TABLE OF CONTENTS
CHAPTER ONE
1.0
INTRODUCTION
1.1
STATEMENT OF THE PROBLEMS
OBJECTIVES
OF THE STUDY
1.2
SIGNIFICANCE OF THE STUDY
1.3
LIMITATIONS OF THE STUDY
1.4
RESEARCH METHODOLOGY
1.5
DEFINITION OF TERMS
1.6
PLAN OF THE STUDY
CHAPTER TWO
2.0
LITERATURE REVIEW
2.1
TYPES OF BANK LENDING
2.1:1 TERMS LOAN
2.2:2 BANK GUARANTEE
2.2:3 LETER OF CREDIT
2.2:4 PROJECT FINANCING
2.2:5 SYNDICATED LOANS
2.3 CLASSIFICATION OF LENDING
2.4
PRINCIPLES OF GOOD LENDING
2.4
CREDIT POLICY AND OBJECTIVES OF THE BANK
2.5 CREDIT MANAGEMENT
2.5
IMPORTANCE OF LENDING
2.7 TECHNIQUES AND TOOLS OF CREDIT MANAGEMENT
2.6
CAUSES OF PROBLEM LOANS
2.7
IMPACTS OF EFFICIENCY LENDING FUNCTIONS
2.8
EFFECT OF LENDING AND CREDIT MANAGEMENT ON PROFITABILITY
AND GROWTH
CHAPTER THREE
3.0
RESEARCH METHODOLOGY
3.1
HISTORICAL BACKGROUND OF THE CASE STUDY
3.2
SOURCES OF DATA
3.3
SAMPLING METHOD
3.4
METHOD OF DATA COLLECTION
3.5
RESEARCH DESIGNS
3.6 THE POPULATION OF THE STUDY
CHAPTER FOUR
4.0
DATA PRESENTATION AND ANALYSIS
4.1
DATA PRESENTATION
4.2
DATA ANALYSIS
4.3 RESPONDENTS BY
YEARS OF EXPERIENXE
CHAPTER FIVE
5.0
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1
SUMMARY
5.2
CONCLUTION
5.3
RECOMMENDATIONS
REFERENCES:
CHAPTER ONE
6.0
INTRODUCTION
Bank lending evolved from the beginning when
the goldsmith discovered that only small proportion of the money kept with him
to save was in fact required by the depositor at any point in time and that he
could safely lend the rest to borrowers and charge interest thereon.
Commercial Banks hinged their consistent
existence in the profession on profit making or profitability. Hence, it is
chiefly regarded as aspect of financial operation system with a very high risk
business. In definition, commercial banks are seen as a financial institution
setup by individual(s) and even the government for keeping and lending money to
their respective customers with the view of making profit from such
transaction.
The place of commercial banking in the national
polity is so peculiar such that the banks engaging in commercial activities are
very important in the achievement of most governmental, economic and fiscal
policies objectives. One of the major aspects of the business of commercial
banks is that of extending credit to other sectors of the economy for their
smooth operation. The process of extending their credit is however known as
“LENDING”
However, undertaking the lending function exposes
the commercial banks to several risks, particularly credit risk, which is the
risk that bank will lose either the whole of the principal of part of it or the
interest thereof.
Lending services by banks is being managed by
the credit management portfolio of the bank. To ensure proper management
therefore, credit management cannot be overemphasized.
According to “PANDY” (2008) Credit Management
can be defined as the procedure, steps and action taken in the loan recovery
and lending a stated in the credit. Policy manual. Credit management concern
itself with the formulation of credit policies with frame work of banks overall
corporate objectives.
Credit policy influences the management of
credit. A good policy must adequately provide and state procedure in granting
different types of credit, credit portfolio and policies for lending officers.
Apparently, the role of commercial bank is
basically intermediation. This involves the act of mobilizing fund the surplus
areas as deposits and passing of these funds to the difficult area as loans and
advances. The depositors that keep their money with the banks do so, based on
trust they expect to credit their money back on demand or as agreed upon.
Consequently, the commercial bank is faced with
the responsibility of not only ensuring that the loans and advance are repaid
as at when due, but also ensuring the depositors can have their funds on demand
or as agreed upon, the way and manner the lending function is carried out in
any commercial bank may have far reaching implications on the liquidity of the
banks. More so, the lending functions also affect the profitability of the bank
as well as its continued existence and future survivals.
1.1
STATEMENT OF THE PROBLEMS
Lending through very profitable and important
to the bank and customer posses some risk. Distress in the commercial banking
industry can be attributed to poor credit management and loan policy, many
loans have proven bad due to non- repayment by the customers. Inconsistency and
inefficiency of lending officers to make appropriate judgment in the allocation
of loans.
As a result of the complexity and
inefficiencies in the lending function of the banks, this study is intended to
examine how a well articulated credit policy and credit management can reduce
to a considerable extent. The research study provides answer to the following
questions:-
1.
What are the practices
of Nigerian banks in their lending function and in the management of loans and
advances?
2.
What are the general
principles and concept of lending in banking?
3.
What benefit and impact
can efficient and effective lending function can have on the bank, the
customers, the banking system and the economy at large?
4.
What significant steps
and action can be taken to drastically reduce the incidence and the causes of
bad problem loans, and also to reduce bad lending?
5.
What are the
importances of lending?
OBJECTIVES OF THE STUDY
·
To highlight the
general principles and concept of lending banking industry.
·
To determine and know
whether commercial banks follow the general acceptable principle and practices
of lending in Nigeria.
·
To examine the benefits
and impacts an efficient and effective lending function can have on the banks,
the customers and the economy at large.
·
To discuss significant
steps and action that can be effective completion and quality of the research
work.
·
To discuss the
importance of lending and credit management.
1.2
SIGNIFICANCE OF THE STUDY
Finding from this study will be used to
commercial banks, in the sense that it would let the bank clearly understand
and appreciate the appropriateness of proper lending and credit management on
banks profitability growth, as a useful means for banks to be able to meet
their day to day obligations.
Also, effective credit management help in
enforcing government, laid down rules and regulations pertaining to lending of
a certain amount of money and also at a particular point in time.
The study will also be benefit to the students
in knowing the rules and principles guarding lending and credit management for
future career.
Lastly, the study will also be of benefit to
the public (Bank-Customer) to let them know that there are principles for lending;
this will make them to be prepare for any future borrowing.
1.3
LIMITATIONS OF THE STUDY
This study has chosen Central Bank of Nigeria
out of the twenty four mega banks to critically examine the effect of lending
and credit management on banks profitability growth
However,
the research work has been constrained as to time, lack of recent and adequate
materials. Lack of corporation of the case study. Hence, effort has been made
to ensure the above limitation did not hinder effective completion and quality
of the research work.
1.4
RESEARCH METHODOLOGY
The research
work on the effect of the lending and credit management on the banks
profitability and growth. The research work were gathered from two main sources
of data i.e. primary and secondary sources of data.
The primary
data employed include questionnaire and interview, while the secondary data
include textbooks, internet, journals, current annual reports e.t.c.
1.5
DEFINITION OF TERMS
LENDING: - It involves the granting of loans and advances to various
customers of the bank.
CREDIT: - It is the transaction between two parties in which one,
the creditor or lender supplies goods money return for promised future payment
by the other known as the debtor or borrower.
MANAGEMENT: - This is the process of designing and maintaining an
environment in which individual working together in group efficiently accomplishes
selected aim.
CREDIT MANAGEMENT:- Is the process of ensuring that all loans and advances,
banking or accommodation granted to a customer by a bank are well managed to
ensure that the facility run to a satisfaction according to the term
governing them are ultimately on the due
data.
LIQUIDITY: - This is the ability of banks to convert assets into case
with minimum risk cost and delay.
PROFITABILITY: - This is the ability of banks to make profit for its
shareholder and the ability to have left over after all expenses have been
deducted with out any liability.
RISK: - This is the situation whereby the outcome of an occurrence
hence a known or estimable probability.
BAD DEBTS: - These are debts that are irremovable or uncountable and no
longer bankable assets, they are debt that have not been and are not expected
to be paid.
NON-PERFORMING LOAN: - These are loans and advances upon which the bank has
experience default from customer in terms of repayment of the principal amount
or interest.
1.6
PLAN OF THE STUDY
Chapter one is the introduction aspect while chapter two is
the literature review.
Chapter three deals with the research methodology and
chapter four include the data presentation and analysis.
Finally, chapter five contains
the findings, summary of the study, conclusion based on the data analyzed and
recommendations of the study.
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