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CREDIT MANAGEMENT AND THE PERFORMANCE OF FINANCIAL INSTITUTION IN NIGERIA
(A STUDY OF SELECTED BANKS IN PORT HARCOURT, RIVERS STATE).
ABSTRACT
This research work is has passed through stages to establish the credit management and the performance of financial institution in Nigeria. This research work is designed to ascertain and establish the following; to see to what extent the study will analyze Credit Management and the Performance of Financial Institution in Nigeria, to investigate the relationship in the credit management and the performance of financial institution in Nigeria, to examine solution to the credit management and the performance of financial institution in Nigeria. In the course of carrying out an effective research, the instruments used in this study was questionnaire there was a frame work or plan drawn in order to ascertain the aim of which to explore the relationship between a variable used in the hypothesis. The statistical tool used for analysis of data in this study was the chi-square (x2). chi-square (x2) is observed frequencies Nwidum (2003) further opined chi-square is applied when there are two research variables drawn from independent samples, each of which is categorized into two ways. It should also be noted that the chi-square (x2) used when the research data are non-metric, i.e when data are expressed in frequencies. For this study, the level of significance is fixed at 0.0 alpha level. This implies that the researcher is 95% confident that the decision taken is correct. From the summary of findings of this research work, chi-square was introduced and test on the formulated hypothesis and some suggestions were reached, which drew conclusion and recommended credit management and the performance of financial institution in Nigeria.
TABLE OF CONTENTS
TITLE PAGE:
CERTIFICATION ii
DEDICATION iii
ACKNOWLEDGEMENT iv
ABSTRACT v
TABLE OF CONTENTS vi
CHAPTER ONE 1
INTRODUCTION 1
1.1 BACKGROUND OF THE STUDY 1
1.2 STATEMENT OF THE PROBLEM 3
1.3 OBJECTIVE OF THE STUDY 4
1.4 RESEARCH QUESTIONS 4
1.5. RESEARCH HYPOTHESES 5
1.6 SIGNIFICANCE OF THE STUDY 5
1.7 SCOPE OF THE STUDY 6
1.8 LIMITATION OF THE STUDY 6
1.9 DEFINITION OF TERMS 6
REFERENCES 8
CHAPTER TWO 9
THEORETICAL FRAMEWORK 9
2.1 INTRODUCTION 9
2.2 REVIEW OF THEORITICAL LITERATURE/EMPIRICAL LITERATURE 11
2.3 PROBLEM FACING THE FINANCIAL INSTITUTION 16
2.4 FUNCTION OF FINANCIAL INSTITUTION 18
2.5 LIMITATION OF THE FINANCIAL INSTITUTION AND PERFORMANCE 22
REFERENCE 24
CHAPTER THREE 25
RESEARCH METHODOLOGY 25
3.1 INTRODUCTION 25
3.2 RESEARCH DESIGN 25
3.3 POPULATION OF STUDY 26
3.4 SAMPLING SIZE AND PRODUCE 26
3.5 DATA COLLECTION AND TECHNIQUES 26
3.6 DATA ANALYSI TECHNIQUES 27
CHAPTER FOUR 28
DATA PRESENTATION AND ANALYSIS 28
4.0 INTRODUCTION 28
4.1 DATA PRESENTATION 29
4.2 ANALYSIS OF QUESTIONNAIRES 29
4.3 HYPOTHESIS TESTING 36
4.4 DISCUSSION OF THE FINDINGS 38
CHAPTER FIVE 39
SUMMARY, CONCLUSION AND RECOMMENDATION 39
5.0 INTRODUCTION 39
5.2 SUMMARY OF FINDINGS 39
5.2 CONCLUSION 41
5.3 RECOMMENDATION 42
BIBLIOGRAPHY 43
APPENDIX I 45
APPENDIX II 46
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Financial institutions are instrumental to the growth and development of the economy through the acceptance of deposits and granting of credit facilities to investors. They are actively in financial intermediation where finds are taken from the surplus unit and channel to pr d cave unit of the economy. Some of the deposits are withdrawn at short notices. It is required of financial institution to maintain adequate liquidity (cash) in their portfolio to meet the demands of depositors and at the same time extend credit to borrowers in order to make profit. They are institutions that issues finance obligation in order to acquire finds from the public.
This finds helps to facilitate economic growth and development as they are channeled into productive uses the financial sector of any economy does matter significantly in economic development of a country. Lewis (1970s) shares this same view in his development process by stating that “the financial sector of any economy matters in economic development. If the financial sector is repressed and distorted, it can intercept the history impulse of development.
Ebhodagha (1990) is of the belief that the flow of finds from financial intermediates may permit significant increase in growth rate of output if the find are allocated to uses which are straight in the process of resources creation. Undoubtedly, it is with the view of the critical role that banks and other deposit taking institutions plays in the national economy that they tend to the most regulated of all business. Among aspect of financial institutions activities is the management of loans, advances and other credit to customers. Most financial institution have been known to carry over whelming sizes of credit and advances these credit are largely concentrated in customers loans and as such form the most risky aspect of bank portfolio. Management of credit is now a matter of serious concern notably to but also to banker and financial institution in the Nigeria business environment.
1.2 STATEMENT OF THE PROBLEM
The Nigeria financial system has recorded an unprecedented number of bank failure and dwindling performance in recent times. Even with the ongoing consolidation exercise (reforms) fears have been expressed in some quarter that many may still go because of high debt balances and their seeming liability to recover them. Debt recovery measure put in place are not also helping matter. The argument has also been that the amount of loans and advances that these banks. Financial institutions gives out are responsible for their down turn of non performance. Equally, accusing finger are also been pointed at managers for not ensuring that equitable collaterals are secured for the creditors some observers of the Nigeria financial sectors agrees that problem faced by theses institution may not be unconnected with the amount of credit granted by the financial institutions. Thus this research work tries to look into the credit management of financial institutions to ascertain the vises of these arguments.
1.3 OBJECTIVE OF THE STUDY
The purpose of this study is to critically look at:
- How credit facilities are manage to meet pre-determine objectives.
- How individual banks access potential borrowers considering the craftiness of Nigeria borrowers and the present economy trend.
- Flow loans are granted considering statutory provisions.
1.4 RESEARCH QUESTIONS
To gather the required information needed for the study the following questions are relevant:
- How does financial institution ascertain the, credit worthiness of their customers?
- Are loans granted based on statutory procedures or are subjected to certain influence outside the institution criteria.
- To what extent does economic situation in the country affects the payment of debt?
1.5. RESEARCH HYPOTHESES
To have a focus on the answer(s) of the above research questions, the following hypothesis shall be tested.
HO: There is no significant relationship between efficient credit management and profitability of financial institution in Nigeria.
HI: There is a significance relationship between efficient credit management and profitability of financial institutions in Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
The Significance of the study lies n its usefulness. This study is expected to be useful to a number of persons and institution are follow; it will be useful to bank particularly who wishes to ensure efficiency in the management of their credits. It will also be useful to policy makers in their effort to fashion out dynamic and reliable policy measures in dealing with debt recovery problems. Lastly, it will serve as reference material for future research in the area of financial economic development
1.7 SCOPE OF THE STUDY
The focal point of this research is intended to cover financial institutions particular located in Nigeria with a mort elaborate study of United Bank for Africa, Access Bank Plc, United Bank and First Bank Plc, as a selected Banks in Port-Harcourt.
1.8 LIMITATION OF THE STUDY
In carrying out any research, it is usual for the researcher to encounter some difficulties. This work could not do without its own problems. This study is limited to Nigeria. This area of coverage is a serious limitation of the study as there is no time to see people who work in these institutions. The escalating crime rate, Northern agitation and subsequent imposition of curfew in North did not help matters as it disrupted the activities of these institutions. Cost pose another constrain as there is little or no money to purchase text books on financial management and other relevant materials.
1.9 DEFINITION OF TERMS
Credit: Credit in this context refers to a debt an obligation to pay at a’ future time. The obligation may be highly formal and embodied in a contract which details the right and duties of the parties.
Credit Worthiness: This refers to the evaluation of the financial stand of the borrowers, particularly as it relates to meeting obligations.
Financial Intermediaries: It is a process where lenders and borrowers of funds are brought together by selling or using debt instruments to supplier of fund and channeling the funds to borrowers or the deficit unit of the economy.
Financial Institution: Institution means a group of various deposit taking institution, operation, agent and market instrument that interact within an economy to provide financial services. These services include resources mobilization and allocation, financial intermediation and facilitation of foreign exchange transaction in order to promote international trade among nations. The financial institution plats a major role in the promotion of economic growth and development. Specially, financial institutions collects saving from surplus economic unit and channels funds to borrowers or deficit economic unit.
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