CREDIT MANAGEMENT TECHNIQUES IN UNITED BANK FOR AFRICA (UBA) PLC. GBOKO BRANCH GESA PINGA

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CREDIT MANAGEMENT TECHNIQUES IN UNITED BANK FOR AFRICA (UBA) PLC. GBOKO BRANCH GESA PINGA

ABSTRACT

This work was carried out to appraise credit management techniques in United Bank for Africa (UBA) Plc, Gboko. Primarily, the work sought to find out the credit management techniques adopted in United Bank For Africa (UBA) Plc. Gboko, to trace the loads and advance granted by United Bank for Africa (UBA) Plc, Gboko and to establish the relationship that exist between credit management techniques and the performance of the Bank, among others. A survey research method was used in the work and the data collected analysed using the descriptive and inferential statistics. From the analysis, it discovered that in United Bank for Africa (UBA) Plc, Gboko, the major credit management techniques used are the appraisal, approved limit and installment disbursement techniques. These techniques have positive influence on the performance of the bank. The conclusion is that even through the financial institution has high performance rating as a result of the use of sound credit mismanagement techniques, the bank still needs to improve upon its efficiency level by giving its credit management staff more orientations on self discipline and adherence to professional ethics and by reducing its organizational levels to reduce bureaucratic tendencies.

TABLE OF CONTENTS

CHAPTER TITLE PAGE

Cover sheet ………………………. i

Title Page ………………………. ii

Certification ………………………. iii

Dedication ………………………. iv

Acknowledgement ………………………. v

Abstract ………………………. vi

Table of Contents ………………………. vii

List of Tables ………………………. x

List of Appendices ……….. …………… xi

INTRODUCTION

1.1 Background Statement e ……………………. 1

1.2 Statement of the Problem ……………………. 2

1.3 Research Objectives ……………………. 3

1.4 Research Questions ……………………. 4

1.5 Research Hypothesis ……………………. 5

1.6 Significance of the Study ……………………. 6

1.7 Scope of the Study ……………………. 6

1.8 Research Assumptions ……………………. 7

1.9 Organization of Terms ……………………. 8

1.10 Definition of Terms ……………………. 8

1.11 Brief Historical Background and Access Bank Gboko. 10

REVIEW OF RELATED LITERATURE

Preamble ………………………………….. 12

General Overview of Asset Prot-folio of Banks … 12

Concept and Nature of Bank Credit………………… 14

Lending Objective and Loan Policies of the Bank …15

Lending Process of Banks ……………….. 17

Principle of lending ……………….. 17

Theories of Bank lending ……………….. 19

Types of Lending ……………….. 21

Different types of loan and their features …………. 23

Credit Management strategy ……………….. 38

RESEARCH METHODOLOGY

Preamble ……………….. 31

Research Design ……………….. 31

Population ……………….. 32

Types of Sources of Data …………………32

Method of Data Collection …………………32

Area of Study …………………33

Techniques of Data Analysis …………………33

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

Preamble …………………34

Questionnaires Distribution and Collection……….. 34

Credit Management Techniques ………………..36

Trends of Loans and Advances granted Access

Bank Plc from 2007 to 2011 ………… 38

The Influence of Credit Management Technique on the Performance of Access bank Plc Gboko……. 39

Difficulties Associated with Credit management techniques in Access Bank Plc. ………… 41

Test of Hypothesis ………… 42

Hypothesis No. 1 ………… 42

Hypothesis No. 2 ………… 45

Hypothesis No. 3 ………… 47

Discussion of findings ………… 49

SUMMARY, CONCLUSION AND RECOMMENDATION

Summary of work ……………51

Conclusion ………… 52

Recommendation …………. 53

Areas for Further Research …………. 53

Reference ………….. 54

Appendixes ………….. 58

LIST OF TABLES

Table Title page

Questionnaire Distribution and Collection 35

Personal Profile of the Respondents 35

Credit Management techniques at UBA Plc Gboko 37

Trend of Loan and advances of UBA Gboko

2007-2011 38

Influence of Credit management techniques used in UBA Plc 40

Difficulties of Correlation Statistics for relationship between Credit Management techniques and volume of deposits din UBA Plc Gboko. 41

Computation of Correlation Statistic for relationship between credit Management techniques and volume of loan advance exerted by UBA Plc to customers. 43

Computation of Correlation statistic for relationship between credit management techniques and the amount loan advance (i.e. exerted recovered by UBA Plc Gboko)

LIST OF APPENDIXES

Appendix Title Page

i. Letter of introduction/instruction 58

ii. Questionnaire on Credit management technique 59

CHAPTER ONE

INTRODUCTION

BACKGROUND STATEMENT

Lending is one of the main functions of the Banks. Banks extend credits to their customers in the form of loans, overdraft and advances. The sum of these credits forms the debt or credit portfolios of the financial institutions. Debts are presented as liabilities to the customers as they are under obligation to pay interest and principal upon maturity (Edwin, 2005).

One outstanding problem in lending is that some customers fail to pay the interest and principal as agreed in the loan contract. This constitutes a major risk element to Banks, shareholders and the financial system as a whole. Credit risk as noted by Ehbodaghe (1995) is the chance that those extended credit by an organization will not repay with the result that the moment, the risk with the largest loss incidence to Nigerian Banks. For example, at the end of 1990, total classified (bad and doubtful) loans and advances which could not be recovered by Banks stood at N11.9 billion. This represented 44.2% of the total Bank loans and 43.8% of total Banks shareholder’s funds Ehbodaghe (995).

Similarly, Adeyemi (2005) observed that as at June 2004, nonperforming assets (i.e bad debt) constituted 19.5% of total loans and advance granted by Banks in Nigeria. Situation as reported here hinders the performance pf many Banks in the country and cause distress in the system hence Banks require effective and efficient credit management strategies in order to cope with the environment. Personal observations over the years indicate that some Banks in the midst of this problems are still performing very well. This implies that such Banks have adopted more effective and efficient credit management techniques which give them competitive advantage over others. One of such banks is UBA. It therefore became necessary to appraise the credit management techniques of this bank in order to identify their strength factors and recommend same to the other banks for improved performance.

The focus of this work has been on an appraisal of credit management techniques in UBA Gboko. As noted above, the choice of this topic was informed by the observed high level performance and stability of the Bank.a

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