AN APPRAISAL OF THE LOAN EVALUATION CRITERIA AND CONTROL TECHNIQUE IN ZENITH BANK

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AN APPRAISAL OF THE LOAN EVALUATION CRITERIA AND CONTROL TECHNIQUE IN ZENITH BANK

ABSTRACT

The role of banks as financial intermediary is crucial to the growth of any society. Primarily, bank supply, such financial services as provision of savings and time deposits, call deposits, working capital and terms loans, tender and performance bonds documentary collections, fund transfer, foreign exchange transaction, equipment leasing and business advisory services. To the individual and corporate business community, bank loans are a prime source of funds for investment and consumption needs. To the government such loans are important because they serves to accelerate development in priority areas. Indeed the provision of loans to viable projects in the society is one important way that the banking industry can be regarded as the economic engine of society because of the multiplier effect of this in creating employment and improving the standard of living of the populace. It is the deposits from customers that banks principally use in lending and therefore it is only national to expect that they be cautions when lending so as to ensure that the risks they take minimum, for instance, there has ben reasonable profits as well. Banks also want document assurances that the loans are interest will be fully repaid. Other conditions for bank loans sometime include the provision that the intending borrowers take on equity in the total cost of the project. This equity ranges often time between 25-45%. A bank may also demand collateral in the form of land or ended property debentures on the assets of a borrowing company, share certificates and such immovable properties as plants and equipment, there is also the personal standing, integrity, status and tract records of the borrowers, a factor which the banks consider equally important. If the aforementioned criteria are strictly applied in loan request, there is little doubt that the incidences of bad debts would be minimal. In practices the criteria are supplemented by “subjective” variable bank loans are at times granted to persons of dubious character and for projects that are clearly not viable or profitable due teither to improper credit appraisal or collusion between loan applicants and lending officers.

TABLE OF CONTENT:

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

1.2 Statement of the Research Problem

1.3 Objectives of the Study

1.4 Significance of the Study

1.5 Research Questions

1.6 Research Hypothesis

1.7 Conceptual and Operational Definition

1.8 Assumptions

1.9 Limitations of the Study

CHAPTER TWO

LITERATURE REVIEW

2.1 Sources of Literature

2.2 The Review

2.3 Summary of Literature Review

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Research Method

3.2 Research Design

3.3 Research Sample

3.4 Measuring Instrument

3.5 Data Collection

3.6 Data Analysis

3.7 Expected Result

CHAPTER FOUR

DATA ANALYSIS AND RESULTS

4.1 Data Analysis

4.2 Results

4.3 Discussion

CHAPTER FIVE

SUMMARY AND RECOMMENDATIONS

5.1 Summary

5.2 Recommendations for Further Study

Bibliography

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Commercial banking plays a major role in the commercial life of a national regardless of the level of development it has attained; lending is an essential function of commercial banking. Through lending, bank management strives to satisfy the credit needs of the community or credit market that he bank serves or intends to serve. Further more, the bank loans contributed maternity to bank profitability by providing a higher return than most other bank assets and by being a key element in the creation and maintenance of the depositor’s relationships.

If the element in the creation in the economy’s life blood is true, then credit that cease to flow, through the economy and becomes stagnant can be said to represent a hardening of ht economy and arteries it is in the content.

If forestalling such as situation that the ideas of criteria for evaluation loads and control of such loans become of importance, if a bank is to survive to serve the community, she (the bank) most provide loans for sound purposes and repayments but the bank should set in motion a control machinery which will constantly monitor project for which loans been approved and granted. This not only ensures that funds are channels into the ventures for which they are meant but enables the bank to device customers whenever anything goes with the project which if not arrested at all early stage may lead to the division from the payment schedule and possibly end up a bad debt.

This study aims at appraisal the law evaluation criteria and the control techniques currently in operation in zenith international bank limited and hance, on the basis of the findings, make recommendations which may help the bank to reduce cases of bad and doubtful debt in future.

1.2 STATEMENT OF THE PROBLEM

There is a chronic bad debts syndrome currently sweeping across the nations banks, Bad debt constitute one of the most critical factors affecting a bank profitability and survival. A high bad debt profile could cripple the operations of bank and impair its development. In recent times, a number of Nigerian Bank indeed come near insolvency, as a result of bad debt. A loan can turn bad after it is granted for example where security was not perfected prior to draw down.

A loan can also turn bad as a result of combination of other factors many from incomplete knowledge of a custom and his activities corporate illiquidity problems due to over borrowing or over expansion instance, abrupt changes in government or in government policies to shear incompetence and bad judgment on the part of loan office. Experts, in fact attribute the phenomenon of bad debt to unforeseeable contingencies and part of bank loan officers.

The conduction from the foregoing is the bad debt arise from factor beyond the control of both the bankers and his customer or both of then acting in concert. A problem loan graduates into bad debt if not properly managed, and is then charged off thus representing a drawn on the banks resources. In the present financial squeeze where bank loans represent the major source of capital funds for several forms, this will means reduce access to such funds and this reduced productivity, reduced employment opportunities, increased inflation. Similar economic complication for the nation.

BRIEF HISTORY ON ZENITH BANK PLC

Zenith Bank plc is presently the most capitalized company on the Nigerian stock Exchange (NSE), with a market capitalization of N612.82 billion as at end June 2007 and the biggest bank in Nigeria in terms of total assets plus contingents which stood at N1,178.39 billion as at June 2007.

The bank was established in May 1990 and started operations in July same year as a commercial bank. It become a public limited company on June 17, 2004 and was listed on the Nigerian stock exchange on October 21, 2004 following a highly successful initial public offering (IPO), which recorded a subscription level of 554%. The bank present has a shareholder base of above one million, an indication of the acceptability of the zenith brand.

Its head office is located at 87, AjoseAdeogun street Nigeria Island, Lagos, Nigeria. with over two hundred and fifty (250) branches and business offices nation wide connected online, real time zenith bank has presence in all the state capitals, the federal Territory (FCT) and numerous towns and cities.

Over the years, zenith bank clearly set out to differentiate itself in the banking industry through its service quality, drive for a unique customer experience and the caliber of its client base. Today, it is easily associated with the following attributes in the Nigerian banking industry;

· Best risk assets portfolio

· Consistent superior financial performance

· High quality personnel

· Leadership in the use of information and communication Technology (ICT)

· Formidable marketing team

The overall vision of the bank is to make the zenith brand a reputable international financial services network recognized for innovation, superior customer service and performance while creating premium value for all stakeholders.

1.3 AIMS AND OBJECTIVE OF THE STUDY

The main aim of the study is to critically analyze the criteria used in granting loan and the effectiveness of control measure adopted in zenith bank international.

The specific objective for the study include the following:

1. To review the credit guidelines of the monitories to all banks.

2. To examine the credit policy and practices of zenith international bank.

3. To review the management of loan, bad debts and recovery processes in zenith international bank.

4. To appraise the control measures in averting bad debts.

5. To identify problems associated with credit management.

6. To make recommendations on the finding of the study.

1.4 HYPOTHESIS OF THE STUDY

To achieve the objectives of the study the following hypothesis was formulated.

H₀: Banks do not follow laid down criteria and control in their evaluation of application for credit facilities.

H₁: Banks follow laid down criteria and control in their evaluation of application for credit facilities.

RESEACH QUESTIONS

The study answers the following research questions:

1. To what extent does an effective loan management techniques reduce bad doubtful debts in zenith internal bank of Nigeria, limited.

2. To what extent ha adequate control techniques of Nigeria banks reduced bad and doubtful debts?

3. What extent has CBN regulation and guideline mechanism affected the tending function in the country.

4. To what extent has CBN various conventions and techniques of control influenced the loans creation and management of commercial banks in the country?

5. How effective can loans be evaluated to check the occurrence of bad doubted debt in the Nigerian banks?

1.5 SIGNIFICANCE OF THE STUDY

There have been several researchers into the activities of the financial institution in the past but there has never been one that actually addressed the management of problem loans and debt in Nigerian commercial banks.

The study henceforth, examines how bad debts actually affects banks the public and the nation. Large bad debt lead to huge loss for the bank and erode the bank’s earnings. The buck of banks income derives from lending operations, particularly from interest on loans. Where such loan are not repaid as at when due bank’s liquidity position is put in jeopardy. Since economic resources are in addition expended in pursuing such loans.

Bearing all these mind therefore, the study is a unique one as it shows how banks can reduce their bad debts, manage their loan and design the modalities for such loan’s recovery and collection.

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OWNERSHIP STRUCTURES, CORPORATE GOVERNANCE AND PERFORMANCE OF small MFIs in Nigeria(MSC)

YOU CAN CALL US BACK FOR THE COMPLETE THESIS. WE CAN ALSO HELP YOU WITH CORRECTIONS FROM YOUR SUPERVISOR. PLEASE CALL 08068231953, 08168759420 MSC THESIS TOPIC: OWNERSHIP STRUCTURES, CORPORATE GOVERNANCE AND PERFORMANCE OF small MFIs in Nigeria(MSC) Abstract The purpose of the study was to examine the relationship between ownership structures, corporate governance and the performance of small MFIs in Nigeria. Interest in this study was as a result of poor performance of these MFIs as indicated in the AMFIU Annual report of 2006. The study therefore sought to determine if this could be attributed to their ownership structures and therefore governance levels. A cross sectional survey design was used to undertake this study using a sample of 65 MFIs from which responses from 44 MFIs were received; giving a response rate of 67.7%. Findings of the study reveal that ownership structures and corporate governance are significant predictors of MFI performance accounting for 42.4%

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AN APPRAISAL OF THE LOAN EVALUATION CRITERIA AND CONTROL TECHNIQUE IN ZENITH BANK

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