While granting of loan is been described as the '"Power
Point" in banks; the battle with the non-performing loans (debts) remains
one of the most serious issues in banking sector across the globe, particularly
in developing countries like Nigeria. Despite the strict considerations of
cannon of lending applied in loan appraisal of customers, there is still no
single bank that is not confronted with non-smooth repayment of loans. Non
compliance with the terms and conditions of loans by borrowers is what is
leading to the huge portfolio at risk (PAR).
However, sequel to the big effects of debt on bank in particular, the
researcher makes effort to carry out research on debt recovery procedures and
strategies in commercial banks in Nigeria, using United Bank for Africa (UBA)
Plc, Ekpoma, as a case study.
The research will contain five chapters. the chapter one contains the
introductory part, which consist of; background of study, statement of the
research problems, research questions, objectives of the study and significance
of the study. The chapter two contains the detailed literature review of the
research topic. The chapter three comprises of methodologies. Chapter four
consist of methods of data collection and analysis of data gathered and finally
chapter five embodies the summary, findings, conclusion and recommendations.
Title page i
Table of Content v
Background of the Study 1
Statement of Research Problem 3
Research Questions 4
Objective of the Study 4
Significance of the Study 5
Statement of Hypothesis 6
Scope of the Study 7
Limitation of the Study 7
1.9 Definition of Terms 8
Meaning of Debt in Bank 14
Causes of Debts in Bank 15
Impacts of Debts in Banks and Entire
Debt Recovery Challenges
Preventives Measures of Debt in Banks 23
Debt Recovery Procedures and Strategies
in Banks 26
Sources of Data 31
Sample Size 32
Data Presentation and Analysis 33
Restatement of Hypothesis References 38
DATA PRESENTATION AND ANALYSIS
4.1 Introduction 40
4.2 Data Analysis and Presentation 42
4.3 Test of Hypotheses
OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
of Finding 47
1.1 BACKGROUND OF THE
of the core responsibilities of banking institutions in Nigeria and all over
the world is the granting of facilities (loans) to borrowers after successful
mobilization from the surplus unit to the deficit units of the economy. The
lending to individualsor corporate bodies can either be by way of loans and
degree of extension of loans and advances to customers determines the level of
returns on loans and advances. This enables the bank to advance towards the
achieving of the main objectives of profit maximization.
although the service of granting loan is the vehicle that move the bank to it
stage of success, it is observed, that they are not without problems of bad
debt. The high risk banks takes is the approval of loans for borrowers.
Whatever form of lending is granted by commercial banks to borrowers, the main
issue is that a debt is inevitably created between the bank (creditor) and
borrower (debtor). The bank automatically becomes the creditor and borrower,
no single commercial bank in Nigeria can proudly declared that it has not been
affected by the problems of loans and bad debts or will never be confronted
with the issue. Many loans falling into the class of bad debt accounts and
proffering the possible way of recovery, is way of life in banking sector
this research work, debt recovery procedures and strategies in commercial banks
in Nigeria will critically be examined with area of coverage limited to United
Bank for Africa (UBA) Plc, Ekpoma Branch.
to the CBN Prudential Guidelines, (2010) non-performing loans and advances
interest are not part of the bank’s income because it’s not realistic until
debts and interest are realized by the bank. Bad debts are regarded as negative
contributors to the profitability of commercial banks. The only possible way
the bank can make these debts and it’s accumulated interest realizable, is if
the bank has in place an effective debt recovery procedures and strategies
1.2 STATEMENT OF THE RESEARCH
is the engine on which banking activities moves because it provides the largest
part of the profit. The banking has to be efficient in its credit
administration in order to ensure effective and efficient allocation and
utilization of the loan able funds. With well managed credit administration,
economic development and growth is guaranteed. However, the banks in Nigeria
are faced with issues of bad debt and how they can eventually be recovered. Bad
debt occurred when the borrowers are unable to amortize their loans and when
this occurred; it brings heavy burden to the bank on recovery these debts.
(Adebayo 1990; 1)
is very important to state clearly some of the prevailing problems of loans and
debt recovery, how it has impeded the smooth operations of the commercial banks
and thereby hindering the banking sector the golden chances of rendering its
unique objectives to the entire economy.
1.3 RESEARCH QUESTIONS
following research questions are addressed in the study;
What debt recovery techniques can be
employed by commercial banks in Nigeria?
What debt recovery challenges exist in
commercial banks in Nigeria?
What relationship exist between bank
profitability and returns on loans and assets.
Which techniques can be employed to
minimize bad debts in commercial banks in Nigeria?
1.4OBJECTIVES OF THE STUDY
specific objective of the study is to critically examine debt recovery
procedures and strategies in commercial banks in Nigeria. The objectives are:
To find out debt recovery techniques
employed bycommercial banks in Nigeria (case study of UBA)EkpomaBranch.
To identify debt recovery challenges of commercial
banks in Nigeria.
To examine the relationship between bank
profitability and returns on loans and assets.
To recommend techniques to minimize bad
debts in commercial banks in Nigeria.
1.5 SIGNIFICANCE OF THE STUDY
significance of the study includes:
To provide additional material to carry out future research in this area.
To increase and widen the scope of the researcher’s knowledge
To educate and enlighten the general public and especially the credit and debt
recovery departments in commercial banks in Nigeria on debt recovery procedures
and strategies in commercial banks towards accomplishing the bank’s objectives.
To assist the banks in some problemsof loans and proffering steps in recovery
1.6 STATEMENT OF
bank customers do not often divert borrowed funds to other purpose different
from original motive for the request.
bank customers often divert borrowed funds to other purpose different from original
motive for the request.
CBN credit guidelines do not have influence on the bank liquidity and
CBN credit guidelines have influence on the bank liquidity and profitability.
1.7 SCOPE OF THE STUDY
this researchwork the researcher decided to narrow down the area of study to
the credit and debt recovery departments in United Bank for Africa (UBA)Ekpoma
Branch in Edo State. Hence, the experience encountered by this branch, as
regard loans, are similar to other branches in the state and other banks in
Nigeria.while various head office of banks are mainly in charge of
administration of their branches.
1.8 LIMITATION OF THE STUDY
every research embark upon by the researcher; must have its own peculiar
externalities which brings about some limitations against the smooth
operations. In respect of this research work, the researcher is faced with some
constraints, the constraints includes:
Financial constraints, the high level of
corruption which results to misallocation of funds in the country imposes
economic hardship on the people; as a result, the limited financial resources
available at a time are inadequate to meet all the researcher needs. For example at moment of the research, the
fuel price hike limited the smooth movement of the researcher for the purpose.
Time constraints, academic work for the last
semester and responsibilities in the office as a public servant occupied most
of the time required for the research work allowing limited time for the
Facts and vital information’s regarded
as confidential are been hoarded from the researcher, thereby limiting the
Problem of busy schedules, rescheduling
or booking appointments, for social engagements and receiving phone calls also affected the time.
1.9 DEFINITION OF TERMS
terminologies used in this study are defined below to enables readers that are
non Banking or Accounting Profession oriented have a clear and better
understanding of such terms in the studyfor the clear and understanding of such
terms by the readers.
is known ascash or fixed assets pledge by customers to secure loan.
is a reminder to the Client that a certain amount is due for repayment and the
Client is advised to come along and meet his obligation.
is a legal notice sent to the Client that he has certain period (usually three months)
within which he must pay his loan.
FULL BACK ON GUARANTEE
case applies in a situation where the loan is guaranteed by outside body.
a contract between a lessor (the owner) and the lessee (the user) for hire a
specific asset selected from a manufacturer or vendor of such assets by the
is a credit facility granted by bank to a customer at a specific rate, for a
period of repayment, it could be for personal or commercial purposes; it is
usually for short, medium or long terms.
simply the lending to one borrower by a group of banks or lending institutions.
given to a customer for later payment
structure or arrangement put in place for repayment of credit facilities
occurred when the borrower is not able to meet the terms and conditions of loan
falls under this category if there is no hope of recovery the debt.
this study, we mainly refers to the banking sector and other investment houses.