AN APPRAISAL OF DEPOSIT AND LENDING POLICIES IN NIGERIAN BANKS
(A Case Study of Access Bank Plc,
Title page – – – – – – – – – i
Declaration – – – – – – – – ii
Approval – – – – – – – – – iii
Dedication – – – – – – – – iv
Acknowledgement – – – – – – – v
Abstract – – – – – – – – – vi
Table of Content – – – – – – – vii
Background of the study – – – – – 1
Statement of the General
Problem – – – 4
Objectives of the Study – – – – – 5
Research Questions – – – – – – 5
Significance of the
study- – – – – – 6
Scope of the study – – – – – – 7
Historical background of
access bank – – 7
Definition of terms – – –
– – 12
TWO (Literature Review)
Introduction – – – – – – – 14
Lending principle – – – – – – 16
Lending policies and
bank managers – – 19
Security for bank
lending – –
– – – 19
Lending process at
Access bank – — – 22
Achievement of access
bank through lending- – 24
of bank deposit on lending policy – – 26
THREE: Research Methodology
Research methodology- – – – – – 29
Population and sample
size- – – – – 29
Sample techniques – – – – – – 30
for data collection – – 30
Method of data analysis
and interpretation- – 32
of the choice – – – – 32
CHAPTER FOUR: (Data Presentation and Analysis)
4.0 Presentation of data- – – – – – – 34
Data analysis and
interpretation- – – – 34
Summary of findings – – – – – – 37
CHAPTER FIVE: SUMMARY, CONCLUSION AND
Summary- – – – – – – – 38
Conclusion – – — – – – – 39
– – – – – – 39
References – – – – – – – – 41
OF THE STUDY
In a modern economic system, there is distinction
between the surplus and deficit economic
units and consequently a separation of the savings and investment mechanism.
This has necessitated the existence of financial institutions whose jobs
include the transfer of funds from savers to investors. One of institution is
the money deposits bank, the intermediating roles of the money deposit banks
places them in a position of “trustees” of the savings of the widely dispersed
surplus economic units as well as the determinant of the rate and shape of the
economic development. The techniques employed by bankers in this intermediary
function should provide them with perfect knowledge of the outcome of lending
such that funds will be allocated to investment in which probability of full
payment is certain. However, in practice no such tool can be found in the
decision of lending bankers. Virtually all lending decisions are made under
creditors uncertain of the risk and uncertainties associated with lending
decision situations are so great that the concepts of risk and risk analysis
need to be employed by lending bankers in order to facilitate sound financial decision
making and judgment.
This statement implies that if risks are to be
objective assessed, lending decisions by the money deposit banks should be
based less on quantitative data and more on principals tools subjected to
provide sound and unbiased judgment. Furthermore, the banks depend heavily on
historical information as a basis for decision making.
Apparently aware of the inadequacies of his or her
decisions base, the lending banker has often sought solace in tangible and marketable assets as security giving the
impression that lending against such securities is an insurance against bad
debts. This makes the banker complacent with his loan port folio. The
increasing trends of provision for bad and doubtful debts in most money deposit
banks is a major source of concern not only to management but also to the
shareholders who are be coming more ware of the dangers posed by these debts.
Bad debts destroy part of the earning assets of banks such as loans and
advances which have been described as the main source of earnings and also
determine the liquidity and solvency which generates two major problems, that
is liquidity and profitability, has to earn sufficient income to meet its
operating costs and to have adequate returns on its investment.
Lending has becoming a vital function in banking
operations in view of its direct effect on the economic growth and development
in the business sectors. Thus, as far as banks are concerned, their activities
are lending are as important as their deposit taking, considering the
inter-relationships between lending and deposit taking.
Although Lending is risky, commercial banks profit
oriented organization having a primary objective as profit maximization cannot
do without lending out money. In most cases, they generate the highest
proportion of their interest on lending. Moreso, the principal objective of
lending of a bank is the provision of growth inprofitability and liquidity
within the economy.
Commercial banks play an important role in the
pass-through of monetary interest rates. Nevertheless, the efficiency of transmission
of decisions of Central Bank is a complicated process and may depend on many
factors such as: level of competition in financial industry, perception of
credit risk (risk prenina) risk aversion, availability of close substitutes for
loans etc. Moreover, banks may influence the external fiancé premium not only
via the interest rate but also modifying the available maturity of loans or
changing collateral requirements. Finally, as evidence by broad literature on
bank lending channel, credit rationing and uncertainty about creditworthiness
of borrowers may markedly influence banks risk taking thereby influencing their
willingness to lend.
The existence of bank lending channel is conditioned
on two important assumptions. First monetary policy decision impact bank
liquidity position. Second, changes in the supply of loans affect borrowers
because of constrained access to other sources of financing than bank loans.
Tightening of monetary policy usually leads to decrease in the demand of
deposit because banks adjust their
deposit rates only partially to the other sector to equity investment funds.
Shrinking bank’s liabilities force banks to decrease the supply of loans
STATEMENT OF THE PROBLEM
Years after years, banks suffer much from the part of full loan extended which has
for one reason or the other proved irrecoverable. Banks lose millions of Naira
in various bad debts yearly and deposit efforts by bank management committee of
chief inspectors and the bankers committee on the other hand, the ware of bad
debts in banks is still on alarming proportion. This is gathered from a
combination of literature reviews on the topic.
On the other hand, many banks experienced a lot of
bad debts when new government abandoned the project awarded to the contractors
by the former government. These contractors borrowed to execute the project
awarded to them but could not repay the loan, due to government action on
revamping the economy. Again, experience may arise in respect of lapses on the
part of the bank credit officers. For instance, there may be excesses over
approved facility, unformatted facilities and expired facilities not renewed in
time in each of these cases, the customer may easily deny even owing the bank
all or part of the amount. Deposit banks have always borne the burden alone,
but this may not continue in future as the banks may be unable to take the risk
of lending more but when eventually they do, they would seek the best way to
come out of the risk with realistic reward which they are dearly failing to
achieve at present.
OF THE STUDY
objective of the study are stated below:
to determine and
appraise the lending procedure of bank using Access bank plc as a case study
with a view to highlighting the effectiveness and adequacy or otherwise of the
credit management policy of Nigeria banks in reducing the occurrences and
consequences of bad debts.
To ascertain the extent
to which government intervention in lending policies of bank deposit has
influenced bad debts in Nigeria money deposit and lending policies.
To highlight the extent
to which improper project evaluation influence bad debt of deposit money banks
and their lending policies in Nigeria.
To highlight that rate
at which inadequate collateral security provision by borrowers increase the
incidences of bad debts in Nigeria.
In view of the consequence of bad debts in Nigeria deposit
money banks and their lending policies, it is necessary to formulate some
research question which will enable the researcher formulate statistical
has adequate collateral
security provision by borrowers caused bad debt in access bank of Nigeria plc?
Does fund diversion has
any effect on bad debt in intercontinental bank of Nigeria plc?
To what extent has
government intervention in lending polices and bank deposit influence bad debts
in Access bank plc?
To what extent does
improper evaluation influence bad debt in intercontinental bank plc?
OF THE STUDY.
It is hardly an exaggeration that the difference
between the success and the failure in the banking industry is in the effective
management of the banks loans and advance. Efficient loan management is vital to
the protection of assets and the achievement of adequate returns to investment.
Through much work abound in the literature of the techniques of lending, the
methods of securing such lending and the pitfalls that await the unwary banker.
By comparison it appears to be very little in the point on the subject of loan
management and recovery.
A study of this subject will therefore be a welcome
addition to the existing volume of banking literature.
Bank deposit and lending polices recognize that
beyond the application of sound banking principles whenever a loan is made,
there is need for urgency in appreciating the point when a loan begins to look
doubtful. In arriving at a decision as to the appreciate action and in taking
that action. This will enable the bank to at least obtain full payment
including accrued interest or at worst
to mitigate the capital loss in the face
of increased competition among banks. Future profits are likely to be harder to
come by and since bad debts are charged against profits, it is appropriate that
the researcher review the methods, proportions and margins of lending to bad
Hence, the significance of this study to bankers
will enable them to appreciate an appraisal of their lending control mechanisms
now that they are expected to lend under tight monetary conditions. The
economic as a whole will benefit from the study because if the level of bad
debts is reduced, banks will be left with more profits to enable them make the
expected contributions to the development of the economy.
1.6 SCOPE OF THE STUDY
In the scope of the study deposit and lending
polices in Nigeria, Access bank plc was used for my analysis. All references
therefore relates to access bank plc.
BACKGROUND OF ACCESS BANK PLC
Access Bank Plc, commonly refers to as Access bank
but often called intercontinental is a commercial bank in Nigeria. it is one of
the twenty-four (24) commercial banks licensed by the central bank of Nigeria,
the country’s banking regular.