– Bank Loan Monitoring and Loan Performance –
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ABSTRACT
For banks to achieve their goals there is the need to put in place structures that will keep loans active within the acceptable ratios defined by regulatory authorities.
Notable among these structures are the internal procedures designed to ensure appropriate procedure for credit appraisals, objective approvals of loan applications and proper credit administration of all disbursed funds.
Despite these, empirical evidences portray a different and disturbing picture as consistently the Nigeria banking system is characterized with high ratio of non-performing loans,
banks liquidity crises, shrinking profitability, general losses, eventual corporate failures and finally financial crises.These cast doubts as regards the institutionalization of loan monitoring mechanism in the banking system.
This study sought to establish whether there is a relationship between bank loan monitoring and loan performance among Deposit Money Banks (DMBs) in Nigeria. The survey and correlational designs were adopted for the study.
The research hypotheses were tested using Chi-Square and correlation techniques. The study found that there is a relationship between loan monitoring and loan performance among DMBs in Nigeria.
It is therefore concluded that there is a relationship between bank loan monitoring and loan performance and that the more effective and efficient the monitoring the higher the loans will remain active.
TABLE OF CONTENTS
Declaration………………… i
Certification……………… ii
Acknowledgement…………………. iii
Abstract………………… iv
Table of Contents……………….. v
List of tables……………….. vii
CHAPTER ONE: Introduction
- Background to the study…………………. 1
- Statement of the problem…………….. 5
- Research Questions…………………….. 6
- Objectives of the study……………….. 7
- Statement of Hypotheses………………… 7
- Significance of the study…………………. 8
- Scope of the study……………………. 8
- Limitations of the Study……………………. 9
CHAPTER TWO: Literature Review
- Introduction……….. 12
- Concept of Loan Monitoring………….. 12
- Objectives of Monitoring Loans…………. 15
- Monitoring Tools and structure……………. 17
- Risks factors affecting loan performance……….. 21
- types of loans facility………. 26
- Loan Performance……….. 27
- Loan Recovery/Restructuring………. 30
- Strategies for improving loan repayment………. 34
- Five C’s of Credit…………. 36
- Credit processing management and Non-Performing Loan…….. 40
- Principles of Lending……… 44
CHAPTER THREE: Research Methodology
- Introduction………………. 48
- Research Design……………. 48
- Population of the Study…………… 48
- Sample size and Sampling Technique………… 49
- Sources of Data…………. 51
- Administration of Questionnaires……………. 52
- Technique of Data Analysis………….. 53
- Justification of the Methods and Techniques…………. 57
CHAPTER FOUR: Data Presentation and Analysis
- Introduction……………. 58
- Administration of Questionnaire………… 58
- Presentation of Data………… 59
- Hypotheses Testing…………….. 86
- Presentation of the findings………. 91
CHAPTER FIVE: Summary, Recommendation and Conclusion
5.1 Summary………………… 95
5.2 Conclusion………………. 97
5.4 Recommendations………….. 99
5.5 Suggestions for Further Research………… 100
Bibliography………… 102
INTRODUCTION
The existence of banks suggests they perform functions of intermediation between borrowers and savers more efficiently than is available via direct exchange in capital markets, (Richard, Kim, Ma& Martin 2011).
Deposit Money Banking (DBM) plays an important role in the development of world economies, where it serves as a vehicle that channels excess funds from those economic units that have surplus money in form of deposits and/or investments to those that are in need of ideal productive funds to boost their economic activities in form of loans and advances.
This has made the role of DMBs in facilitating economic growth imperative. From this we can comfortably reach some level of generalization that the essence of these banks is taking deposits from liability customers and making same available to their assets customers by way of granting loans/credit facilities.
However, in Nigeria this role is being played through a well-guided credit process by banks under the checks of regulatory authorities such as Central Bank of Nigeria (CBN) and Nigerian Deposit Insurance Corporation (NDIC).
Therefore, the banks and the regulatory authorities are charged with the responsibility of ensuring that the depositors’ funds are not lost and that the desired level of economic growth and developments are achieved.
REFERENCES
Aremu, O.S., Suberu, O.J.,&Oke, J.A. (2010). Effective credit processing and administration as a panacea for non-performing assets in the Nigerian bankingsystem.Journal of Economics, 1(1), 53-56.
Arindam, B., &Pratima, S. (2009).Estimating recovery rate on bank’s historical loan loss data.National Institute of Bank Management Working paper Series.
Bank for International Settlement (2005, January).Stress testing at major financial institutions: Survey result and practice. Global Financial System Report.
Cadena, X., &Schoar, A. (2011).Remembering to pay?Reminders vs financial incentives for loan payments.National Bureau for Economic Reform Working Paper Series.
Connor, L.J. (2006).Chi-Square Tutorial. Being a tutorial Paper for postgraduate Students, Department of Linguistics, Georgetown University, U.S.A.
Drehmann, M., & Nikolaou, K. (2008).Funding liquidity risks: Definition and measurement.Conference on Liquidity: Concepts and Risks, Centre for Economic Studies and Institute for Economic Research.
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