The Impact Of Accountants In Credit And Loan Control Management In Micro Finance Banks

Project and Seminar Material for Accountancy / Accounting

The Impact Of Accountants In Credit And Loan Control Management In Micro Finance Banks


Abstract


This study was carried out to examine the impact of accountants in credit and loan control management in micro finance banks. The study was carried out to investigate the role of accountants in credit and loan management in micro finance banks, assess accountants’ influence on credit and loan management in micro finance banks, and ascertain the impact of the accountant on achieving effective and efficient collateral security on loan issuance. The survey design was adopted and the simple random sampling techniques were employed in this study. The population size comprised of staff of Fina Trust Microfinance Bank in Lagos state. In determining the sample size, the researcher conveniently selected 41 respondents and 35 were validated. Self-constructed and validated questionnaire was used for data collection. The collected and validated questionnaires were analyzed using frequency tables. The result of the findings reveals that the influence of accountants on credit and loan management in micro finance banks is significant. Therefore, it is recommended that banks should organize effectively its credit risk control department as the asset quality depends heavily on how well credit risks are controlled in a banking institution. Banks in their quest to a higher financial performance should have to also concentrate on other factors affecting its operations.


Table of Content


  • Title Page
  • Certification
  • Dedication
  • Acknowledgement
  • Table of Content
  • List of Tables
  • Abstract

Chapter One:

Introduction

  • 1.1 Background of the Study
  • 1.2 Statement of the Problem
  • 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:

Review of Literature

  • 2.1 Conceptual Framework
  • 2.2 Theoretical Framework
  • 2.3 Empirical Review

Chapter Three:

Research Methodology

  • 3.1 Research Design
  • 3.2 Population of the Study
  • 3.3 Sample Size Determination
  • 3.4 Sample Size Selection Technique and Procedure
  • 3.5 Research Instrument and Administration
  • 3.6 Method of Data Collection
  • 3.7 Method of Data Analysis
  • 3.8 Validity of the Study
  • 3.9 Reliability of the Study
  • 3.10 Ethical Consideration

Chapter Four:

Data Presentation and Analysis

  • 4.1 Data Presentation
  • 4.2 Analysis of Data
  • 4.3 Answering Research Questions

Chapter Five:

Summary, Conclusion and Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendation
  • References
  • APPENDIX
  • QUESTIONNAIRE

Chapter One


Introduction

1.1 Background of Study

Banking is primarily concerned with accepting deposits from the general public (i.e., bank clients) and matching those deposits to borrowers in the form of loans for investments and consumption. Accounting measurement constraints provide realistic guidance for decreasing the volume and cost of reporting accounting data while maintaining its usefulness to decision-makers. As a result, one of the most important functions of commercial banks is lending. Loans are investments and typically make up the majority of a bank’s assets. Individuals and institutions both want to borrow money. When the surplus of income over expenditure is negative, households seek bankable funds (Mbat, 1995:89). The beauty of this position is that credit control concepts are the same regardless of industry, and you may move into different industries with enough experience. With enough experience, you could even become a consultant and share your knowledge with others. The lack of synchronization between receipts and payments during the usual course of business operations has resulted in the necessity for loanable funds. When a bank grants a loan to a home, an individual, or a business, it considers criteria such as liquidity risk, repayment method, and the loan’s purpose (Mbat, 1995).

The primary goal of business organizations is to generate wealth for their owners. The following are some examples of modern corporate organizations: Sole proprietorships, partnerships, and limited liability companies are examples of business structures. As modern businesses become more complicated (and, in many cases, worldwide), the requirement for complete, transparent, dependable, and accurate information that can be accessed rapidly grows. This is especially important because, in keeping with worldwide best practices, the gap between ownership and management has widened, and most large businesses are controlled by a diverse group of shareholders. An accountant, according to Susan Davis (2015), is a person who performs financial responsibilities relating to the collection, accuracy, recording, analysis, and presentation of financial operations for a business, organization, or enterprise. Within a company’s operations, the accountant frequently has a number of administrative tasks. An accountant’s function in a small business may consist solely of financial data gathering, entry, and report preparation. Those in charge of governance will be focused on ensuring that the bank has effective controls in place to ensure compliance with the new financial reporting standards, as well as avoiding the reputational, regulatory, and financial harm that could arise from major control breaches. Some banks may be subject to additional reporting obligations on the efficacy of internal controls (e.g., Section 404 of the US Sarbanes-Oxley Act), and will need to consider how the implementation of IFRS 9 would affect their compliance with those other laws. IFRS 9 will necessitate significant upfront and ongoing senior management efforts, as well as major modifications to credit risk management and financial reporting systems, processes, and internal controls, regardless of an entity’s size and complexity. Expected credit loss (ECL) projections are likely to have a significant impact on most banks’ financial statements. The ECL estimate is difficult and inherently subjective. It is based on a variety of variables that may not be accessible right now, such as forward-looking assessments of key macro- and microeconomic indicators, as well as management’s assumptions about the relationship between these forecasts and the amounts and timing of borrowers’ recoveries. These indicators indicate that there is a possibility of material bias impacting the financial statements due to the magnitude of the potential implications. This could have an impact on crucial financial and regulatory indicators. As a result, it’s critical that ECLs are established in a well-managed environment. Middle-sized businesses may hire an accountant to act as a financial counselor and interpreter, presenting the company’s financial facts to both internal and external stakeholders. Third parties, including vendors, consumers, and financial institutions, are usually dealt with by the accountant.


1.2 Statement of Problem

There are risks associated with this investment, just as there are with any other. Default and inflation, or buying power risk, are examples of these risks. As a result, expert counsel would be required to make decisions (Ejiogu, 2002). Edimnce (2004) agrees with Ejiogu that loan and credit supervision and management require the services of a professional accountant. Mgbada (2007), on the other hand, calls into doubt the accountant’s unique position in loan and credit control and management, claiming that banks may still achieve better loan and credit control and management without the accountant’s help. The largest and most visible source of credit risk for most institutions is loans. Other areas of credit risk, such as the investment portfolio, overdrafts, and letters of credit, exist on and off the balance sheet. Derivatives, foreign exchange, and cash management services are just a few of the products, activities, and services that put a bank at risk. A bank’s credit risk management methods can either reduce or increase the risk of payback, i.e. the likelihood that a lender will fail to perform as agreed. The initial credit-granting process, which includes good underwriting standards, a fast, balanced approval process, and knowledgeable lending staff, is a bank’s first line of defense against excessive credit risk. Are accountants required in credit and debt administration and control? What part does accounting play in loan and credit control and management? These are the questions that this study aims to address.


1.3 Objective of Study

The following are primary objectives of this study:

  1. To investigate the role of accountants in credit and loan management in micro finance banks.
  2. To assess accountants’ influence on credit and loan management in micro finance banks.
  3. To ascertain the impact of the accountant on achieving effective and efficient collateral security on loan issuance.

1.4 Research Questions

  1. What role do accountants play in credit and loan management in microfinance banks?
  2. What is the influence of accountants on credit and loan management in micro finance banks?
  3. What impact do accountants have on achieving effective and efficient collateral security for loan issuance?

1.5 Significance of Study

This study will be beneficial to management accountants who are in charge of managing the organization’s investment portfolio, as well as appraising and approving each investment. The study will also be beneficial to the federal debt management agency, as it aims to serve as a guide for loan and credit or debt management agencies with credit control and loan approval responsibilities. The study will also be useful to academics who want to do research on a similar topic because it will act as a guide for their research. Finally, the research will benefit academic students as well as the general public.


1.6 Scope of Study

This study focuses on investigating the role of accountants in credit and loan management in micro finance banks. It also seeks to assess accountants’ influence on credit and loan management in micro finance banks. Lastly, to ascertain the impact of the accountant on achieving effective and efficient collateral security on loan issuance. The Fina Trust Microfinance Bank in Lagos state is the focus of this study.


1.7 Limitation of Study

Finance, inadequate materials and time constraint were the challenges the researchers encountered during the course of the study


1.8 Definition of Terms

Accountants:

An accountant is a person who records business transactions on behalf of an organization, reports on company performance to management, and issues financial statements.

Credit management:

Credit management is the process of granting credit, setting the terms on which it is granted, recovering this credit when it is due, and ensuring compliance with company credit policy, among other credit related functions.

Loan:

A thing that is borrowed, especially a sum of money that is expected to be paid back with interest.


Chapter Five


Summary, Conclusions and Recommendations:

5.1 Introduction

This chapter summarizes the findings on the impact of accountants in credit and loan control management in micro finance banks. The chapter consists of summary of the study, conclusions, and recommendations.


5.2 Summary of the Study

In this study, our focus was on the impact of accountants in credit and loan control management in micro finance banks. The study is was specifically focused on investigating the role of accountants in credit and loan management in micro finance banks, assessing accountants’ influence on credit and loan management in micro finance banks and ascertaining the impact of the accountant on achieving effective and efficient collateral security on loan issuance.

The study adopted the survey research design and randomly enrolled participants in the study. A total of 35 responses were validated. And the enrolled participants where all respondent are selected staff of Fina Trust Microfinance Bank in Lagos state.


5.3 Conclusions

In the light of the analysis carried out, the following conclusions were drawn.

  1. The role accountants play in credit and loan management in microfinance banks include:
    1. Preparing financial records
    2. Examining financial records
    3. Ensuring information is up to date and accurate
    4. Selecting and vetting borrowers
  2. The influence of accountants on credit and loan management in micro finance banks is significant.
  3. The impact accountants have on achieving effective and efficient collateral security for loan issuance include:
    1. Assess and examine collateral
    2. Place values on collateral
    3. Makes sure the collateral reduces the risk for the lending banks
    4. Makes sure the borrowing margin is slim

5.4 Recommendation

Based on the findings the researcher recommends that;

  1. The researcher recommends that banks should organize effectively its credit risk control department as the asset quality depends heavily on how well credit risks are controlled in a banking institution. Banks in their quest to a higher financial performance should have to also concentrate on other factors affecting its operations.
  2. Banks should have an effective and efficient loan monitoring and recovery unit in place.
  3. This study also recommends that banks in Nigeria should use a moderate credit policy as a stringent credit will undermine the financial performance. Moreover, commercial banks should seek to adequately control their credit risk by keeping lower their ratio of nonperforming loans which is the major determinant of commercial banks’ financial performance as shown in the study. They should finally endeavor to holding adequate capital for the sake of liquidity and going concern even if it undermines to some extent their capital to maximize financial performance.

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