ABSTRACT
This
work was carried out to appraise credit management techniques in United Bank
for Africa (UBA) Plc, Gboko. Primarily, the work sought to find out the credit
management techniques adopted in United Bank For Africa (UBA) Plc. Gboko, to
trace the loads and advance granted by United Bank for Africa (UBA) Plc, Gboko
and to establish the relationship that exist between credit management
techniques and the performance of the Bank, among others. A survey research
method was used in the work and the data collected analysed using the
descriptive and inferential statistics. From the analysis, it discovered that
in United Bank for Africa (UBA) Plc, Gboko, the major credit management
techniques used are the appraisal, approved limit and installment disbursement
techniques. These techniques have positive influence on the performance of the
bank. The conclusion is that even through the financial institution has high performance
rating as a result of the use of sound credit mismanagement techniques, the
bank still needs to improve upon its efficiency level by giving its credit
management staff more orientations on self discipline and adherence to
professional ethics and by reducing its organizational levels to reduce
bureaucratic tendencies.
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND STATEMENT
Lending is one of the main functions of the Banks. Banks extend credits
to their customers in the form of loans, overdraft and advances. The sum of
these credits forms the debt or credit portfolios of the financial
institutions. Debts are presented as liabilities to the customers as they are
under obligation to pay interest and principal upon maturity (Edwin, 2005).
One outstanding problem in lending is that some customers fail to pay the
interest and principal as agreed in the loan contract. This constitutes a major
risk element to Banks, shareholders and the financial system as a whole. Credit
risk as noted by Ehbodaghe (1995) is the chance that those
extended credit by an organization will not repay with the result that
the moment, the risk with the largest loss incidence to Nigerian Banks. For
example, at the end of 1990, total classified (bad and doubtful) loans and
advances which could not be recovered by Banks stood at N11.9 billion. This
represented 44.2% of the total Bank loans and 43.8% of total Banks
shareholder’s funds Ehbodaghe (995).
Similarly, Adeyemi (2005) observed that as at June 2004,
nonperforming assets (i.e bad debt) constituted 19.5% of total loans and
advance granted by Banks in Nigeria. Situation as reported here hinders the
performance pf many Banks in the country and cause distress in the system hence
Banks require effective and efficient credit management strategies in order to
cope with the environment. Personal observations over the years indicate that
some Banks in the midst of this problems are still performing very well. This
implies that such Banks have adopted more effective and efficient credit
management techniques which give them competitive advantage over others. One of
such banks is UBA. It therefore became necessary to appraise the credit
management techniques of this bank in order to identify their strength factors
and recommend same to the other banks for improved performance.
The focus of this work has been on an appraisal of credit management
techniques in UBA Gboko. As noted above, the choice of this topic was informed
by the observed high level performance and stability of the Bank.
1.2 STATEMENT
OF THE PROBLEM
One
of the main functions of Banks is to grant loans and advances to customers (i.e
borrowers). The loans and advance created are the prime sources of income to
the Banks which enable the financial institutions to achieve their
profitability and shareholders wealth maximization objectives.
However,
as noted by Davidson (2005) a high proportion of the total loans and
advances granted by Banks are not usually repaid as at when due. Some turn into
bad debts which may not be recovered. The implications are:
(a)
Higher
write-off of bad debts by Banks with negative consequences for Banks profitability
and shareholders wealth.
(b)
High
reduction in the quality of the Bank’s risk assets and;
(c)
Gradual
reduction in customers’ confidence in the Banks e.g as happened to Spring Bank
Nigeria Plc and sky Bank Nigeria Plc among others.
It
is instructive therefore that for improved performance, banks need more
effective and efficient credit management techniques. Personal observations as
noted earlier indicate that UBA has a higher performance rating as compared to
what is obtainable in other Banks (such as mentioned above) which prompted this
research in order to recommend the techniques of credit management used by the
firm to the other Banks......
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