An Analysis Of Loan Default In Nigeria Agricultural Co-Operative And Rural Development Bank (A Case Study of NACRDB Nkpor Anambra State)

Project and Seminar Material for Cooperative Economics and Management (CEM)

An Analysis Of Loan Default In Nigeria Agricultural Co-Operative And Rural Development Bank (A Case Study of NACRDB Nkpor Anambra State)


Abstract


The research analyzed the loan default in Nigeria agricultural co-operative and rural development bank (NACRDB). This bank finances all forms of co-operative societies and small-scale industries. This aimed at knowing the extent of NACRDB loan administration programme and the extent it has accomplished the objective of its establishment. Most co-operative societies are not aware of the NACRDB loan scheme. Improper loan disbursement and low supervision has contributed not render the necessary assistance to the loaned in terms of advice and training.

These are the result from questionnaires. Based on the finding, the following recommendations were made: NACRDB should ensure efficient disbursement of loan, they should create awareness for their loan scheme, they should arrange proper programme for the loaned appropriate supervision of the loan to avoid loan diversion if necessary, they should assess aspire to give the loaned both the business and technical advice needed. All these are aimed at efficiency to reduce the rate of loan default.


Table Of Content


Preliminary Page(s)

  • Title
  • Approval page
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of content

Chapter One

1.0 Introduction

  • 1.1 Background of the Study
  • 1.2 Statement of the Study
  • 1.3 Objective of the Study
  • 1.4 Research Questions
  • 1.5 Significance of the Study
  • 1.6 Scope of the study
  • 1.7 Limitation of the study
  • 1.8 Definition of terms

Chapter Two

2.0 Literature Review

  • 2.1 The Meaning of Co-operative Society
  • 2.2 The objective of the NACRDB
  • 2.3 The organizational structure of NACRDB
  • 2.4 Types of loan issued by NACRDB
  • 2.5 Procedures for securing loans recovery
  • 2.6 Causes of loan default

Chapter Three

3.0 Research Methodology

  • 3.1 Types and sources of data
  • 3.2 Research design
  • 3. 3 Population and sample size
  • 3.4 Sampling Techniques
  • 3.5 Validity and reliability of measuring instrument
  • 3.6 Method of data analysis

Chapter Four

4.0 Data Presentation And Analysis

  • 4.1 Presentation of data tables

Chapter Five

5.0 Summary of Findings, Conclusion and Recommendations

  • 5.1 Findings
  • 5.2 Conclusion
  • 5.3 Recommendation
  • References
  • Appendix
  • Questionnaire.

Chapter One


1.0 Introduction

1.1 Background Of The Study

In 2001 Nigeria in the quest to offset debt crises of economic problem mapped out specialized banks primarily set to entrance investment in agriculture and finance macro and micro credit especially within the rural communities. Such banks are Nigerian agricultural co-operative and rural bank (NACRDB) development banks, industrial bank, and mortgage banks. They grant loans to small holders and large investment holders.

These banks were designed as an avenue to get in contact with numerous farmers and business investors at the grass roots level. Nigerian agricultural co-operative and rural development bank (NACRDB) is aimed at financing basically agricultural co-operative and other co-operative societies in the small scale business.

The research for the recovery of loans from clients include: lack of trained and experienced personnel in agricultural financing and loan administration on most of the commercial and merchant banks default in loan repayment resulting from poor project appraisal or management as well as outright unwillingness to repay by some borrowers, also problem related to settlement of loans is caused by the bank to file claims in accordance with procedure and passion stipulated by the banks, improper loan disbursement and poor supervision. Another problem could be caused by delay in approval due to low capital base on the banks as a result of inflation in the economic. This delay may lead to misappropriation of funds which might eventually lead to losses.

The observed trend is that Nigerian Agricultural Co-operative and Rural Development Banks and other financial institutions are experiencing a high level of loan losses each year due to the shortcomings indicated earlier. This is the obtaining at an insight into the problem of loan recovery and offering adequate and requisite suggestion.

This is the main reason why analysis of the loan default in Nigeria agriculture Co-operative and rural development banks (NACRDB) with the view of obtaining an insight in to the problem of loan recovery and offering adequate and requisite suggestion.


1.2 Statement Of The Problems

Special banks have been set up in the country to advance loan and credit for development purpose. Incidentally these banks have always find it difficult in recovering the advanced loans especially NACRDB which is the focal point of study. In problem of credit recovery by these banks, it can be seen to range from lack of collateral. Commitment, lack of trained and experienced personnel in agricultural financing and loan administration, to the default in loan repayment negotiation, poor project appraisal or poor project management, as well as simple uncollingness of the borrower to repay borrowed money, equally seen as a problem towards loan recovery is whether the bank supervised the loan given to the borrowers, the inadequacy of the funds guaranteed in an inflating economic as well as low capital base ion the funds and finally difficulties associated with the deregulation of the financial market and distress of the banking industries in “go” which reduced the interest to participate in NAERDB’s operations, against these established shortcomings, the work will methodically study these areas of shortcoming and suggest the solutions to the problem, for future guide against credit and loan defaults by NACRDB to the prospective customers.


1.3 Objectives Of The Study

The general objective of this study is to analyse loan default in Nigerian Agricultural Co-operative and Rural Development Bank (NACRDB).

The specific on objective of the study include:

  1. To find whether or not co-operative societies secure loan from NACRDB.
  2. To determine the condition for such loans.
  3. To determine and examine the factors responsible for the loan default.
  4. To determine and find out the problems that affect the organization in loan administration.
  5. To find out the credit burden of such loan.

1.4. Significance Of The Study

This study well expose the ways by which loan default in co-operative movement. It is very big significant part from stimulating and paving way for further studying of this area, it will also provide a clear standing of these defaults and growth affecting NACRDB. And it will also expose how good management loan can bring about greater happiness among co-operative co-operators, co-operative bodies individuals, all loaned and NACRDB Nkpor Zone.

This work has emanated from the performance of the co-operative credit institutions, especially the NACRDB Nigeria Ltd. Its purpose is to help provide a true and objective position of NACRDB Nigers Ltd. In that process, the following will be critically looked at:

  1. There findings will help enable us to appreciate the contributors the NACRDB has made so far in the general economic and industrial development of Nigeria especially as regards in financing of co-operative societies.
  2. It will also guide co-operative societies in tackling the various credit financing problems facing them and make full utilization NACRDB.
  3. The study will also help those who may have need for further research on the financing of co-operative societies by development banks.
  4. The findings will also help to make recommendation and suggestions for further improvement of the present situation.
  5. Lastly, the work will be useful in addition to the existing research work, in the area of loan disbursement and recovery in our country and hence will serve as a reference to further researchers.

1.5 Research Questions

  1. To what extent are loan disbursed to Agricultural Co-operative Societies by NACRDB in Nigeria?
  2. How regular is the loan disbursed to Agricultural Co-operative Societies in Nigeria?
  3. What are the interest rates on loans disbursed to Agricultural Co-operative Societies in Nigeria?
  4. At what rate do Agricultural Co-operative Societies repay their loans to NACRDB?
  5. What is the extent of loan default by Agricultural Co-operative Societies in Nigeria?

1.6 Scope Of The Study

This study covers the operations of NACRDB Nkpor Zonal Office with regards to its loan disbursement and recovery. It looks at the operations of the banks in granting financial assistance to co-operative societies who are the users of fund to ensure their investment. It also talk about how the NACRDB will uplifted to avoid failure in the society, with this it will enable the co-operative society to grow higher than expected with the help of the financial assistance.


1.7 Limitation Of The Study

Apart from these, NACRDB like any other organization has a secret nature of handling its official document. Hence they could not provide enough data as required by the researcher for instance, the staff of NACRDB could not let out any unpublished data that is newly documented with regards to their operation.

Therefore there is no doubt that it has some limiting impact on collecting a sufficient data because time and money were the greatest problem encountered in this research work as a student.

The research (i) have to make use of the little information provided by the NACRDB. Also there is this difficulty in obtaining enough information from individual borrowers on the amount of loan given to them each year.


1.8 Definition Of Terms

For the purpose of this study, it is useful to make clear meanings at some major terms used specially for the purpose of the study such as terms are as follows:

Loan Able Funds:

Loan able funds are money available for lending in financial market, the loan able fund theory holds that the rate of interest is determined by the force/rate of demand and supply of loan able funds in the capital market,

Registrar:

This means the registrar of Co-operative Societies appointed under an appropriate section of co-operative law of any state or country and he can also be a person who is exercising such power or a registrar, as may have conferred on him under Co-operative law.

Loan Interest:

It is a portion of surplus value which an industrialist transfers to the bank or finance house as payment for using its loan.

Credit Facility:

This is that which is meant to enable the beneficence to generate additional income which will in the long run time to attain reliance.

Self Reliance:

Ability to verify oneself for survival and continuous development rather than relying on others.

Mortgage:

Conveyance of property like lands and buildings to a creditor as security for acquiring loans.


Chapter Five


5.0 Summary Of Findings, Conclusion And Recommendations

5.1 Introduction

Based on the factors that motivate this research, the findings are geared towards giving concrete answer to questions hypothesis in this study.

The first hypothesis centered whether some factors first are responsible for loan default the investigators used model data which came from responses on table 2.1 consequently it was observed that some factors are responsible for loan default by the co-operative societies. Some of these factors are whether, vagaries, diseases, pest, and inflation business hazards.

More also, chi-square method of data analysis was also employed to investigate the second hypothesis that is centered on whether NACRDB is an effective source through which co-operative societies secure loan. The data model used some from table 19. Consequently it was observed that NACRDB is an effective source for securing loan.


5.2 Summary Of The Findings

In respect with the research question of this work. The findings includes among others are the following: It was discovered that NACRDB couldn’t grant adequate loans necessary for meaningful productive ventures. The findings regarding whether NACRDB grants enough loan to co-operative societies is that NACRDB cannot grant adequate loan because most of these societies do not apply for loan. According to oral interview to the officials of the NACRDB, most of the societies are not aware of the NACRDB loan scheme this leads to inadequacy.

Secondly, the administrative duties of the NACRDB is hindered due to poor loan recovery Table 21 distributed the reasons for loan default which include weather vagaries, diseases, pest inflation, business hazard etc. It was discovered that some societies find the Bank condition too high in case where collateral, societies are required. According to oral interview the bank has specification of collateral and securities for loans that go into production other than agricultural ventures that is societies who seek macro loans.


5.3 Conclusion

The following findings of this research work which was based purely on the analysis of the data obtained from the respondent’s sampled and subsequent recommendation. It has been observed that the major constraints to loan repayment are management, business hazards, poor yield, poor supervision, low productivity, lack of technical advice to co-operative, unavailability of extension services. Conclusively, the research highly believes that careful adherence to the recommendations itemized the above well and also help to cub the problem of repayment.


5.4 Recommendations

Based on the findings of this research work the following recommendation have been advanced or made by the researcher towards the elimination of those obstacles facing the staff of NACRDB and co-operative societies in applying for loan. This could be done through advertising, organizing a seminar etc. The Federal Government should in conjunction with the Central Bank of Nigeria, should intensify their effort in ensuring that NACRDB is adequately financed in order to boast their financial aides in the forms of loans to co-operative societies. The federal Government should strictly be the watch dogs on both staff of the NACRDB as well as the officers of co-operative societies.

The researcher highly appeals to members of the public in general and co-operative societies in particular that NACRDB loans are like other loans which must be loans meant to help them must never be seen as their own share of the “National cake” The attitude must be discarded. NACRDB should set up field extension agents who must be ready to work closely with the loan and the co-operative societies in the execution of their projects to avoid mismanagement and improper channeling of resources so that the problems of loan repayment will not arise.


An Analysis Of Loan Default In Nigeria Agricultural Co-Operative And Rural Development Bank (A Case Study of NACRDB Nkpor Anambra State)


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