CREDIT AND DEBT RECOVERY IN FINANCIAL INSTITUTIONS. (A CASE STUDY OF U.I.D.C PLC, WARRI DELTA STATE)
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CREDIT AND
DEBT RECOVERY IN FINANCIAL INSTITUTIONS.
(A CASE STUDY
OF U.I.D.C PLC, WARRI DELTA STATE)
ABSTRACT
The purpose
of this study is to evaluate the impact of Credit and Debt recovery Department
in financial institution. It is also meant to assist the investment Company to
identify some of its problems with a view to proffer a solution.
Chapter two
of this project reviewed some of the literatures that have been written about
credit, debt recovery and its impact on organization, particularly an
investment as all their transaction involves cash and credit facilities.
In Chapter
three, emphasis is placed on the various techniques adopted by the researcher
for data collection as well as describing the population used in the research
work. Both primary and secondary data collection methods, such as questionnaire
and documentary evidence were applied for the purpose of extracting relevant
information from staff of the company. Unlike the above chapter which
concentrates on the techniques used for data collection.
Chapter
four, however, is based on the presentation and analysis of the information
collected, i.e. analyzing the various responses from the management staff and
beneficiaries of such loan. The Chapter also went further to test the
hypothesis with a view to confirming or rejecting the assertion made that
credit and debt recovery department plays a vital role towards achieving the
objectives of financial institutions.
And
finally, in Chapter five, efforts have been made to summarize all that was said
in the previous chapters. Conclusion, Suggestion, and Recommendation were also
made to the Management so as to enable them improve operational capacity
related to credit and debt recovery
TABLE OF CONTENTS.
Title page
Approval page
Declaration
Acknowledgement
Abstract
Table of contents
CHAPTER ONE
1.0 Introduction
1.1
Historical Background of U.I.D.C Plc
1.2
Statement of General Problem
1.3
Research Questions
1.4
Research Hypothesis
1.5
Objectives of the Study
1.6
Significance of the Study
1.7
Scope of the Study
1.8
Limitation of the Study
1.9
Definition of terms.
CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
2.1 Review of the related literature
CHAPTER THREE
RESEARCH METHODOLOGY
3.0 Introduction
3.1 Instrument used
3.2 Research population and sample size
3.3 Sampling procedures
3.4 Validity and reliability
3.5 Statistical techniques used
CHAPTER FOUR
PRESENTATION AND ANALYSIS OF DATA
4.0 Introduction
4.1 Presentation and analysis of data
4.2 Test of hypothesis
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
5.0 Introduction
5.1 Summary
5.2 Conclusion
5.3 Recommendation
Bibliography
Appendices
CHAPTER ONE.
1.0 INTRODUCTION
A major
function of the banking system is the transfer of funds from the surplus units
to deficit units of the economy. This is achieved through deposit mobilization
and onward lending to customers by ways of loans and advances.
Most
investment companies in Nigeria today cannot equivocally declare that they have
been untouched by problem of loans certainty; it is a way of life in these
tumultuous times of investing that virtually all investors are faced with
problem loans.
Whatever
form of lending is adopted by investment company in any given situation depends
on the purpose of the borrower and the circumstances of the transaction. The
important thing to understand is that regardless of the form investment lending
takes, a debt is inevitably created between the Investment Company and
customers.
The
investment company becomes the creditor and customer, the debtor. Review of
loan facilities span served stages from the request stage to the repayment and
when the facilities get bad.
In this
research work, the aim is to outlines the prerequisite for loan, warning
signals, management of problem loan as well as debt recovery strategies with
the impact of the credit and debt recovery department towards recovering of
such debt.
It appears
that the review of a debt recovery structures should be related to review of
analytical tools of credit facility towards its restructuring, preparing a
workable game plan or pay out plan. In this project, the subsequent chapters
will look at prevention of problem debts and various strategies for recovering
credit facilities.
1.1 HISTORICAL BACKGROUND OF U.I.D.C PLC
The
Universal Investment and Development Company Plc is a Development, Finance /
Management Consultancy institution.
The Company
was incorporated by the then mid-western state government in 1971 under the
name, Nigeria Economic Welfare Services (NEWS) Limited as a purely consultancy
outfit. In 1987, the Company was re-organized into its present status as a
Development Finance/ Management Consultancy institution, under the name
Universal Investment & Development Company Plc. Its scope of activities was
similarly enlarged to reflect its enhanced status.
In February
2000, by an agreement between the government of Edo and Delta states, the
Company was ceded to Delta State Government, thus becoming a wholly owned Delta
State Government Company.
U.I.D.C Plc
is an investment development and finance company, undertakes investment
activities and participates in the capital and money markets in order to take
full advantage of opportunities present by the markets for the enhancement of
the company’s wealth creative capabilities.
Its
development activities involve mobilizing funds internal and external sources
which could be used in providing medium and long term finance in the form of
loans and equity for small and medium scale industrial projects and for short-
term facilities in Delta State in particular and Nigeria in general.
This also
involves the rendering of consultancy services. As a finance company , it is
involved in the provision of short- term finance services.
1.2 STATEMENT
OF GENERAL PROBLEM
It is
paramount to state as clearly as possible some of the prevailing problem of
loan and debt recovery, how it has impeded the smooth operations of financial
institutions and thereby hindering the banking sector chances of achieving its
objectives.
The essence
is to appreciate the magnitude and the vital roles which the investment company
plays as the lubricant to the economy, as a sector, it is the pillar of the
economy. It is therefore as a result of these important roles that the
researcher have taken pains to carryout an in depth research into the impact of
credit and debt recovery department in investment company with the view to
identifying not only the problem loan, but the possible causes of this loan
becoming bad debt and possibly make recommendation that will perhaps assist in
solving these problems.
1.3 RESEARCH
QUESTION
In the
course of this research project, emphasis is to be made so as to answer the
following research questions:
a) Criteria
for judging the credit worthiness of an applicant
b) Is there
any standard procedures for collecting loan?
c) Do
financial institution review their lending and collecting policy?
d) Is there
any step needed to be taken to recover loans from defaulters?
e) Does
credit & debt recovery has an impact in Investment Company
1.4 RESEARCH
HYPOTHESIS
For the
purpose of achieving the objectives of this study, the information and relevant
data will be collected and tested in subsequent chapters. The Null and
Alternate hypothesis are given as follows:
Hi – Credit
and Debt recovery plays a vital role in Investment Company.
Ho - Credit and Debt recovery does not play any
role in Investment Company
1.5
OBJECTIVES OF THE STUDY
The aim of
this research work is specifically:-
a) To
uncover the root cause of the problem embodied in loan recovery
b) To
comprehensively review how to conduct a credit interview / credit evaluation or
ascertain the credit worthiness of a customer.
c) To intensively study how credit can be
administered and debt recovery strategies
It is
indeed the researcher’s hope that by the time these objectives are achieved, a
clear picture of the problems will surface and subsequently recommendations on
how to go about tackling the problem will be made, it is also the researcher’s
hope that by the time this is done, the attitude of the investment company
towards lending and the borrowers attitude will change as it is only when the
money lends are paid back that the company remains in business.
1.6
SIGNIFICANCE OF THE STUDY
Like in all
research work, the significance of this study are :
a) To
provide additional material to carry out future research in this area
b) To
increase and widen the scope of the researcher’s knowledge
c) To
educate and enlighten the public on the impact of credit and debt recovery
department towards accomplishing the organization objectives.
d) To
assist the investment company in identifying some of its pressing loan problem
with a view to take steps in recovering such loan which will make it achieve
its overall objectives.
1.7 SCOPE OF
THE STUDY
The
researcher have decided to limit the area of coverage to Universal Investment
& Development Company Plc , Warri Delta State, due to the nature of its
activities particularly the department of Credit and Debt recovery division
considering that they perform similar activities in the head office , other
branches in the industries. It will be quite difficult if not impossible to
cover the entire investment industry as it would involve traveling in order to
have access to materials for information and other logistics which may
eventually hamper the effort of the researcher.
1.8 LIMITED OF
THE STUDY
When
conducting a research, the researcher is faced with some constraints. The
prominent constraints faced as a result of conducting the research are as
follows:-
i) Financial constraints, the present economic
hardship amplified by the increase in fuel price has limited the researcher’s
movement for this purpose.
ii) Time
constraints, academic work for the semester occupied most of the time required
for the research work allowing limited time for the research work
iii) Facts
and vital information’s regarded as secret are been hoarded from the research,
thereby limiting the information’s required
iv) Problem
of busy schedules, rescheduling of booked appointment s, receiving phone calls
and unscheduled meeting.
1.9 DEFINITION
OF TERMS
The
terminologies used in this study are defined below for the clear and understanding
of such terms by the readers.
SECURITY - Can be defined as a cash or fixed
assets pledge by customers to secure loan.
DOCUMENTATION – This involves any written and
endorsed papers that in one way or the other relates to the lending transaction.
DEMAND NOTICE - This 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.
STATUTORY NOTICE – This 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 – This case
applies in a situation where the loan is guaranteed by outside body.
LEASES – Is 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 lessee.
LOAN – Is the facilities extended through
loan accounts for investment products of medium and long term nature where
amortization is at predetermined intervals or made in full at the end of an
agreed period.
SYNDICATE – Is simply the lending to one
borrower by a group of banks or lending institutions.
CREDIT – Money given to a customer for
later payment
CREDIT MANAGEMENT – Arrangement put in place of
repayment of credit facilities
DEBT – Is the credit received by a
borrower from a prime lender who may be a formal or informal financial
institution.
BAD DEBT – Are debt are doubtful of recovery
FINANCIAL INSTITUTION – Refers to
in this study represent mainly the banking sector and other investment houses.
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