Evaluating the credit analysis procedures in the Libyan banking sector and its effectiveness in reducing the credit risks

Abstract

The study seeks to evaluate the credit analysis procedures, whether related to the customer, the bank, or the subject of credit adopted when granting credit in the Libyan banking sector, and to verify the extent of their effectiveness in rationalizing credit decisions to avoid the risks of bank credit and to identify their most important causes. To achieve this purpose, the deductive approach was adopted in designing the study plan and its hypotheses. The procedural approach based on the survey strategy was also used in conducting the study, and its data was collected through a questionnaire form prepared for that purpose and distributed to all Libyan commercial banks. The results concluded that the commercial banks studied are committed - at a moderate level - but statistically significant - to following credit analysis procedures and approved standards for granting bank credit. However, the results confirmed that only adherence to credit analysis procedures is not enough, as the results did not confirm the effective and important role of credit analysis procedures in reducing the risk of bank credit defaults. This may be attributed to several other reasons, the most important of which are: the repercussions of the state of indiscipline in the country and its effects on political and economic instability - the weak role of the Central Bank to monitor and follow up on lending procedures in commercial banks - mismanagement and the lack of awareness of the senior administrative leaders of their responsibilities and the seriousness of their commitment.