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EFFECTIVE CREDIT MANAGEMENT IN THE BANKING INDUSTRY: A CASE STUDY OF ZENITH BANK PLC, LOKOJA

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 Sep 15, 2019 |  01:04 pm |  2288

TABLE OF CONTENTS

Title page

Approval page

Dedication

Acknowledgement

Abstract

Table of content

 

CHAPTER ONE

1.0      Introduction

1.1  Background of Study

1.2  Statement of Problem

1.3  Objective of the Study

1.4  Scope of the Study

1.5  Research Question

1.6  Statement of Hypothesis

1.7  Significance of the Study

1.8  Limitation of the Study

1.9  Definition of Terms

1.10 Organisation of the Study

 

CHAPTER TWO

2.0  Review of Related Literature

2.1  Credit

2.2  Nature of Credit

2.3  Credit Management

2.4  Goals of Credit Management in Banks

2.5  Variables of Credit Policy

2.6  Factors Affecting the General Level of Relievable

2.7  Effects of Non Performing Loans in Banks and Economy

2.8  Overcoming of Non Performing Loans in Banks and Economy

2.9  Risks Involved in Credit

 

CHAPTER THREE

3.0  Research Methodology

3.1  Introduction

3.2  Research Design

3.3  Area of the Study

3.4  Population of Study

3.5  Sample Size

3.6(i)      Method of Data Collection

3.6(ii)     Primary Data

3.7  Method of Data Analysis

 

CHAPTER FOUR

4.0  Data Presentation and Analysis of Data

4.1  Introduction

4.2  Presentation of Data

4.3  Test of Hypothesis

4.4  Discussion of Findings

4.5  Area of further Study

CHAPTER FIVE

5.0  Summary of Finding, Conclusion and Recommendations

5.1  Summary

5.2  Conclusion

5.3  Recommendation

Bibliography   

Credit Management is a very essential activity in various businesses today. It is also appreciated in the banking industry, where granting of credit in major activity performed by banking. Banks are supposed to carefully manage their credit in order to achieve maximum returns from them and also to minimize the risk that may be involved after these credits have been given out. This research work is conducted by the researcher to ascertain the quality of the credit policies applied in Zenith Bank Plc and find out if these policies are properly implemented in order to avoid the increase of bad debts incurred by Banks. Both historical and case study methods of research are used for this research work. Primary and Secondary data were also employed as sources of data collection in which interviews and questionnaires were both conducted to bank officials and customers. It was discovered in this research that bad debts which are usually incurred by banks are as a result of credit policies not being strictly adhered to. And credit officials should desist from sentimental tending and supervised tending scheme should be adopted. When all these are applied, it will ensure that credit management and in the banking industry will be effective.


CHAPTER ONE

1.0  INTRODUCTION

1.1  BACKGROUND OF THE STUDY

In the banking industry, one of the main functions of banks is the grating of credit to their customers. In doing this, the banks have guidelines to enable them succeeded and also service s when this credits are granted.

   Banks are expected to be paid at a repayment schedule time when deadline are not met the result is nonperforming loans. Non performing loans are loans that are unlikely to be paid. Any bad loans among the non performing are then written off from the account. Since any bad loans are seen to be irremovable by the banks, the banks involved in the task of granting credit must make sure they minimize the occurrence of bad debts through effective knowledge of credit management by those in charge of granting loans to customers. 

Before the advent of banks which serve as intermedianes between the surplus and deficit unit, the functions of credit management were performed by power money lenders who usually charged very high interest on their borrowing. The extent to which banking is accepted within any environment is the measure of the degree of sophistication of the generality of the population. Credit management also reflects an awareness of the inherent opportunity cost in holding idle cash.

1.2     STATEMENT OF PROBLEM

          The problems which are associated with credit management could be traced to inadequate credit policy adopted by the banks management and where this policies present and adequate. There may be strict adherence to them, many banks have encountered a number of problems in their recovery efforts. Some of there problems or constraints fall within the sphere of the banks control, while other fall outside the care of the banks influence.

          With the present stage of Nigeria economy every business needs financial supports to maintain continuity of it business activities.

          Therefore, the management of bank effort should be geared towards proper allocation of the banks scare resources so as to obtain maximum benefit for various businesses.

          Banks are supposed to carefully manage their credit in order to achieve maximum returns from them and also minimize the risk that may be involved after these credits are given out. From the foregoing, the specific problems of the study are:  -

i.        The level of credit policies implementation and adherence.

ii.        The extent of sentimental lending by credit officials.

iii.        The impact of supervised-lending scheme in curtailing bad debts.

 

1.3    OBJECTIVE OF THE STUDY

          This research work is conducted by thee researcher to ascertain the quality of the credit applied in Zenith Bank Plc and find out if these policies are properly implemented in order to avoid increase of bad debts incurred by banks.

 


OTHER OBJECTIVES ARE

i.        To highlight the level of sentimental lending by credit officials of the banks

ii.        To ascertain the impact of supervised-lending scheme of banks bad debts.

iii.        To appraise the degree of intimacy of loans seekers with banks audits effect on loan repayment.

 

1.4    SCOPE OF THE STUDY

          This research work is centened on the issue of credit management process in Zenith banking elaborating on how effective those facilities can be handed. It emphasizes on the credit management procedures, step and the short comings of the term. It is also analyses the precepts of granting credits on the banking sector (Zenith Banks) pointing out ways through which effective credit policies can be initiated and maintained.


1.5    RESEARCH QUESTIONS

  i.        What are credit management in banking sector?

ii.        What are the procedures involve in the credit management?

iii.        What are the problems and strategies in the management?

iv.        What are the involvements in the credit management?

 v.        What are the risk involved in the credit?

 

1.6    STATEMENT OF HYPOTHESIS

       It is known that hypothesis is a tentative statement or assumption made by a researcher as to the likely outcome of a research.

       For the purpose of this research work, the following hypotheses have been formulated.

Ho: The existence of effective and efficient credit management

Hi: The existence of effective and efficient credit management brings economic growth to the country.

Ho: Granting of credit facilities based on sentimental does not affect repayment by customers.

Hi: Granting of credit policies can be initiated and maintained.

 

 

 

1.7    SIGNIFICANCE OF THE STUDY

          The usefulness of the study of credit management in a developing country like Nigeria cannot be debtors represent very significant portion of the recruitment assets figure in the balance sheet of banks on the average. Yet, the mechanism of analyzing and reaching a decision whether or not to gain credit facilities to customers is only beginning to gain the significance it deserves. This research is not of significance of the bank offering credit, students and researchers and member of the public who are in business include: -

-          Presently handling of credit matter is the put upon which the survival of banking industry gyrates. Because major revenue of bank are realize from interest on loan, and very often the inadequately of a good credit policy frame work has been the major reasons behind high bad debts figure by banks. This research work will suitable aid banks in better formulating administrating and controlling their credit policy.

-          To student and other researcher conducting similar study or merely interesting in credit management issuers especially in basis. This research wok will doubt provide a theoretical basis for consultations.

-          To members of public who depends on banks on the extension of credit facilities. This research work would enlighten them on the proper use of credit in order to attain product success.


2.8    LIMITATION OF THE STUDY

          Owing to lack of time and resources at the researchers disposal, this research work is limited to activities of credit management dealings of Zenith banking. This study can not claim to have dealt with every aspect of other banks but it mainly focused on some vital areas in Zenith banking credit policies as outlined in the table of contents.

 

2.9    DEFINITION OF TERMS

          Banking industry: These are financial institution in a country‚Äôs financial system that engage in monetary transaction and are involved in collecting deposits, accepting and cashing cheques, granting loans and overdrafts to customers giving financial service to customers e.t.c.

Credit Management: This refers to ability of prudently maintain the resources available to a business.

 

Credit: This refers to a process of acquiring a good or service without immediate payment until a late data. In this research work, the meaning of credit is restricted to the extension to money in form of loans, overdraft and other facilities by bank to its customers usually being backed up with adequate security.

Overdrafts: Short-term loans with interest calculated on a daily basis. If the customer does not makeful use of the facility he is made to pay for the portion utilize only.

Loan Money: Lent out customer by banks.

Credit Standard: This refers to the minimum criteria management considers before the extension of credit to customers.

Credit Limit: This refers to the maximum amount of money a customer is allowed to borrow from credit customer.

Collection Period: - This is a procedure, which banks apply or follow to collect payments from credit customers.

Efficiency:  - This refers to the process of taking out a task in a way that produces the best or intended result.

Bad Debts: - This refers to a process where banking lend out money and is expected to be paid at a stipulated date.  But if the money is not paid at the date,  it become  uncertain and is later written off as bad debts.

Account Receivable: - These are accounts, which are created by banks and represent the right to receive an assets service in the future.

Collateral: - There are assets that customers may offer as security to obtain fro banks. It is usually a secondary way out in the case of default in payment by the borrower.

Interest Rate: - This is an extra amount of money which is paid in addition to the sum borrowed from banks by customers. It is usually agreed by both parties and expressed in percentage (%).

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