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CREDIT
MANAGEMENT TECHNIQUES IN AGRICULTURAL CO-OPERATIVE BANK IN NIGERIA
(A
CASE STUDY OF BOA, ENUGU)
ABSTRACT
This project is written to be useful to
all who are interested in co-operative organizations, banks and the general
public. This is to reveal the process of effective management of credit in
Co-operative Agricultural Bank in Enugu. In this project, one finds out
the means of which this Bank of Agriculture grants loans to public. For
example, critical examining showed that BOA grants two broad categories of
loans namely: micro and macro. At the macro level, only agricultural
projects like agro processing, marketing, production, etc are considered.
While non-agricultural projects financed under micro include artisans such as
vulcanisers, road side mechanics, barbing, hair dressing saloons etc.
Factors militating against effective credit management in Agricultural
Co-operative Banks in Enugu were revealed both economical and political. The
method use in collecting data for this project is presented in tables and
analysed using simple percentage rating. Much recommendations on the
way/ways of improving co-operative credit management is critically highlighted.
TABLE
OF CONTENTS
CHAPTER ONE:
1.0
Introduction
1.1 Background of the
study
1.2 Statement of the
Problem
1.3 Objective of the
study
1.4 Research
Questions
1.5 Significance of
the
study
1.6 Delimitation of
the
Study
1.7 Definition of
Terms
CHAPTER TWO:
2.1 Literature
Review
2.2 The Nature of
Credit
Co-operative
2.3 Origin of Credit
Co-operative
2.4
Types of Credit
Co-operative
2.5 Co-operative
Thrift & Credit Society (CTCS)
2.6
Overview of Credit Management
Techniques
2.7 Importance of
Credit
Management
2.8 Contribution of
Credit to Economic Development
The BOA as a source
of finance for co-operative
business
2.9
Bank of agriculture Limited as a source of Finance for Co-operative
Business
2.10
Mandate, Corporate Objectives and Business Philosophy of
BOA
2.11
Credit Scheme
2.12
Customer Profile
2.13
How to Access BOA
Loans
2.14
Contribution of other Banks in Agricultural Financing
Reference
CHAPTTER THREE:
3.0 Research Design
and
Methodology
3.1 Research Design
3.2 Area of
study
3.3 Population of the
study
3.4 Sample Size
3.5 Method of Data
Collection
3.6 Sources of
Data
3.7 Reliability of
Instrument
CHAPTER FOUR:
4.0 Data
presentation, analysis and Interpretation
4.1 Data Presentation
4.1 Data Analysis
4.3 Interpretation of
Data
CHAPTER FIVE:
5.0 Summary,
Recommendation and Conclusion
5.1 Summary of
Findings
5.2 Conclusion
5.3 Recommendation
Bibliography
Appendix
CHAPTER ONE
1.0
INTRODUCTION
1.1
BACKGROUND OF THE STUDY:
Bank of agriculture is the nation’s
apex agricultural and rural development financial institution. As a development
finance institution it is government owned (CBN 40% and federal ministry of
finance 60%) and supervised by federal ministry of agriculture. The bank was
incorporated as Nigerian Agricultural Bank (NAB) in the year 1973 and in the
year 1978 was renamed Nigeria Agricultural and Co-operative bank (NACB).
Subsequently in the year 2000, it was
merged with the people’s bank of Nigeria (PBN) and took over the risk assets of
Family Economic Advancement Programme (FEAP) to become Nigeria agricultural
Co-operative and Rural Development Bank. A plan to reposition the bank into an
effective and sustainable national agricultural and rural development finance
institution in 2010 led to a further name change to Bank of Agriculture (BOA).
Bank of agriculture limited is dedicated primarily to agricultural financing at
both the micro and macro levels as well as micro financing of small and medium
scale enterprises.
The bank has a 3-tier
administrative structure. The Head Office is in Kaduna and there are six
zonal offices located at Abuja, Kano, Bauchi, Enugu, Port Harcourt and
Ibadan. Under the Zonal Offices, there is a network of over 200 branches.
Enugu zonal office is responsible for monitoring and supervision of the
activities of the 26 branches in the South-East zone which are distributed as
follows:
26 BRANCHES IN THE
SOUTH – EAST ZONE UNDER ENUGU ZONAL OFFICE SUPERVISION
|
ABIA
|
ANAMBRA
|
EBONYI
|
ENUGU
|
IMO
|
|
Umuahia
|
Awka
|
Abakaliki
|
Enugu
|
Owerri
|
|
Akoli Imenyi
|
Ihiala
|
Afikpo
|
Nsukka
|
Aboh Mbaise
|
|
Isuochi
|
Nteje
|
Akaeze
|
Oji River
|
Atta
|
|
Ohafia
|
Oko
|
Onicha
|
Mgbowo
|
Ideato
|
|
Ukwa
|
Onitsha
|
Uburu
|
|
Oguta
|
|
|
Ukpo
|
|
|
Orlu
|
The awareness of the
serious decline in agricultural production necessitated the establishment of
the bank. The BOA is not the only financial institution which provides
agricultural credit. Prior to the establishment of BOA, agricultural credit
schemes was operated by some agencies such as the Ministry of Agriculture,
supervising credit scheme, agricultural credit co-operative thrift and loan
scheme, farmers multi-purpose co-operative societies. Most of these
institutions were not effective sources for strictly agricultural credit.
There were a lot of evidence that creditors borrowed money for agriculture but
diverted it to other ventures. Again, credit was often extended to only
favourites and scarcely to genuine small scale farmers. Besides, they could
not meet the collateral and equity contribution requirements, a situation that
compelled a significant proportion of the farmers to seek for other sources of
credit.
According to Idachaba
quoted from Cardoso, (1987:18) or research carried out showed that 58% of
farming related borrowing was from family and friends, 224% from private money
tenders, 15% from merchants and only 3% from institutional sources.
It is against this
background that the researcher is to investigate how credit will effectively
administered in co-operative enterprises. They will enable us to identify
the major problems associated with credit administration in co-operative
agricultural banks and seek solution to these problem to ensure continued
existence of developing co-operatives.
1.2
STATEMENT OF PROBLEM:
In this sector, co-operative banks
mobilizes credit for their members through the savings of members. It has
been observed that they are inefficient in mobilizing and utilization of
credits. Many problems led to this ineffective mobilization of
credit. They are:
-
Illiteracy and lack of awareness.
-
High cost of credit delivery due to the fact that farmers are many and are
scattered.
-
Default in loan repayment.
-
Inadequate funds to lend to the numerous customers.
-
Diversion of loans
-
Inefficient management of loan
-
Faulty loan policy which may sometimes emphasize credit worthiness of borrowers
and not viability of projects.
-
Credit operations of meek money activities without proper organization
procedure and planned systematic arrangement.
-
Absence of regular monitoring and supervision of loans.
The above problems
need to be solved for effective performance of co-operatives.
1.3
OBJECTIVES OF THE STUDY:
The situation of co-operatives is
nothing to write home about, if co-operatives should continue at this rate,
they will wind up. In view of the above, solution have to be designed for
these problems.
Therefore, the
objective of the study is to find out the various societies existing in the
area under review. To find out various problems being encountered by
these co-operatives which tend to hinder their effective and efficient
performance as agent of credit. Finally, to make recommendations and
suggest probably solutions that will enable these societies overcome the
problems so as to function effectively.
1.4
RESEARCH QUESTION:
For the fact that credit is very
important in every business activities, therefore, the study is focused on
finding relevant solutions to the following research questions:
1.
How do you manage your agricultural credit techniques?
2.
What is the purpose of credit management in agricultural co-operative bank in
Enugu South?
3.
What problems are encountered in the administration of credit in agricultural
co-operative bank and what are the solutions to these problems?
1.5
SIGNIFICANCE OF THE STUDY:
The study will assist the loan
committed managers in their decision making, as it concerns credit policy and
management of credit in form of proper assessment of loan applications, proper
supervision of credit and evaluation of project proposals. It will help
the management to see the need to employ professional staff.
Lastly, the study or findings will be
of educational importance to the various universities, polytechnics and
students of co-operative departments in the various schools.
1.6
DEFINITION OF TERMS:
For clarity of purpose, limitation of
confusion and any kind and the proper understanding of this study, the
following definition of terms is necessary:
Credit:
David W. Pearly defined credit as financing directly
or indirectly, the
expenditure of other against future repayment. Such lending or financing
is direct when say, a bank extend an overdraft facility to a customer who then
uses it. It is indirect when a trader or producer supplies goods on
credit. Traditional savings and credit groups are one of the most common
variants of informal financial intermediaries in rural areas (Ijere 1991:23).
Management:
administration or management is the art of
attempting to achieve
stated objectives by directing human activities in the production of goods and
services. Management utilizes the land, factory, officers, machinery and
other facilities at the disposal of the enterprises in the most effective,
efficient and profitable manner. Bob Igwe (1993:39).
TECHNIQUE:
Method of performing something.
ENTERPRISE:
Enterprise is an economic system in which
individuals are free,
singly, collectively. To own capital and undertake economic
activity within a frame work of social legislation designed to protect the
interest of the members (Hamson 1974:218).
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