THE PROBLEMS OF DEBT MANAGEMENT IN FINANCIAL INSTITUTION

(A STUDY OF UNION BANK PLC GARDEN AVENUE ENUGU)

ABSTRACT

This work is to carryout research on debt recovery techniques in the banking sector issues, problems and prospects (A study of Union Bank of Nigeria plc). This research will expose how non-distressed banks bring effective resolution to a distressed bank because of the effective means of recovering the debts. And if there is any loss in one bank, it leads to a loss of confidence in the entire banking system. This research will state the aim at finding solution to the debt and general causes of financial distress in banking sector, and looking into finding last solution. This research work will find out whether banks  take loan policy into consideration when granting loans to customers. It will determine the causes of loan decinquency of banks and also analyze the effects of loan requirement and take recommendations for improvement of debt recovery in the banking sector. This research work will determine the problems associated with or difficulty in loan recovery.

 TABLE OF CONTENTS

Title page                                                                     i

Approval page                                                              ii

Dedication                                                                    iii

Acknowledgement                                                         iv

Abstract                                                                       v

CHAPTER ONE

INTRODUCTION

1.1      Background of the study                                         1

1.2      Statement of the Problems                                      3

1.3      Objectives of the study                                           3

1.4      Research Questions                                                4

1.5      Research hypothesis                                               4

1.6      Significance of the Study                                                5

1.7      Scope and Limitation of the Study                           7

1.8      Definition of operational Terms                                9

References                                                             12

CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1      An overview                                                           13

2.2      Literature review                                                    13

2.3      Debt and Debt Management Defined                         14

2.4      Types of Debt                                                       14

2.5      How Banks Create Money                                               16

2.6      Common Causes and Problems of bad Debts              21

2.7      Fundamental of Credit Analysis                                 27

2.8      Prudential Guideline in Nigerian Banking                     31

2.9      Minimizing Risk Associates with Bank Lending                   34

2.10  The Need for Frequent Government Regulation           38

2.11  Short Coming of the Traditional Method of

Credit Analysis                                                       43

CHAPTER THREE

RESEARCH METHODOLOGY AND DESIGN

3.1      An overview                                                           46

3.2      Sources of data                                                      46

3.2.1        Primary data                                                       46

3.2.2        Secondary data                                                   47

3.3      Population of the study                                           47

3.4      Sample and Sampling Technique                              48

3.5      Instrument use in collecting sample size                           49

3.6      Validation and reliability of the Instrument used          49

3.7      Method of Data presentation and analysis                  49

CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS

4.1      An overview                                                           52

4.2      Presentation of data                                                       52

4.3      Presentation of analysis of data                                61

4.4      Testing of hypothesis                                              62

4.5      Discussion of findings                                              64

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

5.1      Summary of the Findings                                                65

5.2      Conclusions                                                           68

5.3      Recommendations                                                  68

5.4      Suggestions for further studies                                 69

Bibliography                                                           71

Appendix I                                                                                                          72

Appendix II                                                                                                        73

CHAPTER ONE

INTRODUCTION

1.1  BACKGROUND OF THE STUDY

Financial institution is that sector of the economy that providing the community with money balance and payment up of the banks and sector of the economy is made up of banks and non-banks financial institutions like financial house, mortgage house and other institutions that provide financial services and intermediation to the various segment of the economy.

In modern society, economic prosperity and progress depend largely on level of savings in a Nation.  It happens that someone’s savings is made available to an investor for productive venture like what happens in Commercial Banks.  When this happens, a debt is created.  A debt has been described as an obligation to made future payment.

It is against the borrower’s promise to make future payment. As a result of this, the owners of these funds face the risk of not getting their money in good time or losses it entirely when the custodian of these funds cannot manage them well hence debt management becomes a singvenon to guarantee the confidence of the individual depositor that his money is safe.

Debt management involves arrangement put in place for repayment of these credit facilities

In the same way, it is also fulfill a wider role in safe guiding the stability of the individual bank and thus the banking system as a whole. At this juncture, the research mentioned that this work is based on the constraints in relation to Debt tagged on the problems of management in Nigeria Financial Institutions (A study of Union Bank of Nigeria Plc. Garden Avenue Enugu).

Recently, the Banking sector undergo a traumatic experience whereby some Banks were judged distressed; this, however was a direct manifestation of improper debt management.

1.2  STATEMENT OF THE PROBLEMS

1.    Failure to pay back loan granted by the creditors as and    when due.

2.    Inability to function well by the bank due to inability of the       creditors to pay back.

3.    Inadequate measures of working capital management in the     bank.

1.3  OBJECTIVES OF THE STUDY

1.  To find out if creditors do not pay back loans as and when due.

2.  To expose the reasons behind banks failure to function well.

3.  To discover how inadequate the measures of working capital management is.

1.4  RESEARCH QUESTION

1.   How can the debtor be considered responsible for their debts management?

2.  Will good analysis of trade debt management help to measure an effective working capital management in the financial institution?

3.   How does debt  exposes banks to credit   risks?

4.  How will bank managers know the capable borrowers in order not to expose the capital structure of the  banks to debt?

5.  Can financial institutions apply some measures to recover their money from their borrowers?

1.5     RESEARCH HYPOTHESIS

HYPOTHESIS ONE

H1­:

The debtors exposes banks to credit risk

H0­:

The debtors do not exposes banks to credit risk

HYPOTHESIS TWO

H1:

The analysis of trade debt management help to measure an effective working capital management in the financial institution

H0:

Th

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