A STUDY OF THE IMPORTANCE OF BANK LENDING TO THE DEVELOPMENT OF ECONOMY (A CASE STUDY OF FIRST BANK OF NIG PLC EMENE )
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A STUDY OF THE
IMPORTANCE OF BANK LENDING TO THE DEVELOPMENT OF ECONOMY
(A CASE STUDY OF FIRST BANK OF NIG PLC
EMENE )
TABLE OF CONTENTS
CHAPTER ONE
1.0 INTRODUCTION
1.1
Background of the study
1.2
Statement of
problem
1.3
Objective of the study
1.4
Research
Question
1.5
Research Hypothesis
1.6
Scope of the study
1.7
The significance of the study
1.8
Definitions of Terms
CHAPTER TWO
LITERATURE
REVIEW
2.1 Nigerian Banking System
2.2 Origin of Bank Lending
2.3 Types of Bank Loans
2.4 The Interest of the Bank
2.5 Basic Principles of Lending
2.6 Canons of good Lending
2.7
Various sectors were credit facilities could be
channeled
2.8 Bank lending principles and
Analyses
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Research Design Used
3.3 Area of the
study
3.3 The Population of the Study
3.4 Sampling size and Sampling
Techniques
3.5 Instrument for Data
Collection
3.6 Validation of Instrument
3.7 Reliability of Instrument
3.8 Method for Data
Collection
3.9 Method of Data Analysis
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS
INTERPRETATION AND FINDINGS
4.1 Research
Questions
4.2 Testing of
Hypothesis
4.3 Findings
CHAPTER FIVE
DISCUSSION AND CONCLUSION OF RESULTS
5.1 Discussion of Findings
5.2 Conclusion
5.3
Recommendations
5.4 Implications of the Findings
5.5 Suggestions for further Study
5.6 Limitations of the study
References
Appendix
CHAPTER ONE
1.0
INTRODUCTION
1.1 Background
of the Study
The lending process
as it pertains to my case study (First Bank Nig. Plc) has immensely contributed
to the development of the Nigerian economy.
Bank lending is very
relevant to all sectors in the economy both private and public sectors because
it is one of the major sources of finance. Banks in this idea entails
commercial banks, which mainly grant short term credit facilities and
development banks which grant medium and long term credit facilities. The
latter include Nigerian Agricultural and Rural Development Bank and Nigeria
Industrial Development Bank.
In 1960’s Agriculture
was termed the mainstay of our economy. The fact is that Federal Government
embarked on credit facilities otherwise known as agricultural credit which
gingered every farmer both subsistence and commercial to put more effort in the
field.
At the present time,
there is a lot of changes in both commercial and industrial sectors. New
structure abound all over the country. Commercial activities have become order
of the day. Traders can easily secure loan and overdraft in order to raise
capital for their commercial activities especially in Emene – Enugu,
Metropolis.
First Bank of Nigeria
Plc, has helped many customers in the area of credit facilities to enable them
finance their various projects.
Therefore, the
problem of lack of fund for the execution of private and public projects has
been ameliorated through bank lending especially First Bank of Nigeria Plc.
1.2 Statement
of Research Problem
The researcher has understood that industrialists, commercialists, profit and
non-profit organizations, individuals, students and the society at large would
benefit from the subject matter of this work.
That is why the problem is brought for more analyses.
The problem is the inability of some customers in the repayment of loan
secured. Also to inability of customers to secure credit facilities.
People through ignorance and lack of knowledge or fear of uncertainty are unable
to secure loan and advances for investments or to finance their projects.
Some people may have a good project to embark upon but do not have collateral
security normally required by their creditors. All these and more others are
problems associated with this research. Again, insufficiency of fund to carry
on various activities in the economy leads to low profit and retarded economic
growth. If these trends are allowed to continue, it will have a devastating
effect in the economy. This is why the empirical analysis of bank lending
cannot be ignored. Hence this study seeks to identify the causes and to suggest
some possible solution to them.
1.3 Objective
of the Study
The
objective of this research includes:
1) To examine how
important bank lending is to the Nigerian economy.
2) To examine the
basic principles of banking lending.
3) To examine the
response of customers in repayment of loan.
4) To examine the
various types of acceptable collateral securities.
5) To eradicate the
fear people do have in securing credit facilities.
6) To educate
students and other people about bank lending.
1.4 Research
Questions
i. How do you view the present
economic condition of Nigeria, especially as it affects the importance of bank
lending?
ii. Do customers find it very
difficult to repay the loan?
iii.
Must collateral security be prevented before bank can lend money?
iv.
Are the canons of lending such as profitability, amount, suitability, purpose
of the loan, safety and integrity of the borrower helpful to the banker in the
process of lending?
v. Can lack of collateral security
lead to bad debt?
vi.
Do bankers require heavy amount as interest on loan from the borrowers.
vii.
From the two problems, diversification of loan and lack of security, which one
do bankers encounter most?
viii.
Do people in the rural areas find it very difficult to borrow from bank?
ix.
Is bank lending truly contributing to the development of the economy?
1.5 Hypothesis
Hypothesis 1
H0: Bank lending does
not contribute to the development of economy.
H1: Bank lending
contributes to the development of economy.
Hypothesis 2
H0: Bank lending is
not source of capital.
H1: Bank lending is a
source of capital.
1.7 The
Significance of the Study
This research work will create awareness on the importance of bank lending to
the development of the economy.
To
farmers, bank lending is a major source of credit facilities for expansion and
commercialization.
The credit facilities gingers farmers both the subsistence and commercial ones
to put more effort in their field thereby improving the economy.
Traders can secure loan and overdraft to raise capital for their commercial
activities.
Bank lending also
helps in industrial development. When there are credit facilities, more
industries are built which improve the standard of living by creating job
opportunities to people.
Many industries will be built which is an evidence of development in the
economy with bank lending.
To
the banking industries, it will help in yielding more profit for them because
when they lend credits to the people both private and public, they will get
interest in return which keeps the banks going and cathering for their needs.
Banks give loans, overdraft, advances etc which yield income for them in
return.
To
young undergraduates, it will serve as a basis for them and aid them when they
are writing their projects.
1.8 Definition
of Terms
The related terms below are defined to the understanding of lay people.
Bank Lending:
This term is used in the banking system in which the bank arrange with its
customers to secure credit facilities. Therefore, the borrower is expected to
pay interest on the amount borrowed.
Economic Development:
This
is an overall trend or process in which socio-economic transformation is
achieved with little or no reference to other significant degree of
technological economic growth plus changes.
Credit Guidelines:
This is the CBN annual guideline to commercial banks in respect to the credit
that may be extended to various sectors and sub-sectors of the economy.
Credit Facilities:
This includes loans, overdrafts, discounting, drafts and advance. They are
granted by banks to various potential customers.
Collateral
Securities: collateral serves as security to the
banker for the loan offered to the borrower should the latter become delinquent
in repayment.
Preliminary Expenses:
These
are expenses incurred at the initial stage of making investigation and
formation of company.
Capital:
This is the amount being sought by potential borrower which must be seriously
assessed with respect to its adequacy or otherwise for the execution of the
project in question.
Charge:
This is legal transfer of ownership by a way of mortgage or assignment.
Mortgage:
This is the conveyance or transfer of an interest in land or other assets as
security for a debt.
Security Department:
This is the department charged with the responsibility for granting and
accepting advances and securities in First Bank Plc.
Bond:
This is a document under seal whereby a person binds himself to pay a certain
contract.
Deposit Account:
This is an account opened for the purpose of earning interest.
Overdraft:
One of the methods of bank lending, where the borrower is given permission by
bank to draw more than what is deposited in the persons’ account.
Advances:
These are granted in form of overdraft upon a current account or by loan upon a
separate account loan.
Security loans:
These are referred to as loans secured by marketable securities or other market
valuables.
Unsecured loan:
These are made by bank upon credit information of the borrower and his
integrity to pay his obligations.
Demand Loans:
These are loans with fixed maturity data payable upon demand of the bank,
borrowers billed at specified interval for the interest due.
Account: This
is a statement of dealings expressed in words and figures according to
book-keeping form.
Loanable Interest:
This is an interest paid by the borrower to the bank on the amount borrowed.
Financial Analysis:
This section deals with the assessment of the project from monetary point of
view. It does this by using the information gathered from the marketing and
technical studies to estimate the total project cost, project and cost accounts
cash flow projection and project balance sheet.
Working capital:
This is the total amount needed at the beginning of a new venture in order to
meet operating expense as money for the payment of employees, rent and utility
supplies, money for fuel, water etc.
Capital
Investment: Under this section, costs involved are
the cost of land and its development, building facilities and cost of machinery
and equipment including installation charges.
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