1.0 BACKGROUND OF THE STUDY
Credit in deeper perspective conates different definitions depending on angle on which it is being viewed. In an accountant, credit means financial benefit and also put in another way, having a corresponding relationship on a dual entry principles. To a banker it means financial accommodation, a type of financial facility, packaged, for the benefit of the deficit economic unit. In essence, it involves an allocation of finds. For example, chamber Dictionary define credit as sum placed at one’s disposal in the books of bank. This definition crystallizes the concept that when an account is in surplus position it liberty? Up to the limit of his funds. Therefore, when an arrangement is made between the bank and the borrower overdraws his balance, a form of bank credit has been allowed in which case, there is an obligation to repay such debt at a future date.
Relating this to Bank, credit means that Bank frequently uses part of its deposit in granting credit to his customers thereby affecting confidence in the integrity at customers (borrower) is to whom such loan and advances are made either by way of discounting bills or otherwise, to increase the borrower to increase in borrower purchasing power.
Credit is, therefore created by way of loans and advances or by discounting of bills and engaging in other investment securities normally oblige to the borrowers.
Financial institution ensures that there is enough stock of money to service the needs and aspiration of the economy. It also performs economic as of transferring money from areas of surplus economic units to deficit economic sector.
Credit management is regarded as a vital instrument in the management of banking industry especially as it affects the commercial banking system. Attention in this work would be focused on this area of endeavour. More so as to be one of the most neglected areas of management in most countries today (especially in the developing and underdeveloped nations of the world including Nigeria) it could therefore be said that the inherent problem as experience by banking sector today can be linked to the partial or total neglect of cannons of lending, by the officers of the bank, impact of government policy and customers attitude towards the entire spectrum of credit facilities.
1.1 STATEMENT OF RESEARCH PROBLEM
Research work is carried out to investigate into some areas where attention has not been focused or even where there has been work and ideas put forward in its area, but this has been neglected at the end, this work attempts to find out certain problems and try suggesting solution. Some of these problem include the following:
- Does the bank lack competent hands to handle the sensitive area of credit control of the bank?
- Does the bank actually carry out critical assessment before advancing credit?
- Does the intimacy of some loan suckers both the authorities of the banks inhibit proper credit evaluation?
- Does the counter-order from superior officers affect the lending banker decision?
1.2 OBJECTIVES OF THE STUDY
Based on the background information, this study therefore aims at examining and actually finding out how the banking industry in Nigeria has been facing in managing credit with a view to meet the financial requirement and satisfaction of the various categories of customers like the private sector, industrial and government department vise-visa, the federal government series of monetary policies and control exercise through the central bank of Nigeria in terms of credit guidelines and sectional allocation of funds. The greater the bank credit is, the greater the stimulus to economic activity provided by monetary policy.
The study also aims at examining the management of credit and man tools at the disposal of the banking industry. Since these are necessary for carrying out a safe and sound practice based on statistical data analysis needed for efficient risk evaluation.
1.3 SCOPE OF STUDY
This work is restricted Union Bank of Nigeria Plc, and no attempt was made to compare finding with what is obtainable in the banks within the same sector or industry, although reference could be made in this regard when the need arises.
1.4 SIGNIFICANCE OF STUDY
The significance of this research work includes among others, the gains occur to the researcher, the bank and invariably to other interest groups. To the researcher, a vast knowledge of effective management of a credit in Bank and financial institutions have been gained.
This project work will enable the bank and other financial institutions to know whether the existing credit management system is in line with the recommended credit policy laid down by the Central Bank of Nigeria and if not necessary corrective measures will be taken in order to achieve greater efficiency in the future.
The result from this study would provide the policy makers, opinion leaders and head of organizations most especially the Board of Directors (BOD) of Union Bank of Nigeria Plc a background information for proper credit management system in the Bank.
1.5 RESEARCH HYPOTHESIS
Hypothesis also mean test of the research. Hypothesis could be defined as statement or assertions which are yet to verification in order to prove their validity or otherwise, such preposition for this work include:
H0: Union Bank of Nigeria Plc has adequate credit policy.
H0: The cannons of lending are not often followed when granting credit facilities to customers.
H0: Some customers have the problem of inadequate collateral securities for loan requested for
H0: Bank customers direct borrowed fund to other purpose different from reason of taking the loan
1.6 LIMITATION OF STUDY
The factors that limited the scope of this work is grouped into two variables namely controllable and uncontrollable variables. The former is base on the