LENDING PRACTICES OF NIGERIAN COMMERCIAL BANKS AND THEIR ROLE AS PROVIDER OF FUNDS TO BUSINESS ENTERPRISES

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Date
1999-09
Authors
AMINU, HAMMAYO
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Abstract
The main purpose of this work is to examine the sources of bank finance available to business enterprises: and the problems encountered in obtaining them. It will also attempt to look at the problems militating against the perfonnance of banks in the provision of such finance. A case study of African International Bank Limited will be made to buttress the position. The study looks at the development of commercial banks ,their development in Nigeria and the types of credit facilities they offer. The study also sought probe into commercial lending & effectiveness of lending practices of African internal onal bank Ltd. in carrying out the above. The primary sources of data consist of information derived from the banks officials and interviews with some customers while the secondary sources include the bank's annual reports and review of relevant literature: Annual reports aid statement of accounts of central bank of Nigeria and the Nigerian deposit insurance corporation. The study reveals a great similarity in the various lending practices and constraints faced by commercial banks. While there has been growth in levels of credit, the maturity distribution, security pattern & repayment methods have been unsuitable. A few large establishments have monopolized credits making it difficult for the vast majority of smallscale industries to secure access. The emphasis on provision of security has also tended to limit credit to that group. Nigerian commercial banks have been inefficient in mobilization of personal savings thus limiting their credit lending abilities whilst their marketing efforts were found to be largely limited to image enhancing advertisements rather than innovative product and service development geared toward the attraction of deposits. The prohibitive cost of borrowing has discouraged same and consequently depressed investment in the productive sectors. Borrowers were often found to withhold relevant and reliable information thus complicating assessment and escalating the banks risks. Suggestions proffered from this work include; • Reorientation and retraining of bank personnel in techniques adapted toward the country's development needs. • Delegation of processing and accessing authority to bank branches in order to increase their discretion towards customer's credit requests. • Government should assist banks by establishing rediscounting / refinancing facilities on the commercial banks" loans as a cushion for mismatching of deposits and loans maturities while also providing a policy on technical support for the entrepreneur. • Formation of cooperative societies will assist in generating credit to members while bodies like manufacturers association of Nigeria should be encouraged to develop banks for assisting their members. • Low bank density could also be resolved where the central bank promotes the development of community banks and encourage the establishment of bank branches after borrowers must have demonstrated their managerial competence to successfully execute their projects. • Further study is necessary in the future to assess and examine developments in the banking system; the effects of bank performance and the way forward particularly considering the dynamism of the system
Description
BEING A PROJECT SUBMITTED TO THE DEPARTMENT OF BUSINESS ADMINISTRATION, FACULTY OF ADMINISTRATION IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE MASTER DECREE OF BUSINESS ADMINISTRATION (MBA) OF THE AHAMDU BELLO UNIVERSITY, ZARIA NIGERIA SEPTEMBER, 1999
Keywords
LENDING,, PRACTICES,, NIGERIAN COMMERCIAL BANKS,, THEIR ROLE,, PROVIDER,, BUSINESS ENTERPRISES
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