PROJECT TOPIC- EFFECTIVENESS OF CREDIT FACILITIES IN THE BANKING SECTOR
This project is focused on the effectiveness of credit facilities in the Banking sector. A case study of Zenith Bank PLC, Auchi Edo State . the research work is been directed towards the examination of credit policy of the bank with a view to ascertaining its adequacy in ensuring effectiveness of indebt examination of credit evaluation processes of bank was made paying particular attention to the five criteria for credit evaluation such as character, capacity, collateral and conditions of credit,. Also the analysis of the procedures of debt collection was studied. A case study approach was adopted and in achieving the aim of this research work, questionnaire was administered on the bank’s staff whose duties have to do with granting of credit facilities. Customers were also interviewed orally. Also, chi- equare method was used for the analysis and interpretation of the hypothesis. Finally, conclusion was drawn from the study, after summarizing the various findings
- Background to the Study
Bank is defined by its activities rather than by status. Fundamentally, the business of banking entails the granting of depositors fund.
In Nigerians the first found bank was opened in Lagos in years 1892 by foreign investors but it folded up and by 1894, it was replaced by the Bank of British West Africa (BBWA), which is now First Bank of Nigeria Plc.
The opening of Lagos branch of the colonial Bank followed up in 1917, in 1925, it name was later changed to Barclays Bank (Dominion Colonial & overseas) which is now union Bank of Nigeria Plc. The first office in Nigeria was located of the old five Maria, Lagos. The head office was also or being in lagos and branches all over the country.
In 1971 8.3% of the Bank’s Shares were offered to Nigeria citizens and associations and the Bank was listed on the Nigeria stock exchange as a result of the Nigeria enterprises promotion decree of 1972 and 1977, which put the force of law behind the government’s indigenization policy of the federal government of Nigeria acquired 51.67% of the Banks Shares while Barclays Bank Ltd and it was left with 40% while the remaining was offered to Nigeria public.
Zenith Bank was established in May 1990 and commercial operations in July of same year as a commercial bank to takes some risk in course of granting credit facilities to customers. The major risk is that of default in repayment on the part of borrower which can lead to the loss of the principals and all interest on the credit facility thereby affecting the banks credit portfolio. In anticipation of such zenith bank Plc made provision for bad and doubtful debt.
Considering the adverse effect which large provision for bad and doubtful debt have in zenith Bank Plc profit and capital each of Zenith bank Plc branches management exercised subjective judgment in classifying debt.
In the year of establishment of the Zenith Bank Plc, the central bank of Nigeria (CBN) issued prudential guide lines to licensed Banks in the country. This was done so as to enhance the effectiveness of credit facility of Banks in Nigeria of which Zenith Bank Plc is not an exemption.
- Statement of Problem
The private is a major sector of the economic as a business unit and its sophistication is a measures of development and effectiveness of business activities. It is a nature thing known by all these who own entrepreneurial capacity that has the financial resources to put it into practical operation. Hence there is the need to borrow money from Bank, example is the bank with particular reference to Zenith Bank Plc Auchi management analysis and scholars have agreed that people do not appreciate the impart of effectives credit facilities from the Bank and Country as a whole.
However, this research study is aimed at diagnosing the function as regards the effectiveness of credit facilities granted by Nigeria bank with zenith Bank Plc. The various problems, which come the way of borrowers and zenith Bank Plc in their borrowing process constitute definitive problem, which needs to be highlighted, more so an inherent problem is the credit facility to be provide profitability and sense of fulfillment on the borrowers aids the obligation of paying bank the credit facility provided within the agreed pried.
PROJECT TOPIC- EFFECTIVENESS OF CREDIT FACILITIES IN THE BANKING SECTOR
- Research Questions
The following are the research questions of the study;
- Is there any significant relationship between assessment of the character, capacity of the loan seekers and the diversion of loan of other purpose?
- Is there is a significant relationship between inadequate security and inability to recover facilities?
- Is the appraisal of customer application significantly independent on the occurrence of bad debt?
- Objective of the Study
The main objectives of this study are;
- To examine if there is any significant relationship between assessment of the character, capacity of the loan seekers and the diversion of loan of other purpose.
- To ascertain if there is significant relationship between inadequate security and inability to recover facilities.
- To determine if the appraisal of customer application significantly independent on the occurrence of bad debt.
- Statement of Hypothesis
HO: There is no significant relationship between assessment of the character, capacity of the loan seekers and the diversion of loan of other purposes.
HI: There is significant relationship between assessment of the character, capacity of the loan seekers and the diversion of loan to other purposes.
HO: There is no significant relationship between inadequate security and inability to recover facilities.
HI: There is significant relationship between inadequate security and inability to recover facilities.
- Significance of the Study
The study is significant to the following group of people;
Bankers: The study is carried out so that the bankers will realize the effectiveness of credit facility and the loopholes of the credit system in the sector.
The Government: The government can realize the urgent need to work out appropriate strategies for tackling the huge bad debts that is threatening to destroy Nigeria Banking industry.
The General Public: The study is relevant to the entire economy if it can lead to debt reduction; improve credit creation, thereby placing the banking industry in a comfortable position to extend credit for project that can make expected positive contribution to economic expansion.
Moreover, it is an addition to existing literatures in the field and a useful tool for future researchers.
- Scope of the Study
This study examines the effectiveness of credit facilities in the banking sector.
This research study is restricted to the Banks of Nigeria with particular reference to Zenith Bank Plc, Auchi.
Only the aspect of credit facilities granted to customers by the banks are dealt with Although there are other functions such as safe keeping of deposit, management of customer’s investment, buying and setting of stock and shares for customers etc and departments involved are import and export, foreign exchange accounts department e.t.c, this research study is mainly concerned with the advance and current account department for it’s purpose.
- Operational Definition of Terms
Credit Facilities: Includes Advances, loans overdraft, quarantee e.t.c given by the Zenith Bank Plc, Auchi.
Collateral Security: This refer to anything that can guarantee the quick recovery of the credit facility granted
- Limitation Of The Study
One of the limitation of the study was in the area of data collection in the cause carrying out study, only 20 percent of the staff of the Zenith bank plc Auchi were available to administered the questionnaire. In the study, a specific data was drawn from the available staff on the total amount of credit facilities given to the private sector by the Zenith bank plc Auchi and the other percent of the staff were not ready to administered the questionnaire due to peculiar nature considered in her dealings and information as strictly confidential and they are very highly sensitive to their affairs.
In course of this research, the researcher could not travel extensively to collected and collate all the relevant data due to the lack of fund to travel far and near to collect data for the study.
Also in the study, some businessmen/women who appear not to know the relevance of the study, were very reluctant to give out the information as to the actual amount they enjoy from the Zenith Bank Plc, Auchi. And of what use the loan was put into.