Management Of Bad Debt In The Nigeria Banking System

Project and Seminar Topics with material for Banking and Finance

Proposal

First of all we define what we understand by management of bad debt in the Nigeria banking system scope and remedies in my own understand. I can say that it is the kind of bank that is been credited with invoice role of being in a very important source of funds.

Also as a result of this, banking institute have been an agent of economic growth and perhaps economic development.

Bank also refers to commercial banks. Commercial bank is described by the banking act 1969 as a bank whose business include the acceptance of deposits, with drawable by cheque include loans and advances.

We can also say what the problems of the topic are. In the problem it is the advantage of the loans and advance granted to them by not utilizing them for the purpose of which they are given. Bad debt is known as unrecoverable debts. The borrowers consistant inconsistency in response to demand for the repayment of loan and advance leaves much to be desired and make it extremely difficult for other intending borrowers.

In this it is first and fire most, is the financial disability which compelled me to restrict this volume due to high cost of stationers. More so, a lot of academic commitment which left me with little or no time with which to move ground for the relevant information.

Chapter One

Introduction

1.1 Background Of The Study

Bank have been credited generally with enviable role of being a very important source of funds or capital for the development of the economy.

This recognition largely emanates from the roles assumed by most banking institute in mobilizing various deposits and channeling some towards feasible and viable ventures. This size tyre and level of such profitable outlet along with other complimentary factors contribute to economy well being of the country in which the bank is situated. As a result of this banking institutes have been an agent of economic growth and perhaps economic development.

This deposit which are loanable funds can only be made available to the banks if customer make substantial deposit which banks in turn employ to make loan and advance interest which may accrue from the advances.

This enable the bank to run its day to day administrative cost, remain in business and pay satisfactory dividend to its shareholders.

1.2 Statement of Problems:

It is unfortunate that the borrowers take undue advantage of these loan and advances granted to them by not utilizing them for the purpose for which were given hence bringing about default in the repayment of such loans and subsequent of loan and make it extremely difficult for other intending borrowers or fund seekers to avail themselves of the opportunity of enjoying such facilities among other consequences.

1.3 Objective of the Study

The project work therefore is aimed at evaluating the following points.

To evaluate the problem of bad debts in banking lending.
To identifying its remote and immediate causes.
To determine its effects to the economy in general.
To make recommendation on how possible.

1.4 Delimitation, Scope and Limitation of the Project.

This project work intended to be more encompassing but was hampered by certain unavoidable constraints, some of which are:

First and foremost, is the financial disability which compelled me to restrict this volume due to high cost of stationers?

Finally, the refusal by the institute of management and technology Enugu library (reference section) and University of Nigeria Nsukka to laid out already written work which would have helped in a lot of ways to the making of this project posed a serious constraints. On the scope. Project work is made up of three chapters.

First chapter is introduction of background of lending as an important factor in bank development.

Chapter two deals with the review related literature then chapter three which is the summary of findings.

1.5 Definition of Terms:

1) Bank:

Otherwise specially stated bank in this study refer to commercial banks. Commercial bank is described by the banking act, 1969 as a bank whose business include the acceptance of deposit, withdrawal by cheque include loans and advances.

2) Capital:

This is the amount used for the commencement of business with addition subsequently made. It is also a set aside wealth for the production of more wealth.

3) Loan Credit Risk:

This is the profitability that a borrower m ay not repay the loan granted him by the bank.

4) Money Rate:

This entails the probability of value of money increasing or decreasing.

5) Market Rate:

The probability of the interest rate changing.

Chapter Five

Conclusion and Recommendation

5.1 Conclusion

This study has extensively revealed that many factors caused bad debt in Guaranty Trust Bank Plc. Among them are inadequate collateral provisions, fund diversion, improper project evaluation and non-performing credit. Poor credit appraisal was found out to be the major cause of bad debt. The study concluded that to manage loan and credit effectively, efforts have to be made to obey and respect the cannons of good lending and ensure adequate control and supervision on the facility extended within the frame work of government regulation and guidelines. Sound lending requires a clear, well-articulated and easily accessible policy document which spells out the philosophy of lending. This will ensure that loan losses are kept at a minimum via a program which permits constant supervision on the projects being financed, easy identification of bad loans and instituting effective corrective measures.

5.2 Recommendations

In line with the findings made from this study, the following recommendations were suggested:

It is recommended that GTB management should organize regular training programs for credit staff in areas like credit management, risk management and financial analysis. This would sharpen the knowledge and skills of credit officers so as to improve on the quality of credit appraisal, prevent delayed loan approvals, enable credit officers appreciate the need to comply with credit policy and further enhance monitoring of credit..
Another important way of minimizing unsecured loans is through regular monitoring and supervision of loan facilities.This would prevent diversion of funds into business ventures other than the agreed purposes.
Loans granted to customers should be well secured in terms of adequacy of the collateral provided and also ensure that proper legal documentation is put in place. This would reduce the losses arising from problem loans and minimise the effects of such loans in the form of bad debt provisions, on the financial performance of the bank.
There should be close and proper monitoring of loans before and after disbursement. This monitoring should be followed up for the entire life of the loan.
It is recommended that banks in Nigeria should enhance their capacity in credit analysis and loan administration while the regulatory authority should pay more attention to banks’ compliance to relevant provisions of the Bank and other Financial Institutions Act(1999) and prudential guidelines.