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CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The business of banking focuses mainly on acceptance of deposits from members of the public (i.e. bank customers) and matching the deposits available to
borrowers in the form of loans for investments and consumption purposes. Constraints of accounting measurement provide practical guidelines to reduce
the volume and cost of reporting accounting information without reducing its value to decision makers. Thus, lending is one of the key functions of
commercial banks.
Loans represent investments and usually constitute the largest assets of banks. Both individuals and institutions demand for loan. The households seek
lendable funds from bank when the excess of income over expenditure is negative (Mbat, 1995:89). The beauty of this role is that credit control principles are
the same whatever industry you work in and you can move into different
sectors, with enough experience you could even become a consultant and share
your experience with others. The need for loanable fund is a result of the non-synchronization between receipts and payments during the normal course of
business transactions. The bank in granting loans to household, individuals or business firms takes into consideration factors such as liquidity risk,
repayment method, and the purpose of such loans (Mbat, 1995).
Loans and advances are mostly short-termed. The quality of loan portfolio depends on credit analysis undertaken by the loan oicer.
The credit analysis
function is to ensure that loan granted has a good qualitative composition. The qualitative element of bank loans include high liquidity quotient, minimum
risk, and appropriate maturity structure. These quantitative elements are necessary to guarantee repayment on demand or on maturity. Accounting services
are indispensable in any organization. Whether big or small, profit oriented or non-profit oriented, all organization require judicious management of scare
researches in order to achieve targeted plans and objectives. Hence, they all need the services of an accountant. Neither a firm of medical doctors nor that of
lawyers can obtain a reasonable magnitude of loan from a bank without being required to present its audited accounts to the bank to analyze its ability to
repay the debt. T When credit controls exit, the bank requires eective
and eicient
management strategies, otherwise, the said loans degenerate into debt.
In this study, the main focus is on the management of loans/credit control in commercial bank. In order to facilitate this research, UBA, PLC has been selected
for a case study.
1.2 STATEMENT OF THE PROBLEMS
As observed above, loan is an investment to a bank. Just like any other investment, there are inherent risks. These risks include the risk of default and
inflation or purchasing power risk. Thus, there would be need decisions to be guided by professional advice (Ejiogu, 2002). In agreement with the opinion of
Ejiogu above, Edimnce (2004) opine that the accountant as a professional is necessary in loans and credit controls and management. However, Mgbada
(2007) question the unique role played by the accountant in loans and credit control and management by saying that banks still achieve better control and
management of loans and credit without the services of the accountant. Are accountant necessary in loans and credit controls and management? What role
do accountant play in the control and management of loans and credit? This research is designed to answer these questions.
1.3 OBJECTIVE OF THE STUDY
The objectives of this research are:
(i) To examine the role of the accountant in loans and credit management in UBA Plc.
(ii) To determine the influence of the role played by the accountant in loans and credit management in UBA.
(iii) To examine the relationship between the amount of loan granted and the management of loans and credit in UBA.
1.4 RESEARCH QUESTIONS
(1) Are Accountants responsible for securing the money being disbursed to customers?
(2) What are the contributions made by the accountants of UBA towards the enhancement of loans a credit control?
(3) What are the problems encountered by the accountants of
UBA while performing their duties of loans and credit control management.
1.5 RESEARCH HYPOTHESES
1. The role of the accountants does not have any significant influence on loans and credit management in UBA, Plc.
2. There is no significant relationship between the amount of loans granted and the management of loans and credit in UBA, Plc.
3. Fund diversion does not aect
loans and credit management in UBA, Plc.
1.6 SIGNIFICANCE OF THE STUDY
It is hardly an exaggeration that the difference
between the success and the failure in the banking industry is in the effective
management of loans and credit
control. With the research work, it will provide an additional source of secondary data to potential researchers who may come by it. The findings in this study
would be used as a blue-print for other researchers on loans and credit controls strategy adjustment and modifications by banks and other financial
institutions that may have access to it.
1.7 SCOPE OF THE STUDY
This research work focuses on the United Bank of Africa (UBA), Uyo branch, Akwa Ibom State. The research work has also x-ray the roles of accountants in
loan/credit control and management in the bank stated above.
Also apart from conducting desk research, the researcher has sampled the opinion of accountants on ways to chockmate their problems.
1.8 LIMITATIONS OF THE STUDY
The limitations of this study include some of unavoidable constraints and problems encountered in the process. They are as follows:
(i) Finance: The problem of finance was not le
out in the course of research to this study.
(ii) Time: Since this study is one of the many courses oered
by the researcher, the researcher was constrained by time to carry out an indent research on
the study.
(iii) Non-Challant Attitude of Bank Officials:
The reluctance of bank officials
to reveal information on the need for this study for fear of breach of duty of
secrecy to customers, exposure of banks administrative short-comings.
(iv) Non-Availability of Records: This one of the most important limiting factors in the course of the study. This includes the problems of easily getting the
appropriate data due to bureaucracy which hiders the information flow in the country.
(v) Ignorance of Respondent/ Borrowers: Most bank customers were semi-illiterates and most oen
it was difficult
the collect adequate data required from
them.
1.9 BRIEF HISTORY OF UNITED BANK FOR AFRICA
United Bank for Africa (UBA) dates back to 1949 when the British and French Bank Limited (BFB) commenced business in Nigeria following Nigeria's
independence from Britain, UBA was incorporated in 1961 to take over the business for BFA.
Today’s United Bank for Africa Plc (UBA) is a product of the merger of Nigeria's third and fih
largest banks, namely the old UBA and the former standard Trust
Bank Plc, and a subsequent acquisition of the erstwhile continental Trust bank Limited (CTR). Since its historical emergence from the merger of former
standard Trust Bank and UBA Plc. The UBA group has positioned itself to be Nigeria's dominant bank and a lending player on the Africa continent.
l.10 ORGANISATION OF THE STUDY
This study was organized into five chapters. Chapter one contains the introduction which is made up of the background to the study, statement of the
problem, objectives of the study, Research questions, Research hypothesis, significance of the study, Scope of the study, Limitation of the study, brief history
of UBA and organization of the study.
Chapter two dealt with review of the related literature, while
chapter three shows the research methods used in carrying out the design.
Chapter four, the
data’s collected were presented analyzed and interpreted.
Chapter five consists of the summary, conclusion and recommendations.
1.11 DEFINITION OF TERMS
ACCOUNTABILITY: Responsibility of giving an explanation when need arises to ensure that money and other resource have not been wasted but properly and
lawfully used for the benefit and welfare of the owners, (Ekpo: 2002)
CONTROLLER - Chief accounting executive of an organization. The controller is in charge of the accounting department.
CREDIT ANALYSIS: process of determining, before a line of credit is extended, whether a credit applicant meets the firm’s credit standards of those of a leader
and what amount of credit the applicant should receive (Ekanem, 2008).
CREDIT MANAGEMENT: Is a term used to identify accounting functions usually conducted under the umbrella of Accounts receivables (Mattila, 2002)
LOANS: Is a credit arrangement a security is pledged and must be repaid with interest over a stipulated period of time (Ekanem, 2008).
OVER DRAFTS: This is a credit arrangement by banks to their customer to withdraw money over and above that what he has in the account. (Mbat, 1995)
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