TABLE OF CONTENTS
Title page i
Certification ii
Dedication
iii
Acknowledgement iv
Table of contents v
Abstract vi
CHAPTER ONE
1.0 Introduction
1.1 Background
of the study
1.2 Statement
of the study
1.3 Research
hypothesis
1.4 Purpose
of the study
1.5 Scope
of the study
1.6 Limitation
of the study
1.7 Significance
of the study
1.8 Definition
of the study
CHAPTER TWO
2.1 Literature
review
2.2 Liquidity
theories
2.3 Original
of bank lending
2.4 Form
and classification of bank credit
CHAPTER THREE
3.1 Research design
3.2 Area of study
3.3 Population of the study
3.4 Sample
and sampling procedure
3.5 Instrument
for data collection
3.6 Method
of data collection
3.7 Method
of data analysis
CHAPTER FOUR
4.0 Analysis and
interpretation of data
4.1 Introduction
4.2 Analysis of research
question
CHAPTER FIVE
5.0 Summary, conclusion and
recommendation
5.1 Summary
and findings
5.2 Recommendation
5.3 Conclusion
References
ABSTRACT
Liquidity management seeks ensure the attainment of short-term objective of
monetary policy, which means maintenance of desire monetary aggregate. It is
very important aspect of monetary policy implementation and control commercial
banks create money every creates incompatible with the absorption capacity of
the economy macro economic instability may result in order to maintain relative
macro economic stability must enhance in place on liquidity management to leave
out the saving liquidity growth in the banking system lending and investment
operation of commercial bank have been widely and extensively discussed in
various literatures. It has also been stated that anyone who express to borrow
from commercial bank should be most concerned with the loan and investment policies
and techniques. The principal profit making activity of a commercial bank
create loan available to its customer and in doing this, it faces uncertainties
and therefore risks money kinds. These uncertainties are with regard to its
features volume and costs of funds and the future income and price of the
various types of assets that it acquire. A bank does not therefore consider
earning alone instead is seeks some optimum combination of earning liquidity and
safety to secure more or one it must often sacrifice some of the other for
instance to get higher earnings a bank many have to incurred more risk and
liquidity and vice-versa risk because of the very high ratio of their liability
to their total assets. Liquidity and management have implication on bank
profitability and ability to meet its obligation both to the regulation
authority depositions and shareholder.
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Liquidity management seeks ensure the attainment of short-term objectives
of monetary policy, which means maintenance of desire monetary aggregate. It is
very important aspect of monetary policy implementation and control commercial
banks. Create money everyday but when the quality of money created in
incompatible with the absorption capacity of the economy. Macro economics
instability may result in order to maintain relative macro economics stability
much reliance is place on liquidity management to leaven out the swing
liquidity grown in the banking system.
Lending investment operation of commercial bank have been widely and
extensively discussed in various literatures. It has also been stated that
anyone who express it borrow from commercial bank should be most concerned with
the loan and investment policies and techniques.
The principal profit making activity of a commercial bank is making loans
available to its customer and in doing this; it faces uncertainties and
therefore risk money kinds. These uncertainties are with regards to its feature
volume and costs of funds and the future income and price of the various type
of assets that it acquires.
A bank does not therefore consider earning alone instead is seeks some
optimum combination earning liquidity and safety o secure more or one. It must
often sacrifice same of the other for instance, do get higher earning, a bank
may have to incurred more risk and liquidity and vice-versa liquidity and
credit management in Nigeria banking industry.
However, commercial banks are limited in their ability to assure risk because
of the very high ratio of their liability to their total asset.
1.2 STATEMENT
OF THE STUDY
Liquidity and credit management have implication on bank profitability
and ability to meet its obligation both to the regulation authority, depositors
and shareholders. It could trigger off mass cash withdrawal thus plunge the
bank into deeper crises. In analyses of credit and liquidity management of
community bank.
I shall examine its assets quality, which include its performing and non
performing loans. In addition efforts would be made to look onto the bank capital adequacy and
ratio and its stock of risk asset using different measure of liquidity
solvency.
1.3 RESEARCH
HYPOTHESIS
1. Ho: Credit
facilities is not useful in banking industry.
Hi: Credit
facilities is useful to banking industries.
2. Ho: Microfinance bank has no impact on the
development of Ifelodun Local
Government.
Hi: Microfinance
bank has impact on the development of Ifelodun Local
Government.
3. Ho: Microfinance
bank render assistance to small scale industry
Hi: Microfinance
bank does not render assistance to small scale business.
1.4 THE
PURPOSE OF THE STUDY
Commercial banks act as matter vies by collecting deposition and paying interest
on them and granting loan charging the borrowers and depositors, their main
goes of bank is to make profit. Part from granting loan bank also generates
liquidity and credit management in Nigeria banking industry. Profit on
investment in order to maximize their earning every bank attempt to structure
its asset and abilities in such a manner as to yield the highest retune subject
to some sufficient cash and other asset in its portfolio together with
liability to raise funds quickly from other sources to enable to meet its
payment obligation and financial commitment in a timely manner.
However way factors bear on nature of operations of commercial bank
generally and lending functions in particular. An important factor which is the
focus of this paper is the “theories in liquidity management of commercial
bank” these theories defined by Wool Worth G. Walker (1967) have existed since
the early days of commercial banking.
1.
The commercial loan which stated that commercial
liquidity is assured as long as its assets are held in short loan. That would
be liquidity in the source of business. The ideal assets under this theory are
short-time size liquidity loans granted for working capital pursues.
2.
The shift ability theory which postulated a bank
liquidity is maintained of it holds asset that could be sold or shifted to
other lending or investors for cash.
3.
The anticipated income, theory which states that bank
“liquidity can be planned if scheduled repayments are based on the future
income of the borrowers”.
4.
The liquidity management theory which maintains that
banks can meet liquidity management requirements by hidings in the market for
additional funds.
These theories were founded in a developed environment different from the
Nigeria
environment which is till developing one liquidity and credit management in Nigeria banking
industry.
This study there aims to discover the extent the microfinance bank plc is
guided by the above enumerated theories in the management of its lending
function and global liquidity problem. To supplement this lending practices and
procedures of the bank will also be evaluated.
An in-depth attempt is made to analysis the relevant ratio relating to
credit and I liquidity of the bank. This study is sub-divided of the study the
work whilst relevant is review in chapter two with brief history of the bank,
the methodology of research is presented in chapter three, chapter four is an
analysis of data the work is summarized conclusion and recommendation are given
in chapter five. The rest of these chapters take a cursor look at the
historical development and functions of the bank in Nigeria as will as overview of
liquidity problems in commercial banks.
1.5 THE
SCOPE OF THE STUDY
The study shall focus on the credit and liquidity management of
microfinance bank for a period of three years 2002 – 2005, this period is
selected because it is current and has also witnessed both bank boon bank
failure resisting from poor liquidity and credit management. This focus is no microfinance
bank plc because of its top position in the banking industry.
1.6 LIMITATION
OF THE STUDY
In any research work a few problems usually encountered, first and
foremost, the time factor constrain bound to hinder the research because of the
time constraint. It was not possible to carry out the study extensively as it
was originally anticipated liquidity and credit management in Nigeria banking
industry. There is also problem arising from collection of the questionnaire
distribution due to non challent attitude of some respondents library facility
is another limitation factors there is inadequate in libraries to consult for
the purpose of selecting secondary data
1.7 THE
SIGNIFICANCE OF THE STUDY
The services offered by commercial banks are numerous and they include:
a.
Mobilization of saving: Commercial banks performs a
very important function to all sector of the economy by providing facilitate
for the mobilization of saving and making the funds available to business to
enable them to expand their productive capacity and to individuals and
households to facilitate consumption.
b.
Extension of credit facilities: According to Needit in
(1984) the primary function o commercial bank is the extension or waiting
borrowers in banking credit available commercial banks are rendering great
social services through their actions production in increase capital investment
is expanded and high standard of lives in realized.
c.
Transfer of funds or money transmission commercial
banks serve as medium for transforming funds. They facilitate payments by
enabling business, Government and consumers to transact without cash, cheques
and credit card are use for the bank purchases as measured by naira amount of
transaction.
d.
Creating money commercial bank create money used to
extend productive facilities otherwise there would be a slowdown of economy activities
generally as business would be force to wait until sufficient profit are made
before they could expand liquidity and credit management in Nigeria banking industry.
e.
International trade services: All commercial banks are
involve in the financial aspect of international trade and the service required
supporting this important part of the country’s economy such services included
bills for collection documentary, credits and open amount which are instrument
use in impart and expert trade.
f.
Services to the travelers: All commercial bank in
Nigeria offer services to the travelers by providing them with travelers
cheques are form of travel currency giving the would the security of letters of
credit and the convenience of a local currency.
g.
Status inquiries: A customer gives his name to another
bank for reference purpose and enquiry is sent to the customer bank to find out
about his financial and personal accounts in commercial bank.
h.
Business advisory services: The aim of this service is
to assist small business customer to develop their business to such a way that
they can attract bank finance.
1.8 DEFINITION
OF TERMS
1. Bank: A place were goods and other
valuable materials are kept i.e. cash, asset, etc they also accept cash deposit
from the public and other business concern.
2. Cheques: This is the instrument use
by the customers operating current account with the bank to withdraw money.
3. Loan: This is the [process of
lending money to banks customer in which the interest is agreed and fixed it is
only meant for customer operating current account.
4. Collateral: A credit or ledger is
not satisfied with the amount of capital possessed by the borrower may support
the debt property whose value can be liquidity and credit management in Nigeria
banking industry determined early and which can be readily converted into cash
is preferred for this purpose.
5. Capital: The types and value of
capital if the borrower affect his ability to obtain credit capital is
protecting the creditor against loss hence the credit analyst must carefully
scrutinize the balance sheet of the borrower.
6. Credit Transfer: It is a types of
banking method of payment whereby cash can be withdraw fro another branch of
the bank or another bank entirely from that where the account is held.
7. Bank Draft: bankers draft is
regarded as near money instrument, it is more acceptable than a cheque can be
dishonor for lack of funds or irregularities in preparation but in the case of
draft, the finds has been moved out of the customer account.
8. Microfinance Bank: Can be described
as a self sustain financial institution owned and managed by a group of people
in microfinance for the purpose of providing credit collection deposit and
other financial services to public largely.
9. Small Business: Small business
refers to self instituted largely self financed and closely self managed and it
is of relatively small size when considered as part of the industry.
10. Organization: In economic term
organization can be described as economic institution having materials
resources for the purpose of making production of profit, liquidity and credit
management in Nigeria
banking industry.
11. Deposit Account: Saving accounts
funds that are not required for immediate use can be deposited in this account
fund deposited are usually for a special period which may be between five month
to one year thus its termed turn deposit.
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