– Credit Management and Debt Collection in Commercial Banks in Nigeria –
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ABSTRACT
Banks are financial intermediaries between two groups: the savers – depositors and borrowers – spenders. Their activities make it possible for idle funds to be transferred to individuals, firms and government who will use this productively.
The surplus units, which the banks borrow from demand the best possible terms in, the rates of interest and maturity structures and maximum liquidity to enable them to have funds back, when they want them or as agreed.
Also, the deficit units which borrow from the banks would want to borrow when they need funds and as cheaply as possible.
Like the lenders, the borrowers also impose the obligation of maximum liquidity on the banks to enable them to obtain the funds when they need them.
The main source of income and profitability of banking remains the spread or difference between the rate at which funds are borrowed at and the rate at which they are invested or loaned out.
In these circumstances, credit and debt collection management has become common with risk management in managing the risks of mismatches between assets and liabilities and between borrowing and lending rates.
INTRODUCTION
Commercial banks constitute the core of a nation’s financial system. Traditionally, the function of a bank was to take deposits and honour demands made on those deposits of their numerous customers – involving individuals, business units and the government itself.
But with the giant strides made by mankind in science and technology in an attempt to solve human problems, new sets of problems and human needs have been created.
Thus, banks as forefront institutions in satisfying human needs have undergone dramatic changes in their functions.
Today, banks render services in area of lending, transfer, remittance, salaries, sale of foreign currencies, overdrafts, sale of travelers’ cheques, safe custody, advisory services, to mention a few 1.
Although the number of services a modern bank offers has increased immensely, risk taking, which is a fundamental nature of banking, remains unchanged.
It is inherent in maturity transformation, which is another fundamental feature of banking. Though other sources exist, the main source of investable funds remains bank deposits and loans and investments.
The main source of income and profitability of banking remains the spread or difference between the rate at which funds are borrowed and the rate at which they are invested or loaned out.
REFERENCES
EMMANUEL N. R. Managing Commercial Bank Funds, Praeger Publisher Inc; New York, 1977, P.11
OSUALA E. C. Introduction to Research Methodology, African Feb, Publishers Ltd, Lagos 1982, P. 26
SELLTIZ C. Research Methods in Social Relations, Methren and Co. Ltd., New Petter Lane, UK. 1971, P. 30.
KERLINGER F. N. Foundation of Behavioural Research, Holt Rinchart and Wiston Inc. New York, 1973, P. 21.
ROBIN L. “Governor of the Bank of England Speech at the Annual Banquet of the Overseas Banks’ Club” February 3, 1986.
COX D. Elements of Banking, John Murrey Publishers Ltd., London, 1983, P.1
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