PROPOSAL
The
research work is basically concerned with the effectiveness of credit
management in the banking industry. It will also discuss about the emergence of
banking industry in Nigeria.
The
research will also discuss about the meaning, benefit of banking industry,
purpose of banking industry, causes and types of lending and credit facility
and tools used in loan monitoring and supervision.
This
research work will be divided into five (5) chapters in – order to have a
better understanding of the subject matter and aid locating of different chapters
and numbers where they can be found.
Chapter
one will discuss the purpose and objectives of
the
study, scope and limitation of study.
Chapter
two will cover the reviewing of different literature
from
different author that are relevant to the project.
Chapter
three will be based on the research methods used in carrying out the research
work.
Chapter
four is the presentation and analysis of data used.
Finally
chapter five will being summary of the work, recommendation, conclusions and
references.
TABLE OF CONTENTS
Title Page i
Certification ii
Dedication iii
Acknowledgement iv
Table of Contents vi
Proposal viii
CHAPTER
ONE
1.0 Introduction 1
- Objective of the study 6
- Scope of the study 7
- Limitation of the study 7
- Background of the study 8
- Statement of the problem 10
- Definition of terms 11
- Plans of the study 13
CHAPTER
TWO
- Review of related literature 15
CHAPTER
THREE
- Research methodology 38
- Background of the studies 38
- Historical background of the case
study 40
- Corporate Organization structure 44
- Population of the study 46
CHAPTER
FOUR
- Data presentation, interpretation and
analysis 48
- Source of Field Summary 48
CHAPTER
FIVE
- Summary, conclusion and recommendation 70
References 79
CHAPTER ONE
1.0 INTRODUCTION
It
is an established fact that Banking industry occupies a prominent position in
the Nigeria
economy today. The significance of banks stem from the fact that they are
custodians of the most sought after commodity on earth. Which is money.
Availability of financial capital is obviously a condition for the rapid development
and transformation of any national economy.
However, since the provision and
efficient management of this scarce resource is best facilitated by the
existence and appropriate function of financial institutions in the economy. It
therefore follows that banks have a vital role to play by making their vast
financial resources available for financing and promoting economic development
banks play this unique role through granting of loans which constitute a vital
function in banking operations, because of its direct effect on economic growth
and business development. Loans and bank lending which is the primary function
of commercial banks. It is the single most important source of gross income for
the commercial banks.
Lending contributes the larger part to a
bank’s profit, hence, it is the backbone of banking activities however, the
degrees of risk associated with lending is proportionate to it contribution to
profit.
As financial intermediaries, banks
assist in channeling funds form surplus economic development generally. Since
these funds are owned by third demands the depositors, prudence demands that
such funds should be efficiently managed to sustain the confidence of
depositors in the banking system and ensure the continued soundless of the
system itself and thereby minimize risk of the bank failures.
Unlike the depositor who is certain of
getting his money back on demand and, or when due a lending bankers is faced with
the problem of either delay in reimbursement or out right non-reimbursement by the
borrowers. As in case of National Bank of Nigeria which is being managed by
Nigerian Deposit insurance corporation (NDIC) due to inability to meet its
numerous customer’s cash needs. The bank was crippled by the non-payment of
about N800 million Naira (eight Hundred million naira lent out to customers.
Recovery of these huge debts became more difficult due to poor credit
administration and control reflective in subjective appraisal of loan request,
improper documentation, poor perfection of securities etc.
In January 1993, the newly reconstituted
management of Owena Bank Plc, discovered several cases of expenses incurred but
not properly booked, unearned income over statement and above all several
unsecured, unanalyzed loans which are not charged off or provisioned lack of
commercial orientation is also glaring in the management and administration of
staff leans in Owena Bank Plc.
By February 1993, total outstanding
staff loans was at over N60 million (sixty million Naira) exceed the bank’s
paid gross loans. These loans are granted at 28% interest rate per annual
against the prevailing cost of loans are said to have been used not for the
purpose originally intended and are not support with documentation to secure
the bank’s interest.
Many bank’s in Nigeria today
are facing similar problems of national bank limited and owena bank plc stated
above and many lead to bank failures if not urgently addressed. In fact, the
number of banks sin operation remained at 90 as at end-December, 2002 following
the insurance of an operating license to one bank (bond bank Ltd) and the
revocation of the operating license of another (savannah bank plc) during the
year.
Nevertheless, this worrisome position of
banking industry in Nigeria
possibly forms the federal government’s decision to amend C.B.N Decree 24 of
1991, which centers autonomy on the Apex Bank. This amendation granted a wider
power to of bank’s debtors, in addition
to the earlier provision in section 52 of the principal decree which authorizes
the nation’s apex bank to compile and circulate to all banks in Nigeria a list
of debtor whose outstand debts to any bank had been classified by bank examines
as bad debts.
From the above therefore, the need for
effective administration of credit to customers cannot be over-emphasized.
Thus, the effective supervision and monitoring loans to ensure that they do not
turn bad forms the theme of this study. A credit to beneficial to the bank only
when the principle and interest are fully paid.
1.1 PURPOSE AND OBJECTIVE
OF THE STUDY
The main purpose of the study is to
measure the credit administration pattern of commercial banks using first bank
Nigeria Plc as the case study.
The specific objectives of the study
are:
- To examine the credit policy and practices of first bank
- To review the credit administration and control procedures in the bank.
- To examine the management of bad debts and recovery process in the bank.
- To measure the effective of the procedure adopted in B and C above.
- To identify constraints associated with loan management
- To make recommendations based on the finding of the study.
EFFECTIVENESS OF CREDIT MANAGEMENT IN THE BANKING INDUSTRY (A CASE STUDY OF FIRST BANK OF NIGERIA PLC)
