TABLE OF CONTENTS
Title page
i
Approval page ii
Dedication iii
Acknowledgement iv
Abstract v
Table of Contents vi
Chapter One: Introduction
1.1 Overview
of the Study
1
1.2 Statement
Of the Problem 4
1.3 Purpose
of the Study 5
1.4 Research
Questions
6
1.5 Statement
of Hypothesis 6
1.6 Significance
Of the Study 6
1.7 Scope
and limitation of the Study 7
1.8 Definition
of Terms 8
Chapter Two: Literature Review
2.1
Introduction 9
2.2 Concept
of credit and debt recovery in the banking industry 9
2.3 evaluation
of Nigeria Banking Sector 16
2.4 Provision
of Prudential of Central Bank of Nigeria 17
2.5 Considerations
for Development Policy 19
2.6 Contents
of Credit Policy 20
2.7 Management
of Credits Banks 21
2.8 Theoretical
Framework of the Study 22
2.9 Empirical studies of credit
management and debt recovery in Nigeria banking sector 25
2.10 Summary 27
Chapter Three: Research Methodology
3.1 Introduction 29
3.2 Research Design 29
3.3 Data collection
Methods 29
3.4 Research
Population and Sample Size 30
3.5 Data Analysis
instruments used 30
3.6 Justification of
Methods and Instruments Used 30
Chapter Four: Data Presentation and
Analysis
4.1 Introduction
32
4.2 Data
Presentation and Results 32
4.3 Summary
of Findings 39
Chapter Five: Summary, Conclusions
and Recommendations
5.1 Summary
40
5.2 Conclusion
40
5.3 Recommendations 41
Reference
CHAPTER ONE
INTRODUCTION
1.1 OVERVIEW OF THE STUDY
Banks are profit making organizations
performing as intermediary, connecting borrowers and lenders in bringing
temporarily available resources from business and individual customers as well
as providing loans for those in need of financial support (Uwuigbe, 2013).
Money deposit banks play a vital role in developing economies like ours,
Nigeria. Bank landings very crucial for it make the financing of agricultural
industry and commercial activities of the country.
Money
deposit banks are entrusted with the fund of depositors. These funds are
generally used by banks for their businesses. The funds belong to the
customers, so a programmes must exist for the management of these funds. The
programme must constantly address three basic objectives which are liquidity,
safety and income. Successful management calls for proper balancing of the
three above given or listed objectives. Liquidity enables the banks to meet
lain demands of their valuable and long established customers who enjoy good
credit standing. The second objective being "Safety" is to avoid idle
risk since banks meet responsibilities of protecting the deposits entrusted to
them. Proper and prudent management of banks create and enhances customer’s
confidence. The third objective being "Income or profits" which is
aimed at growth and expansion to meet repayment of interest charged on debt, to
achieve this objective of maximizing wealth of shareholders and to survive
competition in the banking industry (Uwuigbe, 2011). Credit management can be
seen as in integral part of lending and as such in its absence, good loans can
turn bad. It is expedient to note that the importance of credit management
cannot be over emphasized and good credit management requires the establishment
of adherence to and of sound and efficient credit policies of government.
Credit as the name implies is described as the right to receive payments or the
obligation to make payment or demand or at some future date on account of the
immediate transfer of goods or money (Uwuigbe, 2012). It is based on the faith
and confidence which the creditor repossesses in the ability and willingness of
the debtor to fulfill his promises to pay. In credit transaction, the right to
receive payment and the obligation to make payment originate at the same time.
The term debt is frequently used in
reference to debtor’s obligation to make payments. Debt and credit are
therefore similar in terms. Management is simply the application of the five
management principles which are planning, organizing, commanding, coordinating
and controlling. Money deposit banks are major players in the financial sector
of every country's economy. The failure or success of these banks will to a
large extent affect the financial sector and the economy at large. In recent
times, some money deposit banks have been wound up leaving customers to their
fate. It is important to note that major causes of the winding up of some of
these banks are due to their poor management of finance and credit. Many of
these banks for example, Fun bank, Intercontinental bank, Oceanic bank as well
as equatorial trust bank were in distress and we're acquired by other banks.
They were reflecting some going concern issues that relate to their management
of credit and control of finance.
Credit control management has been used by
top organizations and banks to monitor the amount of loans it gives to debtors.
It has been necessitated as a result of increasing bad loans as a result of
debtors not repaying credit given to them. Moreover, banking industry has been
known for its intermediation role in providing financial assistance (credit)
needed in the economy. This role is normally carried out in many ways, for
example, granting of Loan and advances to customers which constitute the major
part of banks lending. Apart from loans and advances, there are other forms of
bank credit or bonds issued for and un-behalf of customers. Banks are merely
custodians of the money they lend; hence Interest must be paid to depositors
and dividends to the investors. For banks to be successful, their corporate
credit appraisal, disbursement, adequate monitoring and repayment must be
assured. But experiment and research done over the years has shown that
inadequate credit analysis and unsound judgment of loans application have
resulted in assets and loans and advances. Provision of credit which is in the
form of loans and advances are the total amount of money banks lend out to its
customers and any given period of time. The banks usually charges the borrowers
interest for using its money. These loans and advances usually have maturity
periods. In providing credits for business ventures, banks should as a matter
of importance take all necessary steps to ensure that advances are granted to
those customers who can, and will make judicious use of the loans so that
repayment will not become a problem. Therefore credit must and should be made
to people who are capable of utilizing it well and repaying the loans when it
falls due.
The
place of loans and advances in the affairs of banks can be explained by
referring to the fact that loans and advances are the largest single item in
the asset structure of Nigeria Commercial Banks (Edwin, 2012). It also
constitutes the main source of the operating income of banks and also the most
profitable asset for their employment of banks funds in Nigeria (Funso and
Kolade, 2012).
The need for a central data base from which
consolidated credit information on borrowers could be obtained to ensure an
effective and efficient credit control and better management of credit issued
and also to prompt collection necessitating the Central Bank of Nigeria (CBN)
to create the Credit Bureau in Nigeria. The decision to establish the Credit
Bureau in Nigeria in the Presidential Budget speech of 1990. Thereafter, I it
was given a legal backing by the CBN Act No. 24 of 1991(Sec. 21 and 52) as
amended. The enabling legislation empowered the CBN to obtain from all banks
return of all credit with a minimum outstanding balance of ₦100,000 (now ₦1,000,000
and above of principal and interest. All these were done to ensure proper
credit control and management and give proper steps on how to recover the debts
due.
1.2 STATEMENT OF THE
PROBLEM
The
banking industry plays a significant role to other sectors of the economy and any
problem that affect the banking industry would directly or indirectly affect
all other segment of the economy.
The objective of any business organization
for example the banking industry is to maximize profit. Most banks trade
primarily with depositors funds. This profitability has to be met by the end to
ensure the availability of these funds. This intern means that, for the rest to
be effective lending and profitability, the banks must understand, appreciate
and value the techniques involved in the recovery of the debts due.
These statements in effect intends to remind
the requirement lending institutions for example, the banking institutions, to
recognize that the extension of credit has an indirect element of risks, costs
and uncertainties which has to be controlled and considered in the bid to
attain profit maximization.
One major problem of credit extension is the
fear of bad debt losses. As a result of these problems, some banks have
established departments for the purpose of researching into this vital aspect
of the banking sector. Though not all banks have the resources to establish
such, but they have found wisdom in this research and are currently encouraging
them in their banks. The issue of bad debts and irrecoverable loans has led to
low turn and perennial liquidity problems. The search is therefore concerned
with the problem of poor lending process carried out by some banks and it is
aimed at finding the effect of good credit control management on money deposit
and how they can be recovered.
1.3 PURPOSE OF THE STUDY
The
broadly objective of this study is to assess credit control management and debt
recovery in the Nigerian banking sector.
The specific objective the research intends
to cover are to;
I. To determine the relationship
between loan and advance and earnings on banks
ii. To evaluate the impact of
loan and advance on asset
1.4 RESEACH QUESTION
i. What is the relationship
between loan and advance and earning of banks?
ii. Do loan and advances have
significant impact on asset?
1.5 STATEMENT OF
HYPOTHESIS
Hypothesis for this research
has been developed and presented below regarding credit control management and
debt recovery techniques in money deposit banks.
Ho1: There is no relationship between loan and advances and
earning of banks
Ha1: There is relationship between loan and advances and earning of
banks
Ho2: loan and advance have no
significant impact on assets
Ha2: Loan and advances have significant impact on assets.
1.6 SIGNIFICANCE OF THE
STUDY
The study is significant because it deals
with the issues banks are facing and will continue to confront them I'm the
future.
This research would I'm a way reveal the
relevance of coordinating the efforts that contributed to the overall lending
institutions ultimate goal of profit maximization. The study will also expose
participants to the industrial characteristics and prevalent risk in each
sector and show techniques on how to credit for institution and companies as
well as consumers in order to improve the understanding of credit decisions.
The result would be a useful contribution to
existing knowledge for economic planners, policy makers, scholars and
literature on
the impact of credit control
management and debt recovery techniques in the Nigerian banking sector.
In conclusion, this study has important
implication on policy formulations as it could help regulate the way and manner
money deposit banks issue out loans to the public and it will on the long run
improve the economy of the nation.
1.7 SCOPE AND LIMITATIONS
OF THE STUDY
This
study is confined to the banking industry in Nigeria. It is also restricted to
the benefits and impact of credit control management and debt recovery in the
Nigerian banking sector. The period to be covered for the study is a period of
five (5) continues years of operation in the banks which is from 2011-2015
accounting periods.
The project though has achieved its
objectives but not without some limitations which were encountered in the
course of the research. One major problem was the lack of inadequacy
information from the banks. The banking regulatory frameworks made the
researcher to limit his questionnaire of the sample used above. The banks were
not willing to issue out some documents on credit matter; they thought it was
highly confidential. They only gave skeletal material which has to be
complimented by personal interview of the workers and customers.
1.8 DEFINITIONS OF TERMS
i.
Credit control:
this is a policy aimed at serving a dual purpose of; (a) increasing sales
revenue by extending credits to customers who are deemed a good credit risk,
and (b) Minimizing the risk of losses from bad debts by restricting or denying
credits to customers who are not a good credit risk. Credit control is a check
that customers pay on time and do not owe more than their credit limit.
ii.
Debt recovery:
This is the process of recovery of money owed to a creditor from the debtor.
iii.
Debt: This
could mean money owed for goods and services.
iv.
Credit: This
is an entry in an accountant represent a decrease in the value of assets or an
increase in the amount of liabilities.
v.
Loan and advances: This is credit extended to individuals, corporate organizations,
government, etc. at interest rates to finance profitability and viable
projects.
vi.
Non-performing loans: These are credit issued by lending institutions to
beneficiaries who are unable to sector repay such loans for a specific period
of time.