found in the first paragraph where the author argues that some people accept sex selection for children; however, researchers have not addressed other issues such as physical appearance and intelligence. Another feature that makes the article rather captivating constitutes excellent transitions between paragraphs and effective use of rhetoric questions. Paragraph transitions are organized in such a way that they answer questions posed in the previous paragraphs, or pose a question for discussion in the paragraph. Rhetoric questions are vital in this essay as they help in engaging the reader as the article progress es. The writer does not use numbering in the article, but organizes the essay into varying lengths of paragraphs with clear distinctions between paragraph ideas. Long paragraphs are used to explain the author’s ideas, while short paragraphs at the end of the chapters are used to summarize ideas and giving conclusive solutions to questions of the subtitles. Sandel refers to historical events when discussing his opinions to support his views. For example, when discussing the use of genetic testing.

Educational interests and goals, educational background, special Essay

Educational interests and goals, educational background, special interests, and plans for when you return to your home country - Essay Example In 2006, I was given the Most Outstanding Boarder award from Hills International, as well as a Certificate of Achievement for academic results for demonstrating diligence in studies. I feel proud to state that, in 2007, I was among the top 10 percent of the Hills International graduating class. I received commendations for academic excellence in English and Mathematics, and in Physical Education. I also received the prestigious Caltex All Rounder Award for achievement at school and in the broader community. I was College Captain of Hills International College in 2007, and was also a student of the Hills International Golf Academy in 2006-2007. Sport has been an important part in my life-golf is a passion with me. Interest in the game developed because of my family-especially my dad-who, having served three terms as club captain of the Sabah Golf and Country Club, also takes keen interest in junior golf development in Malaysia. I started golf at the age of 12 under my father's coaching, and later trained under British and Australian PGA's. I have received many awards in the sport (a detailed list is enclosed), among which are the First Place for Girls Under 12 Sport Excel Junior Circuit qualifier (Sabah-2002) and the Best Overall Position for All Sabah Players-2003(international Event). In Australia, I represented the Methodist Ladies' College in the golf tournament for Western Australian schools, and also the Royal Fremantle Golf Club in all junior tournaments. My current scores are: average scores 9 rounds, 693 strokes, average 77; Personal Best Tournament Score 72 (par). I derive inspiration for my game from Jason Day, who studied at Hills, and is a golf buddy. Jason was the World Junior Champion in 2004. I spend an average of four hours a day practicing golf. I also play badminton, basketball and touch football for fun. I represented my school in Badminton, cross-country and middle distance running. I am also a PADI open water diver and have logged over 50 dives. I frequently dive at Sipadan Island, which has some of the best diving spots in the world. I read a lot during my free time, especially after my golf practice, which helps me to unwind. I have participated in arts and musical events too while in school. I passed the examination in Pianoforte with high honors, and obtained the third position in the 21st Inter-Secondary Schools Choral competition. I now play the piano for relaxation. I also received an 'Outstanding Achievement' mention in the poster competition for the theme Sports against Drugs under the Rotary Youth Leadership Development Program (2002). I have had some work experience, having worked as 'Assistant Banker' at the Commonwealth Bank, Claremont (W Aus.) in 2005. I have also done voluntary work with the deaf and dumb center at Bukti Padang, Malaysia. Here I participated in activities with hearing impaired children, and was a 'buddy' to a child at the center. I learned sign language for this purpose. I enjoyed my time and learned a lot during the past 3 years in Australia. I had the chance here to meet many friends and people from different parts of the world. It is this experience away from home as a student-athlete, which taught me the importance of being independent, as well

Poseidon Essay Example for Free

Poseidon Essay God of the sea, protector of all waters. Poseidon is the brother of Zeus. After the overthrow of their Father Cronus he drew lots with Zeus and Hades, another brother, for shares of the world. His prize was to become lord of the sea. He was widely worshiped by seamen. He married Amphitrite, a granddaughter of the Titan Oceanus.At one point he desired Demeter. To put him off Demeter asked him to make the most beautiful animal that the world had ever seen. So to impress her Poseidon created the first horse. In some accounts his first attempts were unsuccessful and created a variety of other animals in his quest. By the time the horse was created his passion for Demeter had cooled. His weapon is a trident, which can shake the earth, and shatter any object. He is second only to Zeus in power amongst the gods. He has a difficult quarrelsome personality. He was greedy. He had a series of disputes with other gods when he tried to take over their cities. Poseidon was the second son of Cronus and Rhea. In most accounts he is swallowed by Cronus at birth but later saved, with his other brothers and sisters, by Zeus. However in some versions of the story, he, like his brother Zeus, did not share the fate of his other brother and sisters who were eaten by Cronus. He was saved by his mother Rhea, who concealed him among a flock of lambs and pretended to have given birth to a colt, which she gave to Cronus to devour.[3] According to John Tzetzes[23] the kourotrophos, or nurse of Poseidon was Arne, who denied knowing where he was, when Cronus came searching; according to Diodorus Siculus[24] Poseidon was raised by the Telchines on Rhodes, just as Zeus was raised by the Korybantes on Crete. According to a single reference in the Iliad, when the world was divided by lot in three, Zeus received the sky, Hades the underworld and Poseidon the sea. In the Odyssey (v.398), Poseidon has a home in Aegae. The foundation of Athens Athena became the patron goddess of the city of Athens after a competition  with Poseidon. Yet Poseidon remained a numinous presence on the Acropolis in the form of his surrogate, Erechtheus.[2] At the dissolution festival at the end of the year in the Athenian calendar, the Skira, the priests of Athena and the priest of Poseidon would process under canopies to Eleusis.[25] They agreed that each would give the Athenians one gift and the Athenians would choose whichever gift they preferred. Poseidon struck the ground with his trident and a spring sprang up; the water was salty and not very useful,[26] whereas Athena offered them an olive tree. Temple of Poseidon at Cape Sounion, ca 440 BC The Athenians or their king, Cecrops, accepted the olive tree and along with it Athena as their patron, for the olive tree brought wood, oil and food. After the fight, infuriated at his loss, Poseidon sent a monstrous flood to the Attic Plain, to punish the Athenians for not choosing him. The depression made by Poseidons trident and filled with salt water was surrounded by the northern hall of the Erechtheum, remaining open to the air. In cult, Poseidon was identified with Erechtheus, Walter Burkert noted; the myth turns this into a temporal-causal sequence: in his anger at losing, Poseidon led his son Eumolpus against Athens and killed Erectheus.[27] The contest of Athena and Poseidon was the subject of the reliefs on the western pediment of the Parthenon, the first sight that greeted the arriving visitor. This myth is construed by Robert Graves and others as reflecting a clash between the inhabitants during Mycenaean times and newer immigrants. It is interesting to note that Athens at its height was a significant sea power, at one point defeating the Persian fleet at Salamis Island in a sea battle. The walls of Troy Poseidon and Apollo, having offended Zeus by their rebellion in Heras scheme, were temporarily stripped of their divine authority and sent to serve King Laomedon of Troy. He had them build huge walls around the city and promised to reward them well, a promise he then refused to fulfill. In  vengeance, before the Trojan War, Poseidon sent a sea monster to attack Troy. The monster was later killed by Heracles. Consorts and children Poseidon on an Attic kalyx krater (detail), first half of the 5th century BC. Poseidon was said to have had many lovers of both sexes (see expandable list below). His consort was Amphitrite, a nymph and ancient sea-goddess, daughter of Nereus and Doris. Poseidon was the father of many heroes. He is thought to have fathered the famed Theseus. A mortal woman named Tyro was married to Cretheus (with whom she had one son, Aeson) but loved Enipeus, a river god. She pursued Enipeus, who refused her advances. One day, Poseidon, filled with lust for Tyro, disguised himself as Enipeus, and from their union were born the heroes Pelias and Neleus, twin boys. Poseidon also had an affair with Alope, his granddaughter through Cercyon, his son and King of Eleusis, begetting the Attic hero Hippothoon. Cercyon had his daughter buried alive but Poseidon turned her into the spring, Alope, near Eleusis. Poseidon rescued Amymone from a lecherous satyr and then fathered a child, Nauplius, by her. After having raped Caeneus, Poseidon fulfilled her request and changed her into a male warrior. A mortal woman named Cleito once lived on an isolated island; Poseidon fell in love with the human mortal and created a dwelling sanctuary at the top of a hill near the middle of the island and surrounded the dwelling with rings of water and land to protect her. She gave birth to five sets of twin boys(the firstborn who being named Atlas) became the first rulers of Atlantis.[28][5][6][7] Not all of Poseidons children were human. In an archaic myth, Poseidon once pursued Demeter. She spurned his advances, turning herself into a mare so that she could hide in a herd of horses; he saw through the deception and became a stallion and captured her. Their child was a horse, Arion, which was capable of human speech. Poseidon also had sexual intercourse with Medusa on the floor of a temple to Athena.[29] Medusa was then changed into a monster by Athena. When she was later beheaded by the hero Perseus, Chrysaor and Pegasus emerged from her neck. There is also Triton (the merman), Polyphemus (the cyclops) and, finally, Alebion and Bergion and Otos and Ephialtae (the giants).[29]

Sustaining Competitive Advantage Of Nestle Marketing Essay

Sustaining Competitive Advantage Of Nestle Marketing Essay Sustainability can occur in two ways: firms may differ with respect to resources and capabilities and the differences persist and isolating mechanisms analogous to barriers to entry may work to protect the competitive advantage of firms. 6.1 Resources and Capabilities A firms resource identifies its capabilities. Resources are the productive assets owned by the firm. Capabilities on the other hand refer to a companys ability to make use of its resources in a highly productive manner. Individual resources do not confer competitive advantage, they must work together to create organizational capability. It is capability that is the essence of superior performance. 6.1.1 Resources Tangible Resources Basically, there are three types of a firms resources: tangible, intangible and human resources. Tangible resources are the easiest to identify and evaluate: financial resources and physical assets are identified and valued in the firms financial statements. According to Nestle Annual Report 2011, Nestle Group reported sales of CHF 83.6 billion and 7.5 percent organic growth on top of good growth in recent years. The net profit on a continuing basis was CHF 9.5 billion, up 8.1 percent. At December 2011, Nestles property, plant and equipment were valued at CHF 9041 million. Intangible Resources Resources may also be intangible, such as reputation or a stock of patents and copyrights. Brand name is the most important resource among the intangible resources. Brand name and other trademarks are form of reputational assets: their value is in the confidence they instill in customers. The brand valuations involve estimating the operating profits for each brand, estimating the proportion of net operating income attributable to the brand, and then capitalizing these returns. The value of companys brands can be increased by extending the product/ market scope over which the company markets those brands. Nestle has eight product  lines or categories overall. The strategy used by Nestle is the  family branding  or  corporate  branding in which word Nestle is attached to all  the brands  in all categories. In 2001, Nestles brand value was more than 13000 million US dollars and it has became the largest producer of consumer packaged beverages and foods in the world, which has claimed the 23rd position in the Interbrands list of 100 most valuable brands in the world (Nestle Brand Strategy, 2012). Human Resources The human resources of the firm are the expertise and effort offered by its employees. For example, the combination of Nestles knowledge of biotechnology in coffee with the expertise, Nestle has on the ground in Mexico which will help to achieve sustainable Robusta coffee production in the region (The Nestle People Development Review). In addition, Nestle has a great research and development team. James Gallagher and Andrea Pfeifer were the masterminds behind the research on the La-1 cultures in the LC-1 yogurt. They were also the two that decided on selling LC-1 as a functional food. This enabled Nestle to position the product in a way that differentiated it among the other products in the market (Nestle LC1, 2005). 6.1.2 Capabilities Capabilities are what a firm can do. Organizational capability requires the expertise of various individuals to be integrated with capital equipment, technology, and other resources. For instance, in Asia, Nestles strategy has been to acquire local companies in order to form a group of independent regional managers who know more about the culture of the local markets than Americans or Europeans. The strong cash flow of the company enabled it to engage in wide-scale foreign direct investments and sufficient flexibility for takeovers of local firms able to provide the company with a stronghold in the market. Apart from that, Nestle has employed a wide-area strategy that involves producing different products in each country to supply the region with a given product from one country. For example, Nestle in Indonesia specializes in soymilk products because of the cheaper and easy access to soymilk in the country with soymilk products for distribution in other Asian markets (Nestle LC1, 20 05). Furthermore, Nestle provides an example of a company that has a strong configural advantage in the marketing, distribution and manufacture of food products. Nestle has developed an explicit international brand architecture that consists of 10 worldwide corporate brands, 45 worldwide strategic product brands, 25 regional corporate brands, 100 regional product brands, 700 local strategic brands and approximately 7000 local brands. On the production side, it has 522 factories in 81 different countries providing manufacturing capabilities in key markets. The broad geographic coverage allows Nestle to realize sales from industrialized countries as well as the increasingly important emerging market countries and to transfer information and experience from one market or region to another (Craig and Douglas, 1999). In addition, Nestle has become the first major confectioner to remove artificial colors, flavors and preservatives from its entire range. The company, which is behind leading bran ds including KitKat, Smarties and Quality Street, has changed the recipe of 79 products to remove suspect chemicals. In total, more than 80 ingredients have been replaced with alternatives, mostly from natural sources such as carrot, hibiscus, radish, safflower and lemon (Poulter, 2012). 6.2 Isolating Mechanism Isolating mechanisms limit the rivals from eroding a firms competitive advantage. There are two different types of isolating mechanism which are (1) impediments to imitation and (2) early mover advantage. 6.2.1 Impediments to imitation Impediments to imitation are the mechanism that impedes the existing firms and potential entrants from duplicating the resources and capabilities of the incumbent firm. There are four important types of impediments exist which are legal restrictions, superior access to inputs/customers, market size and scale economies and intangible barriers. Legal Restrictions We are going to look at the legal restrictions and superior access to inputs/customers of Nestle. Firstly, the legal restrictions such as patents, copyrights and trademarks, as well as governmental control over entry into markets through licensing, control rights and certification can impede imitation. Nestle has files over 250 patent applications per year and manages a global patent portfolio of about 20,000 patents. Nestle has now entered the top 100s World Intellectual Property Organization (WIPO) list and is the top patent applicant for the food and beverage industry. Leading edge technologies and highly differentiated products, solutions and benefits are key to Nestles four growth drivers and its global brands such as Nespresso, Nan, Nescafe, Nido and Purina. Protecting these technologies, products, solutions and benefits significantly contributes to sustaining the competitive advantage coming from Nestles unmatched  RD  capability and product and brand portfolio. For exampl e, on 22 February 2006, Nestle had applied for a patent on genetically modified coffee plants with a blocked enzyme, designed to improve the solubility of the coffee powder. The patent covers the technical process, genetically modified plants as well as the use of coffee beans for the manufacture of soluble coffee. With this patent, coffee growers will become even more dependent on Nestle (Greenpeace, 2006). Superior Access to Inputs/Customers Secondly, superior access to inputs/customers means that the firms can obtain high quality or high productivity inputs, such as raw materials or information than its competitors will be able to sustain cost and quality advantages that competitors cannot imitate. With every bite or sip of a Nestle product, Nestle has to assure the highest possible standards all along the supply chain from raw materials via manufacturing, packaging and distribution, to the point of consumption. Every Nestle factory has a laboratory that systematically analyses raw materials and ingredients. Nestle products are checked on the production line and in their finished state to ensure that they meet the company strict standards, as well as national and international regulations (The World of Nestle, 2006). 6.2.2 Early Mover Advantage Early mover advantage is the benefit produce by being the first to enter a market with a new product or service. Early mover advantages include; becoming a market leader in a new; establishing a new leading brand; being able to charge a premium until competitor products appear enhanced reputation, design, and copyright protection and possibly setting an industry standard to which other competitors may have to aspire. There are four different isolating mechanisms fall under the category of early mover advantage which is learning curve, reputation and buyer uncertainty, buyer switching costs and network effects. Reputation and Buyer Uncertainty We are going to discuss the reputation and buyer uncertainty and network effect on Nestle. For experience goods, a firms reputation for quality provides a significant early mover advantage. Once the firms reputation has been created, the firm will have advantage competing for new customers, increasing the number of customers and further strengthening its reputation. The motto of Nestle is Good Food, Good Life, so delivering the qualitative products to the customer is their main objective. Nestle Pure Life (NPL) was first offered in Pakistan by Nestle Pakistan Limited in 1998. People felt need of Pure, safe and clean water because of impurities in water especially in the industrialized cities like Karachi, Lahore, Faisalabad etc. Nestle identified this opportunity and launched NPL that satisfied the customer needs and Nestle become market leader in the water industry. The customers of NPL showed interest on NPL because of trust on Quality of Nestle, at the heart of which there are qua litative products and its long term commitment to deliver better products to consumers. Being the market leader, the market share of NPL is 78 percent that is much higher than its competitors (Ahmad, 2011). Network Effect The network effect is the result of word-of-mouth testimonials where the customer values the product depending on how many others are using the product. There is many ways for the customers to get the information about a companys product. Actual networks are where the consumers are physically linked. Nestle, the 144-year-old Switzerland-based food company created a Fan Page on the social media site, Facebook, where its millions of customers can get information and discuss the company and its products. While a simple and seemingly begin move, the company demonstrated foresight in opening a new channel to better communicate with their customers (A Business Lesson, n.d.).

Out-Out by Robert Frost and Mid Term Break by Seamus Heaney Essay

Analyse the two poems Out-Out by Robert Frost and Mid Term Break by Seamus Heaney by paying particular attention to the similarities between the two poems 'Out-Out' was written by Robert Frost who was an American poet born in 1874. He moved to the New Englandfarm country, where most of his poems were inspired. 'Mid Term Break' was written by Seamus Heaney, who was born on a farm in county Londonderry in Northern Ireland. The two poems are very similar and are both about the deaths of a young child, one about a boy who loses his hand whilst using a buzz saw; unfortunately, he also loses his life. In Mid Term Break the boy loses his life in a car accident. He was only left with "A poppy bruise on his left temple" There are also lots of differences between the two poems. In Out-Out the young boy was from quite a poor working class background in my opinion, which meant that the young boy had to work for the day in order to help the family. However the boy in Mid-Term Break was from a higher class family and seemed to be in quite a posh school. "College sick bay" This could mean it is a boarding school because it has its own sick-bay. The similarities between the poems are that both of the deaths were accidents and were also quite brutal. Out-Out is a poem of 34 lines of just one stanza. The poem is written in the 3rd person by somebody that is narrating the story, and that has no connections with the happenings of the poem. The way the poem is written also makes it less tragic, as every line flows to the next without giving much time to think about what has happened. The rhyming also hides some of the sadness in the poem. One point to consider is the shape of the poem, as it vaguely resemble... ...fer to catholic beliefs as in the religion they light candles to remember peoples lives, and to send them to heaven. Unlike Out-Out the ending is far more dramatic and depressing rather then the fading away from the story as happened In Out-Out, as you didn't even know how old the boy was until the very last line. This makes it seem very sad. "wearing a poppy bruise on his left temple, he lay in the four foot box as in his cot. No gaudy scars, the bumper knocked him clear. A four foot box, a foot for every year." This is very effective because it explained everything that happened, as we didn't know the story until the end. I think that makes the poem much more emotional, not knowing what to think. I believe Mid Term Break is more effective because of the was the poet has described the death, and it seems much more emotional that Out-Out.

Nen perfoming loan in banks

Banks exist to provide financial Intermediation services while at the same time endeavor to maximize profit & share holders value. Availing credit to borrowers is one means by which banks maximize their profit. Loans are the dominant asset & represent 50-75 percent of total amount of most banks, generate the largest share of operating Income & represent the banks greater risk exposure (Mac Donald & Koch, 2006). Managing loan in a proper way is not only has a positive effect on the banks performance but on borrowers firms and the country as a whole.Failure to manage moans, which make up the largest share of banks assets, would likely lead to the episode of high level of NP. According to MIFF (MIFF, 2009), a non performing loan is any loan which interest and principal payments are more than 90 days over due ; or more than 90 days worth of interest has been refinanced. Under the Ethiopians banking business directives (N.B., 2008), non performing loans are defined as â€Å"Loans and Adv ances whose credit quality has deteriorated such that full collection of principal and/or interest in accordance with the contractual repayment of term loans or advances in question†.Theoretically, there are so many reasons why loans fail to perform. Some of this includes, depressed economic conditions, high real Interest rate, Inflation, lenient terms of credit, high credit growth & risk appetite and poor credit monitoring are among the others. Forestall (2002) categorize non performing loans to bank specific and macro economic conditions. Accordingly, this study is focused on assessing factors that contributed for nonperforming loans of Awash International Bank mainly targeting on bank specific determinants of non performing loans. 1. 2 Statement of the problemAn efficient and well functioning of financial sector is essential for the development of any economy. Loan qualities are one of the indicators of financial sectors soundness. A sound financial system among other thing s requires maintenance of low non performing loans. In Ethiopians context. The banks In the country are required to maintain ratio of their non performing loans below five percent (N.B., 2008). The data obtained from the 2011/12 & 2012/13 annual progress report of BIB shows that the ratio of non performing loan of the bank was below the threshold for both years.Despite the fact, the non performing loan of the bank was Increased from Birr 98 million in 201 1/12 to Birr 1 77 million in 2012/13, showing an increments of Birr 108. 9 million (104%). Similarly, the bank's non performing loan ratio was increased from 1. 9% to 2. 8% during the same period. Even, this ratio was above ten percent in some branches of BIB. This fact raises the issue of what causes this non performing loan Increment. Accordingly, two research questions were drawn to investigate this Issue. What does the tends of loans and NP looks like in BIB? Defaulted? What are the main causes for these defaulted loans? 3 Obje ctives of the Study The general objective of the study is to review the non performing loan of BIB and to identify its causes. Side by side, the study was assessed the following issues. Reviewed Loans & NP trends of BIB? 0 Indemnify which loan category, loan purpose & economic sectors more defaulted. Searched the main causes of NP in BIB in general & identify those branches that were highly contributed for this NP. Assessed the credit assessment & follow up practice of other commercial banks. 0 Recommended some remedial actions to be taken to reduce these non performing loans. 1. 4. MethodologyResearch Design: A sample survey was carried out to seek the characteristics of defaulted loan files and to identify likely causes for their loan default. Survey Population: 25- Branches were recorded NP as of June 30, 2013, comprising about 74 defaulted loan files. Sampling Design: Using random sampling method, seventeen branches and 43 defaulted loan files were taken for this study purpose. Table 1. 1: NP Recorded Branches Profile Branches Total NP recorded branches Sampled NP Branches % GE Responded branches Total NP files Sampled NP files % city 119 829 31 21 68 outlying 148 578 432251 Total 25 176017744358Data Sources: To achieve the stated objective, both primary and secondary data were utilized. The primary data was collected by interviewing Selected Alba's Credit Directorate staffs, Compliance & Risk Management Department staffs that are on supervisory position. Questionnaires were also distributed to selected branches incurred loan default. Secondary data was utilized from various documents of BIB, mainly from Annual progress report of BIB, credit policies & procedures of the bank, NP action plan report and other related documents.Various published and unpublished literatures were also utilized from different sources grading the subject. Data Analysis & Presentation: After collection, the data was organized, analyzed & interpreted using both quantitative & quali tative descriptive analysis methods mainly tables, percentages, charts & etc. 1. 5 Scope & Limitations of the study Scope of the study The study was reviewed factors that contributed for non performing loan of BIB and it was focus on bank specific determinants of non performing loan.The spectrum of the study, therefore, includes: Examinations of loans & NP of BIB by loan category & individual economic sectors. – An in depth analysis of the loan file characteristics of the defaulted rowers with special reference to their likely causes for their loan default. – An in depth analysis Credit analysis & follow up practice of BIB with special reference to identification of their limitations that contributed for the banks non performing loans. – Suggestions of relevant non performing loan reduction strategies based on The respondents were busy and usually uncooperative.Particularly, some branch managers were unwilling to fill the questionnaire by themselves and order ot her officers to fill the questionnaire. As a result, the researcher had called phone many times to branches before getting a fulfilled questionnaire. In addition it was difficult to obtain some of the required data's from credit directorates since some of the data's were not compiled properly and regularly. Similarly, it was difficult to get the defaulted borrowers' to conduct interview with them to know their likely causes of loan default.Accordingly, the researcher was forced to see the likely causes of their loan default from the analysis of their loan files and interview conducted with staff members. Despite this limitation, the result of the research provided a meaningful basis for filling the gap and made recommendations that can be used by the management to improve performance of loan portfolio in BIB. 2. Literature Review 2. 1 Theoretical Review of Non- Performing Loans Loans and advances are the most profitable of all the assets of a bank. These assets constitute the primar y source of income by banks.As a business institution, a bank aims at making a huge profit. Since loans and advances are more profitable than any other assets, it is willing to lend as much of its funds as possible. But banks have to be careful about the safety of such advances. In the words of Dry. Leaf, the banker â€Å"has to tamper liberty with caution. If he is too liberal, he may easily impair his profits by bad debts, and if he is too timed, he may fail to obtain an adequate return on the funds which are confided to him for use. It is by his capacity in lending that a bank manager is Judged. A bank needs to be careful in giving loans as there is a greater risk which follows it in a situation where the loan defaults. Loan loss or defaulted loans puts a bank in a difficult situation especially when they are in greatest amount. Banks gives loans with uncertainty whether they are returned or not though they may hold some security. In assessing any proposal for n advance or a loa n, the banker has to satisfy himself/herself regarding the period for which the advance is required and the prospects of its repayment at the end of the period.He/she should not be carried away by the soundness of the security offered to him/her or the rate of interest. Profitability should be given only a sound consideration. He/she should also satisfy himself [herself about the purpose for which the advance is required. He/she is expected to discriminate against and discourage speculative advances. As a matter of fact most bank failures may be traced to faulty policies in respect of loans and advances. From the point of safety and liquidity, loan and advances are poor assets. The risk mostly ensues when loans become non- performing.Allocating loans has always been one of the central pillars of the banking business. Traditionally this marked the start of a long term relationship with the client, which would continue at least until the maturity of the loan. With the growth of deposi ts, banks are supposed to increase the lending. However, when Non-performing Loans (Naps) are high, the willingness to expand loan reduces. This relationship will be distorted under high NP condition. In any lending recess, there is inherent risk of loans being defaulted which leads to the concept of non- performing loans.The concept of non-performing loans has been defined in performing loans are defined as defaulted loans which banks are unable to profit from. They are loans which cannot be recovered within stipulated time that is governed by the laws of a country. The criterion for identifying non performing loans also varies in Africa. Some countries use quantitative criteria to distinguish between â€Å"good† and â€Å"bad† loans (e. G. , number of days of overdue schedule payments), while others rely on qualitative arms (such as the availability of information about the client's financial status, and perspectives about future payments).However, the Basel II Commi ssion emphasizes the need to evolve toward a standardized and internal rating-based approach. Accordingly, the Basel committee puts non performing loans as loans left unpaid for a period of 90 days. Under the Ethiopians banking business directive, non-performing loans are defined as â€Å"loans or advances whose credit quality has deteriorated such that full collection of principal and/or interest in accordance with the contractual payment terms of the loan or advances in question† It further provides that: . moans or advances with pre established repayment programs are nonperforming when principal and/ or interest is due and uncollected for 90 (ninety) consecutive days or more beyond the scheduled payment date or maturity. In addition to the above mentioned category of non- performing loans, the following are also considered as non- performing.Overdrafts and loans or advances that do not have re-established repayment program shall be non-performing when: – The debt re mains outstanding for 90 (ninety) consecutive days or more beyond the scheduled payment date or maturity; – The debt exceeds the borrower's approved limit for 90 (ninety) consecutive days or more; – Interest is due and uncollected for 90 (ninety) consecutive days and more; or – For the overdrafts, (I) the account has been inactive for 90 (ninety) consecutive days or deposits are insufficient to cover the interest capitalized during 90 (ninety) consecutive days or (it) the account fails to show the following debit balance at least once over 360 days preceding the date of loan review: 1 . 20% of approved limit or less 2. 5 % or less This is in accordance with the Basel rules. If a loan is past due 90 consecutive days, it will be regarded as non- performing.The criteria used in Ethiopians banking business to identify non- performing loan is a quantitative criteria based on the number of days passed from loan being due. 2. 2 Classification of Loans & Advances The Na tional bank of Ethiopia supervision of banking directives classifies loans and advances as follows. Pass loan: loans and advances in this category are fully protected by the current financial and paying capacity of borrower and are not subject to criticism. In general loans and advances, which are fully secured both as to ironical & interest by cash or cash substitutes are classified under this category regardless of past due status or other adverse credit factor. Special Mention: Any loan or advance past due 30 days or more, but less than 90 days is classified under this category.Substandard: Non performing loans or advances past due 90 days or more but less than 180 days is classified under this category. Doubtful: Non classified as doubtful. Loss: Non performing loans or advances past due 360 is classified as loss. As per the directive the provision for impairment losses is determined as follows Loan Category Pass loan Mention Extent of provision required 1% of outstanding loan b alances Special 3% of outstanding loan balances Substandard 20% of the net loan balance Doubtful balance Loss Non-performing Loans 65% of the net loan 100% of net loan balance 2. 3 Causes of Default culture is not a new dimension in the arena of investment. Rather in the present economic structure, it is an established culture.The redundancy of unusual happening becomes so frequent that it seems people prefer to be declared as defaulters. Basically, the non- performing loans are a result of the compromise of the objectivity of credit appraisal and assessment. The problem is aggravated by the weakness in the accounting, disclosure and grant of additional loans. In the assessment of the status of current loans, the borrower's credit worthiness and the market value of collateral are not taken into account thereby rendering it difficult to spot bad loans. The causes for loan default vary in different countries. It extends from borrower's specific act to banks weak regulatory mechanism i n advancing loans and monitoring procedures.Generally, in developing and underdeveloped countries, the reasons for default have a multi dimensional aspect. Various researchers have concluded various reasons for loan default. A. Reduced Attention to Borrowers Few of the loan defaults that make trouble for banks can be blamed on reduced attention to borrowers. Borrowers give better attention to the loans that they borrowed when they have the perception that better attention is given to them. Lending officers of institutions should try to keep up with their loans, visiting the borrower's premises at least once a year or up to a half a dozen times a year on larger loans. Banks rarely lose money solely because the initial decision to lend was wrong.Even where there are greater risks that the banks recognize, they only cause a loss after giving a warning sign. More banks lose money because they do not monitor their borrower's property, and fail to recognize warning signs early enough. Whe n banks fail to give due attention to the borrowers and what they are doing with the money, then they will fail to see the risk of loss. The objective of supervising a loan is to verify, first, whether the basis on which the lending decision was taken continues to hold good. And second whether the loan funds are being properly utilized for the purpose they were granted. . Macroeconomic Instability Macroeconomic stability and banking soundness are inexorably linked.Both economic theory and empirical evidence strongly indicate that instability in the macro economy is associated with instability in banking and financial markets and instability in these sectors is associated with instability in the macro economy. Most problems of poor loan quality faced by banks were compounded by macroeconomic rate also makes loan appraisal more difficult for the bank, because the viability of potential borrowers depends upon unpredictable development in the overall rate of inflation, its individual co mponents, exchange rates and interest rates. Moreover, asset prices are also likely to be highly volatile under such conditions. Hence, the future real value of loan security is also very uncertain.Banks do poorly both when product and asset price inflation accelerate unexpectedly and when inflation decelerates unexpectedly, unemployment increases, and/or aggregate output and income decline unexpectedly. Unexpected accelerations in inflation adversely affect banks that, on average, lend longer term at fixed-rates than they borrow because nominal interest rates will rise more than expected. This will increase their cost of deposits more than their revenues from loans. Decelerations in inflation and, in particular, bursting of asset prices harm banks because the value of their asset collateral is likely to decline below the value of the associated loans and fuel defaults and losses.Indeed, probably the greatest threat to banking stability in almost all countries is increasing asset pr ice. C. Unsound Assessment Mechanism and Weak Risk Consciousness Risk, and the ways, in which it can be identified, quantified and minimized, is key concerns for a banks management and its auditors when they are engendering the need to provide for bad and doubtful loans. No loan is entirely without risk. Every loan, no matter how well it is secured, and no matter who is the borrower, has the potential to generate loss for the lender. It is the degree of risk to which a loan is susceptible and the probability of loss that vary; these should normally be reflected in the interest margin and other terms set at the inception of the loan.A bank, in considering whether to lend or not, takes into account the quality of a borrower which is reflected in, inter alai, its past and projected profit reference, the strength of its balance sheet (for example, capital and liquidity) the nature of and market for its product, economic and political conditions in the country in which it is based, the q uality and stability of its management and its general reputation and standing. It is important for the bank to know the purpose of the loan, to assess its validity and to determine how the funds required for the payment of interest and the repayment of capital will be regenerated. D. Lack of Strict Admittance policies and no active exit Under the influence of idea of pursuing market share excessively, banks do not establish detailed and strict market admittance policies, which undermine the first risk to prevent gate and weaken the orientation effect of admittance policies to market.During pre-loan investigation, some relationship managers put little emphasis on authenticity and integrally review on related materials. They haven't clarified the true intended usage of the loan (especially when extending short-termed credit) and the review is too optimistic, which does not analyze the potential influence of changes in related factors. There is also no deep review on the market, no en ough understanding on enterprises' operation management situation, no horrors risk revaluation; inaccurate assessment, the risk of loans is not fully covered and the risk on group customers and affiliated enterprises are not identified effectively. The factors above damage the loans at the early stage. 2. Debt Recovery Processes interest comprises a banks principal source of revenue, and therefore, of profit. Accordingly, from a banks perspective it is essential that its borrowers keep their contractual commitments and repay interest and capital as scheduled. Defaults are inevitable, but when they occur a bank should take appropriate remedial action, or ailing that, recover the outstanding interest and capital promptly. Ethiopians Banks adopt different ways of recovering non- performing loans. These methods are one or the combination of the following: Settlement – This engages both the lender and the borrower in negotiation to settle through collection of cash.Reschedule/Rene wal – this method is used whenever a bank believes that the Naps can be regulated in favorable terms and conditions through negotiation (term loans) and renewals (overdrafts). This is not without limitation. National Bank Directive No. SUB/43/2008 states a bank shall not reschedule restructure or negotiate worth or medium term loan to a borrower for more than three periods. Before rescheduling, restructuring or renegotiating a short or a medium term loan, a bank shall collect in cash full amount of interest thereof and the following principal amounts: a. A minimum of 25% of outstanding principal balance in case of rescheduling, restructuring or renegotiating for the second time.