APPRAISING THE EFFECTIVENESS OF CREDIT ADMINISTRATION AND MANAGEMENT IN BANKING INDUSTRY
Need help with a related project topic or New topic? Send Us Your Topic
DOWNLOAD THE COMPLETE PROJECT MATERIAL
APPRAISING THE EFFECTIVENESS OF CREDIT ADMINISTRATION AND MANAGEMENT IN BANKING INDUSTRY
ABSTRACT
This study was conducted to evaluate the effectiveness of credit administration in the banking business.
We focused our analysis on four (4) Nigerian commercial banks (Union Bank, UBA, Afribank, and Bank PHB).
The research approach used incorporates data from both primary and secondary sources. The source data consists primarily of personal interviews and questionnaires delivered to the management and personnel of these banks.
Secondary data was primarily information gathered from textbooks, journals, periodicals, unpublished monograms, and various professional publications in relevant domains to enhance our investigation.
The overall number of questionnaires distributed to both management and personnel at the banks was 98, and a total of 80 questionnaires were recovered, representing about 82%, with 18 being unfilled, or 18%.
In assessing the three (3) hypotheses, the Spearman Rank order correlation co-efficient was used as a statistical method.
The study’s findings show that loans and advances are a significant component of the asset’s portfolio. That suitable and adequate attention must be paid to credit administration and management.
A more regular review of credit guidelines is often a more effective credit control method.
The findings summary demonstrated that the core skill and understanding of customers and the economy enable the banker to make reasonable loan decisions.
CHAPTER ONE
1. INTRODUCTION
1.1 GENERAL OVERVIEW
Credit administration and management are two key functions of banks that account for a major portion of their profits in any financial market. That banking operations continue to thrive in Nigeria and around the world is a function of how well banks perform this critical duty.
“The level of service performance and realisation of the objectives for which the organisation is set up is a function of the quality of management policies and procedures followed to achieve these set objectives,” writes B.C. Okocha.
Banking institutions are established with the primary or cardinal function (objectives) of deposit acceptance and loan extension for the development and expansion of the economy’s real sector.
Banks can only continue to be a valuable tool for economic progress and wealth maximisation if there is a positive relationship between management and goal.
The aggregate economic growth in both the micro and macro economies prompted investors, governments, and corporate entities to recognise the importance of bank credit as a major source of effective company financing for wealth maximisation.
The researcher seeks to address the growing worry about business growth, which has been hampered by inaccessibility of credit due to rigorous conditions attached, the untold agony of loan interest, banks’ sharp practises, and non-adherence to credit criteria.
Shiro, Abasss A. (2004) “Credit creation presents a good maximisation opportunity for the banking industry to achieve its objectives as the foundation by expanding the money supply base and raising the country’s overall investment level.”
Lending and credit administration are critical functions for banks that, if not performed properly, can impede the banks’ successful operations. Improper lending decisions result in the buildup of large bad debts, which has a negative impact on the banks’ efficacy.
As a result, it is preferable that bank managers be supplied with better information, ideas, and strategies essential for productive lending rather than viewing them as merely guidelines with limitations. Lending is very subjective in nature; the final analysis is dependent on the lender’s judgement;
so, before making a final decision, the lender must analyse all of the techniques, principles, and knowledge gathered through environmental and project analysis. The borrower’s creditworthiness and prospects must also be investigated.
Against this backdrop, the bank determines the amount of lending according to the anticipated demand. This quantum must be the optimum volume in terms and conditions that satisfy the lender’s banking objectives.
Credit administration qualities have a direct impact on a bank’s effectiveness, which can be measured using various parameters such as profitability, customer satisfaction, and shareholder satisfaction, volume of bad debts, employee motivation, and achievement of the bank’s overall goals.
1.2 A STATEMENT OF PROBLEMS
Today’s escalating financial irregularities, insolvency, non-performing loans, bank distress, and near-collapse of the financial system accounted for the business community’s scream and drive for total economic recovery.
The following issues were discovered and solutions were proposed in this study.
Credit is only available under certain circumstances.
Unbearable financial hardships that bank consumers must bear when repaying these debts.
The exorbitant interest, fines, and other charges.
Banks engage in a variety of nefarious practises, including cutting corners and failing to follow credit management policy requirements.
Bank managers do not follow internal rules and protocols while issuing credit, which results in non-performing loans due to lender and beneficiary collusion in short-cut methods.
The Apex bank lacks effective monitoring and strategy to prevent discipline and ensure compliance with these policies and norms.
1.3 THE OBJECTIVE OF THE STUDY
Depositors, the government, financial regulators, and stakeholders who advocate for a strong and viable economy based on a sound financial sector to provide the most needed lubricant in terms of credit lending to aid economic growth and development have expressed great concern about the recent rate of bank failure.
However, the key explanations presented for these failures are primarily related to banks’ faulty lending practises, which, when combined with weak industrial development, inflation, and unemployment, make it impossible to acquire credit.
As a result of the aforementioned issues, the goal of this research is to:
a) Determine how banks efficiently handle credit facilities to guarantee prompt repayment when due, as well as the main grounds for default.
b) Identify the issue connected with effective and efficient credit management, as well as the economic impact of effective management.
c) To initiate or suggest methods for enhancing credit management in accordance with internal and external variables (monetary guidelines) of the bank.
1.4 RESEARCH QUESTIONS
In light of this research topic, a wide range of research questions would be posed in order for the varied data obtained to be analysed statistically. The following are the study’s research questions.
What impact and actions do banks take to efficiently manage their credit facilities in order to ensure prompt repayment when due?
What is the recommended strategy for improving credit management in accordance with internal and external bank variables (monetary guidelines)?
How do banks reveal the problem linked with effective and efficient credit management?
What are the causes of the increase in non-performing loans and loan facility non-security in the financial sector of the economy?
1.5 RESEARCH HYPOTHESIS
The following hypothetical statements are required to aid us in deciding the answers to the problems and questions indicated above.
1ST HYPOTHESIS
H0: There is no substantial link between credit management responsibility and bank profitability and total production.
HYPOTHESIS NO. 2
H0: There is no substantial association between loan asset quality/quantity and bank sustainability and development.
3RD HYPOTHESIS
H0: Bank regulation and supervision have no substantial association with overall growth and development.
1.6 SIGNOIFICANCE OF STUDY
“The banking industry in Nigeria does not operate in isolation of the global banking system, which is facilitated by information technology, which makes bank services and products customer oriented,” writes Olowe R.A (1997).
As a result, its current level of operations and development falls far short of expectations in terms of products, services, and effective resource mobilisation for her lending, despite the fact that banks are widely regarded as a necessary medium for propelling other sectors through investment and credit lending to achieve desired growth development.
As a result, credit management is a component of banking services that has been excessively exploited and mismanaged.
This study is thus expected to provide useful suggestions and recommendations to most problems affecting effective and efficient credit management in banks. Most importantly, this study will be useful to bank managers, prospective facility seekers,
and project prospects to expose them to the necessary requirements by banks in terms of security, financial information for analysis, project prospects, and so on. This research will be extremely beneficial to the government and the agencies in charge of banking supervision.
This study will also be useful to students and social science professors who are involved in research on banking in general using secondary data sources.
1.7 SCOPE OF THE STUDY
This research is limited to credit administration and management in Nigerian deposit money banks.
The study is also confined to information acquired from the geographical area of study (ABA) as a basis for drawing broad assumptions about the performance of Nigerian deposit money banks in credit management and administration.
Due to the oath of secrecy, the top management and personnel of the banks are hesitant to give out any vital information, posing a constraint to the research work.
1.9 DEFINITION OF TERMS:
Monetary Policy: This is a government-initiated policy that regulates the amount of money in circulation.
Credit Limit: This is the maximum amount of money that a bank will lend to a customer.
Global financial: This refers to the interconnection of financial services and products via an information technology network that is more customer-oriented than traditional banking.
Credit management is the planning and control of loan and advance collections in accordance with the management corporate objective of maximising shareholder wealth.
Distressed Bank: These are banks that are experiencing liquidity issues. Earnings are low, and there is a huge amount of non-performing assets.
1.10 STUDY LAYOUT
This work is divided into five chapters.
The first chapter looks at the introduction; the overview, statement of the problem, purpose of the study, research questions, scope of the investigation, significance of the study, limitations of the study, and definition of words are all covered.
The second chapter is a survey of relevant literature, which looks at the work of other scholars in the topic. This is primarily from textbooks, journals, the internet, and other related sources.
The third chapter is about research technique. It includes research design, sampling procedures/determining sample size, data collection methods, and data analysis methodologies.
The hypothesis stated in chapter one is statistically tested in chapter four, and recommendations with reference to the problems studied are made.
Need help with a related project topic or New topic? Send Us Your Topic