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This research work critically examines credit management, its techniques and risks in Nigeria mortgage banks with Mayfresh Mortgage Bank LTD, Aba Branch as my précised reference point. The objectives of this study includes to x-ray the ways Mayfresh mortgage bank manage credit risk; the credit management techniques adopted by Mayfresh and the volume of loans and advances granted by the bank to its customers; the influence of credit management techniques employed, on the level of banking performance of Mayfresh Mortgage Banks; if Mayfresh mortgage bank strictly adhere to the use of appropriate credit management techniques; and the difficulties associated with the credit management techniques employed by Mayfresh Mortgage Bank Limited, Aba. In this study, literatures were empirically reviewed, primary and secondary data collated from a sample size of 56 staff (although only 51 staff responded). A total of five (5) hypotheses were formulated to guide the study and the data collated were critically tested and analyzed using “Correlation Model”, this was efficiently achieved with the aid of “SPSS Statistics 20 Software”. The result obtained unveils that Mayfresh mortgage bank is not aged biased, rather work experience is regarded best; they adopt appraisal techniques, they do not monitor or regulate the usage of the loan facility granted to their customers. Credit management techniques have positive and significant influence on the bank, they also establish credit limit, use credit insurance and ensure that the agreement terms are clear to and quite understood by the customers. It was also uncovered that the bank faces the problem of enacting effective and efficient credit management due to lack of objectivity, insider abuse, and bureaucracy. Having successfully concluded this research work, based on the findings the study recommended that if Mayfresh Mortgage Bank Aba, can strictly adhere to some credit management and limiting policies, most of the problems attached to credit management as they experience, would definitely be a thing of the past; the bank should give its credit management staff more orientation, oneself-discipline and adherence to professional ethics in order to make them more objective in the discharge of their credit management functions and duties thus, all activities linked with insider abuses should be discouraged. For effective management of credit given to customers, the bank is advised to imbibe the spirit of “after–sales–services”; they should always emphasize on collateral, the use of credit insurance policy and the litigation to minimize risks resulting from investing in vulnerable clients and maximize returns; bureaucracy in the organization should be reduced by decentralizing some functions and reduction of organizational levels; time to time orientation should be made available for credit management staff to avoid loses and align with the banks objectives with respect to credits; they should develop a standard process for handling overdue account of their debtors.


Cover page                                                                                                                              i

Title Page                                                                                                                                ii         

Declaration                                                                                                                                                                                                                                                                                                            iii

Certification                                                                                                                          iv

Dedication                                                                                                                              v

Acknowledgements                                                                                                                vi

Table of Contents                                                                                                                   vii

List of Tables                                                                                                                          xi

Abstract                                                                                                                                  xiii




1.1      Background of the Study                                                                                      1

1.2      Statement of the Problem                                                                                     3

1.3      Objectives of the Study                                                                                        4

1.4      Research Questions                                                                                              5

1.5      Research Hypotheses                                                                                            5

1.6      Significance of the Study                                                                                     6

1.7      Scope of the Study                                                                                                7

1.8      Limitations of the Study                                                                                                   7

1.9      Profile of the Organization under Study                                                               7

1.10        Operational Definition of Terms                                                                          9



2.1      Conceptual Framework                                                                                        10

2.1.1      Process of credit management                                                                  13

2.1.2      Types of  bank Credit                                                                               14

2.1.3      Credit policies and procedures                                                                 16

2.1.4      Credit analysis                                                                                          16

2.1.5      Credit information                                                                                    19

2.1.6      Credit process                                                                                           19

2.1.7      Lending objectives and loan policies of bank                                          22

2.1.8      Types of lending                                                                                       24

2.1.9      Types of loans and their features                                                              25

2.1.10   Credit management strategy                                                                     28

2.1.11   Compliance with loan agreement                                                             30

2.1.12   Contact                                                                                                     30

2.1.13   Operation of account at various branches                                                31

2.1.14   Functions of credit department                                                                31

2.2  Theoretical Framework                                                                                              32

2.3  Empirical Studies                                                                                                       34

2.4  Summary of Review Related Literature                                                                     36

2.5  Gap in Literature                                                                                                        36



3.1  Research Design                                                                                                         37

3.2  Sources of Data                                                                                                          37

3.3  Population of the Study                                                                                              38

3.4  Sample Size Determination                                                                                        38

3.5  Description of the Research Instrument                                                                     38

3.6  Validity of Research Instrument                                                                                39

3.7  Reliability of Research Instrument                                                                             39

3.8  Method of Data Analysis                                                                                            40




4.1  Return Rate of Questionnaire                                                                                     41

4.2  Data Presentation                                                                                                        41

4.3  Test of Hypotheses                                                                                                     47

4.4  Result Discussion                                                                                                       51




5.1  Summary of Findings                                                                                                 54

5.2  Conclusion                                                                                                                  55

5.3  Recommendations                                                                                                      55

5.4  Area for Further Studies                                                                                             57










4.1: Questionnaire Distribution and Returns                                                                          41

4.2: Sex of Correspondent                                                                                                      41

4.3: Respondents Qualification                                                                                              42

4.4: Job Experience                                                                                                                42

4.5: Which Department are you currently Employed in Mayfresh

  Mortgage Bank, Aba.                                                                                            42

4.6: What is your position in Mayfresh mortgage bank, aba                                                 43

4.7: Are you involved in credit management?                                                                       43

4.8: Does your bank Strictly Adhere to the use of Appropriate Credit Management? 43

4.9: What type of Credit Facility do you extend to your customers?                                     44

4.10: Who are your Major Customers/Credit Beneficiaries?                                                44

4.11: What Credit Management Techniques does your bank adopt in

Managing Credits?                                                                                               45

4.12: Is there any relationship between Credit Management Techniques

Adopted and the Volume of Deposit Mobilized by your bank?                           45

4.13: What are the Difficulties Associated with Credit Management

Techniques and Facilities granted in your bank?                                                 46

4.14: What is the Influence of Credit Management Techniques on the

         Bank Level of Performance?                                                                                  46

4.15: What are the ways that your bank Manages Credit Risk?                                            47

4.16: Correlation on ways of Managing Credit Risk in

         Mayfresh Mortgage Bank                                                                                        48

4.17: Correlation on Credit Management Techniques Adopted in

         Mayfresh Mortgage Bank                                                                                       49

4.18: Correlation on the Influence of Credit Management Techniques on the level of

         Bank Performance                                                                                             50

4.19: Correlation on if the bank Strictly Adhere to the use of Appropriate

         Credit Management Techniques                                                                       51

4.20: Correlation on the Difficulties Associated with the Credit Management

         Techniques adopted by Mayfresh Mortgage Bank Aba.                                   52










One of the most pressing problems facing the mortgage banks in Nigeria today is the best credit management techniques to be employed so as to ensure that credits lent out to their customers are repaid as at when due. The banking industry has been known for its intermediary role in providing financial assistance to individuals and cooperate bodies so as to enhance the economy of a nation. According to Driga (2012) “Bank” is defined as a profit-making organization that perform as an intermediaries, connecting borrowers and lenders by providing temporarily available resources for businesses and individual customers as well as loans for those in need of financial support. These financial mediations are carried out in so many ways which includes, granting of credit loans and advances to customers (this constitutes the major part of bank lending), bond issued by banks for and on behalf of their customers. Banks extends credits to their customers in the form of loans, overdraft and advances, the sum of these credits forms the debts or credit portfolio of the financial institutions. Debts are presented as liabilities to the customers as they are under an obligation to pay interest and principal upon maturity (Edwin, 2005). The outstanding problem in lending is that some customers fail to pay the interest and principal as agreed in the loan contract as at when due. This constitutes a major risk element to the Banks, shareholders and the financial system as a whole.


Similarly, in 2005, Adeyemi observed that as at June 2004, non-performing assets (i.e. bad debts) constitutes 19.5% of the total loans and advances granted by Banks in Nigeria. Situation as reported here hinders the performance of many Banks in the country and causes distress in the system. Hence, Banks require effective and efficient credit management in order to cope with the demands and behaviors of the society. Personal observations over the years indicated that most banks in the midst of all these problems still perform above average. This implies that, such performing banks must have adopted more effective and efficient techniques of credit management, which gives them competitive advantage over the less performing ones. One of the most pressing problems in the Nigerian banks today, is to ascertain the best credit management technique to be employed so as to ensure that money lent out to their customers are fully recovered without being involved in any risk.


With reference to Mortgage Banks in Nigeria, credit management has become strategic in the conveyance of or lien against property (as for securing a loan) that becomes void upon payment or performance according to stipulated terms. Mortgage in Nigeria is as old as the colonial era but today has been redefined by the CBN (Central Bank of Nigeria) with operation jurisdiction given to each according to its category. Sequel to a press release by the CBN on the 25th Feb, 2014, it was announced that the apex bank has approved seven (7) out of eighty nine (89) firms as primary mortgage institutions. According to the source, the firms include Sun Trust Savings and Loans, Mayfresh Mortgage, Jubilee Life, Platinum Savings and Loans, Trust Bond, Kogi State Savings and Loans and Abbey Building Society. Consequently, based on the mortgage bank consolidation in the country as demanded by CBN in 2010, a compliance deadline of April, 2013 was set and the aforementioned seven (7) met up with the minimum requirement of N5billion while thirty three (33) others out of the remaining eighty two (82) complied with only the capitalization requirement of N2.5billion, which licensed them to operate only in a particular state of their choice in the country. This categorized them into the secondary mortgage institution. Traditionally, the key duties of Mayfresh Mortgage Bank LTD, ABA (my study reference), is to increase capital investment, housing investment are also expanded and thus, an improved standard of living is realized. But today they have extended their features to granting different types of soft loans with lesser payback time. This extended features lies on the capacity of the services they can render to their customers and it basically includes rendering great financial services and the extension of credits to worthy borrowers.



As previously stated, one of the major functions of the bank is to grant credits (loans and advances) to customers .These credits created are the prime source of income to the bank which enables the financial institution to attain profitability with its shareholders, achieving wealth maximization objective. Credit management techniques employed therefore varies from bank to bank; this is due to the challenges faced by these banks as a result of the inability of their borrowers to repay their credits as at when due, making it quite difficult to single out an adequate/effective credit management type. Naturally, banking is a risky business especially as it involves lending. The credit policies and management techniques of these banks reflects on the risky nature of the business and that is why credits are given to justified customers upon agreement on certain terms and conditions which are generally referred to as the “Canons of Lending”. These conditions often include;

1.     How much does the customer want to borrow?

2.     Why does the customer want the loan?

3.     Duration of the loan?

4.     How does he intend to repay?

5.     How consistent and reliable can his means of repayment be?

6.     Is the customer’s business financially strong enough to manage any set back on his repayment plan?

7.     Evidence of past performance?


According to Mr. Uche Maduabum, the head of credit department in Mayfresh Mortgage bank, who stated that despite adherence to these canons, Mayfresh Mortgage Banks still suffers huge portfolios of overdue debts most of which are bad and doubtful. Thus, the mammoth question lies on whether these canons of lending are not adequate to stern the tide of defaulters in loan repayments? Or is it that the problem is due to the recalcitrant nature of Nigerians? This research x-rays and unveils whether Mayfresh mortgage bank credits are adequately collateralized or if the credits are given based on nepotism and cronies of staff of the bank as to warrant the high rate of credit defaults being experienced by the bank.



The main objective of this study is to generally ascertain and evaluate the credit management techniques in Nigeria Mortgage banks with Mayfresh Mortgage Bank Limited Aba, as a reference point, and the specific objectives are to;

1.     Examine the ways Mayfresh mortgage bank manage credit risk.

2.     Examine the credit management techniques adopted by Mayfresh and the volume of loans and advance granted by the bank to its customers

3.     Examine the influence of credit management techniques employed, on the level of banking performance of Mayfresh Mortgage Banks.

4.      Examine whether Mayfresh mortgage bank strictly adhere to the use of appropriate credit management techniques.

5.      Examine the difficulties associated with the credit management techniques employed by Mayfresh Mortgage Bank Limited, Aba.



In this study, the following research questions were puzzled upon:

1.     What are the ways of credit risk management in Mayfresh Mortgage Bank?

2.     What are the credit management techniques adopted by Mayfresh Mortgage Bank LTD, Aba and the volume of loans and advance granted by the bank to its customers?

3.     What is the influence of credit management techniques employed, on the level of your bank performance?

4.      Does Mayfresh Bank strictly adhere to the use of appropriate credit management techniques?

5.     What are the difficulties associated with credit management techniques as employed by Mayfresh Mortgage Bank LTD, Aba?



The following research hypothesis articulated and tested in the study:

Ho1: There is no significant relationship between credit risk and the way it is been managed in Mayfresh Mortgage Bank LTD, Aba.

Ho2: There is no significant relationship between credit management techniques employed by Mayfresh Mortgage Bank LTD, Aba and the volume of loans and advance granted by the bank to its customers.

Ho3: There is no significant relationship between credit management techniques employed and the bank level of performance.

Ho4: There is no significant relationship between credit management techniques and the bank strictly adherence to its uses.

Ho5: There is no significant relationship between the difficulties associated with the credit management techniques employed by Mayfresh Mortgage Bank LTD, Aba.



It is rarely an exaggeration that the difference between success and failure in the banking industry is in effective management of the bank loan and advances. Effective credit management (mostly in banks) is vital to the protection of assets and achievement of profitable investments. Consequently, this study is significant in the following perspectives.

·       It provides information and inputs that could be useful in improving debts/credit management efficiency in the bank and other banks or financial institutes.

·       The work stipulates crucial information and strategies capable of minimizing credit/debts risk in the Nigerian banking sector, enhance good business relationship and maximize profit.

·       The research provides additional put to secondary data for further researches in the subject area or other related topical issues.

Above all, the work increases the researcher’s knowledge and understanding of credit management techniques and its relevance in improving the performance of Nigeria mortgage Banks and the Nigerian financial system at large.



The issue of credit management is quite embracive covering customer relationship and confidence, building loan application appraisal, loan approval and disbursement schedules/systems, loan supervision, loan recovery and bad debt management strategies, etc. in Mayfresh bank Ltd, Aba. All these aspects are incorporated into the work.



In a study of this nature, the following limitations were encountered in the hunt for information such as:

1.     Dearth of information

2.     Uncooperative attitude of some respondent. 

Sequel to all these and other constrains the research have so far been successful.



This Bank was incorporated in October 22, 1993 and license to commence mortgage banking by the Federal ministry of Works and Housing on April 27, 1995 with its registered head office at No. 83 Aba-Owerri Road, Umungasi – Aba, Abia State. It was established with the aim of becoming one of the foremost mortgage banks whose products and services creates positive impacts on the lives of the citizenry especially the lower strata of the society of which constitute a vast majority of the Nigeria populace,  and at the same time, meet other corporate responsibility such as offering appreciable returns to investors. It has the vision of growing into a mega mortgage bank and carving out a niche for themselves in the area of good market share through effective and efficient service delivery using our network of branches so that we can be second to none in the country. Today, Mayfresh Mortgage Bank has stood with 22 branches located in different states (Lagos, Onitsha, Anambra, Enugu, Abakaliki, Abuja, Nassarawa, etc.) of this country and thus, offers a wide range of banking services. This includes the following:

·       Gold Deposit Account

·       Saving Account

·       Mayfresh Call Account

·       Mayfresh Target Account

·       Children Educational Saving Scheme

·       Christmas Savings Account

·       Salary Advance

·       Shares Acquisition Scheme

·       Business Advisory Services

·       Mortgage Current Account

·       Loan Facilities

·       Residential Housing Financing

·       Credit Facilities For Land Purchase and Mortgage

·       Accessing NHF Facilities

·       Estate Development Financing Scheme

·       University Hostel Development Financing Scheme

·       Christmas Incentives Scheme

·       Mayfresh Saving Extra

·       Other Banking Services – which concentrate more on mortgage financing and sometimes extends to overdraft.

They also have some other promotion products such as, Diamond Home Ownership Account, Mayfresh Top Cooperative Home, Mayfresh Platinum House Savings, Target Account Promo, Mayfresh Easy Home Ownership Account, Mayfresh silver Mortgage, Mayfresh Gold Home Savings Account, Mayfresh University Grant (University Community Savings Promo).



·       Credit: – This is a financial assistance in the form of loans and advances granted by banks to their customers.

·       Credit Management: – This is the skillful treatment, delicate contrivance or managing of sums of money placed at a person or corporate body’s disposal by a bank or financial institution.

·       Credit Analysts: – These are specialist, employed in the credit management department who are responsible for scrutinizing each loan application.

·       Collateral: – It is assets the customers may offer as security to obtain credit in case of bad debt.

·       Bad And Doubtful Debts: – This refers to all the non-performing credit facilities to reflect such specification in the CBN prudential guidelines.

·       Credit Policy: – It is rules and regulations guiding banks in their lending.

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