BANK LOAN MONITORING AND LOAN PERFORMANCE: A STUDY OF DEPOSIT MONEY BANKS IN NIGERIA
BANK LOAN MONITORING AND LOAN PERFORMANCE: A STUDY OF DEPOSIT MONEY BANKS IN NIGERIA
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Date
2014-06
Authors
IDRIS, Ismail Tijjani
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Abstract
For banks to achieve their goals there is the need to put in place structures that will keep
loans active within the acceptable ratios defined by regulatory authorities. Notable
among these structures are the internal procedures designed to ensure appropriate
procedure for credit appraisals, objective approvals of loan applications and proper
credit administration of all disbursed funds. Despite these, empirical evidences portray a
different and disturbing picture as consistently the Nigeria banking system is
characterized with high ratio of non-performing loans, banks liquidity crises,
shrinking profitability, general losses, eventual corporate failures and finally
financial crises. These cast doubts as regards the institutionalization of loan
monitoring mechanism in the banking system. This study sought to establish whether
there is a relationship between bank loan monitoring and loan performance among
Deposit Money Banks (DMBs) in Nigeria. The survey and correlational designs were
adopted for the study. The research hypotheses were tested using Chi-Square and
correlation techniques. The study found that there is a relationship between loan
monitoring and loan performance among DMBs in Nigeria. It is therefore concluded
that there is a relationship between bank loan monitoring and loan performance and
that the more effective and efficient the monitoring the higher the loans will remain
active. The study among other things recommended that DMBs should design more
rigorous and effective mechanisms such as being proactive in handling the bad loan
through restructuring and/or work out arrangements as the early warning signals of bad
loans begin to set in or sell them to the secondary loan markets. The banks are also
recommended to come up with reward and punishment system on their staff concerned
with loan monitoring, which should also form part of their Key Performance Indicators
(KPIs) as well as establishing a mutual collaboration with their borrowing customers in
ensuring that their loans are made to remain active throughout the period of the loans.
Description
A THESIS SUBMITTED TO THE SCHOOL OF POSTGRADUATE STUDIES,
AHMADU BELLO UNIVERSITY ZARIA, IN PARTIAL FULFILMENT OF THE REQUIREMENTS
FOR THE AWARD OF MASTER OF SCIENCE DEGREE IN BUSINESS ADMINISTRATION
DEPARTMENT OF BUSINESS ADMINISTRATION
FACULTY OF ADMINISTRATION
AHMADU BELLO UNIVERSITY, ZARIA
NIGERIA
JUNE, 2014
Keywords
BANK LOAN,, MONITORING,, LOAN, PERFORMANCE:, MONEY BANKS