AN APPRAISAL OF LENDING POLICIES OF COMMERCIAL BANKS (A STUDY OF UNITED BANK FOR AFRICA PLC)

This study examined the appraisal of lending policies of commercial banks with focus on United Bank for Africa Plc. The study employed quantitative descriptive research method. Data were sourced basically through primary source with the aid of questionnaire. The research population of this study is made up 350. A sample of 20 was drawn from the population using the simple random sampling technique. The data collected were presented on tables using simple percentage. The formulated hypotheses of the study were tested using Chi square statistical analysis. From the findings of the analysis, it was concluded that co –operative societies has myriad of roles to play in rural development. It was recommended among other recommendations that interest rate be reduced to a level fair enough to encourage customers  to borrow and deposit money with the bank

2.2.1 Liquidity and Profitability

2.2. Forms of Commercial Bank Loans and Advances

2.2.4 Long –Term Loans

2.2.5 Bills Negotiated

2.2.6 Bond

2.3.1 Current Account Individuals.

2.3.2 Saving Account

2.3.3 Deposit Account

2.3.4 Sales of Draft (Bank Draft)

2.4.1 Integrity and Reliability of the Customer

2.4.2 Purpose of the Loan

2.4.3 The Amount of Loan Being Sought by Customers

2.4.4 Repayment Programme of the Advance

2.4.5 Duration of the Loan/Advance

2.4.6 Evidence of Past Performance

2.4.7 Security

3.3.2 Instrument

3.4.1 Primary Data

3.4.2 Secondary Data

References

Appendix: Questionnaires

Commercial banks are in the services industry, in safe keeping of money and valuables, remitting foreign and domestic exchanges, collecting cheques, draft, notes and other obligations and behalf of other customer. According to Christian Ammer, Deans Ammer in their books dictionary of business and economics, defined commercial bank as “bank whose principal functions are to accept demand deposit and to make short medium and long term loans chiefly to business firms.

Before going into the origin of credit disbursement by commercial bank in Nigeria, it is important to trace the historical development of commercial bank in Nigeria. Commercial banking started in 1892 with the establishment of Africa Banking Corporation in Lagos in 1894, that is two year later British bank for West African was established to take over the operation of the Africa Banking Corporation (ABC) which ceased to operates, this was followed by the established of several other banks.

The origin of credit creation by commercial bank can be traced back to surplus and deficit sector in Nigeria economy, the surplus sectors are those with excess money and have the need to deposit in the bank. While the deficit sector are those that do not have enough and looking for a place to borrow. The surplus is caused by income being greater than expenditure, while deficit is caused by expenditure being greater than the income. In this credit disbursement commercial bank act as financial intermediary between the economic agents that have surplus money to lend and those with shortage of funds and therefore need to borrow. When the bank reserve sector deposit there money with the bank, the bank reserve will increase. These reserves are earning interest to the bank. Bearing in mind that the bank need profit, what they do is to lend out the money after keeping certain amount required by the reserve requirement. In making credit available to the borrower, commercial banks are rendering a great social service’s which leads to increase production, expansion of capital investment and higher standard of living is obtained.

Credit disbursement by commercial bank is through creation, credit creation involves a situation where all commercial banks are expected to lend out some percentage of their daily deposit after returning their legal reserve requirement as prescribed by law. The proportion so lent out would go into a new bank which will in turn region the legal reserved and give out the rest as loans to customers who will utilized the money in away that is ultimate collector process it into other bank which takes it turn recirculation to sum collected.

The commercial banks have over the years proved be the most important financial intermediary. They have facilities for the rapid transformation of an economy for an away. They are the largest single group in financial sector. Out weighing by share volume of transaction all the non-bank financial institution put together.

In Nigeria, although the government has substantial share-holding in the equity capital of the banks, they are still regarded as part of the private sector. The commercial banks have contributed importantly to the economic development through their deposit holding and credit to the Nigeria economy.

This study entitled “An Appraisal of Commercial Bank Lending Policies to the Private Sector” attempts to appraised the various ways through which the commercial banks  disburse money in  form of loans and advances to the private sector’s, with a view to determining the extent of compliance with the Central Bank of Nigeria credit guidelines. The importance of being attentive to the commercial banks lending policies to the private sector cannot be over emphasized, some of the problems statement are:

That is to say the banks always grant credit facilities to the preferred sectors of the economy like agriculture and manufacturing at very high interest rates subsequently other problems as learnt by the researcher from some of the bank officials regarding lending to the private sectors as regards borrowing by customer are:

This study is important in the sense that it shows the ways loans and advances are made available to individual and companies by banks to enable them carry on their business with a view to repay back such loans at an agreed future previewed. The study is also significance because the findings will help the banks to identify that problems faced by their customers (the beneficiaries) and therefore help the policy makers to adjust the existing lending policy and or formulate new and appropriate lending policies or facilities in such a way as to reduce these problems.

It will also be immense benefit to future researchers on the same subject matter or in a similar circumstance.

This study will also provide data for planning purpose.

In a study of the types a lot of set backs are bound to come up.

The work will be constrained by many variables. The greatest identifiable ones are time factors, finance and respondents.