CHAPTER
1
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The business of banking focuses mainly on
acceptance of deposits from members of the public (i.e. bank customers) and
matching the deposits available to borrowers in the form of loans for
investments and consumption purposes. Constraints of accounting measurement
provide practical guidelines to reduce the volume and cost of reporting
accounting information without reducing its value to decision makers. Thus,
lending is one of the key functions of commercial banks.
Loans represent investments and usually constitute
the largest assets of banks. Both individuals and institutions demand for loan.
The households seek lendable funds from bank when the excess of income over
expenditure is negative (Mbat, 1995:89). The beauty of this role is that credit
control principles are the same whatever industry you work in and you can move
into different sectors, with enough experience you could even become a
consultant and share your experience
with others. The need for loanable fund is a result of the non-synchronization between
receipts and payments during the normal course of business transactions. The
bank in granting loans to household, individuals or business firms takes into
consideration factors such as liquidity risk, repayment method, and the purpose
of such loans (Mbat, 1995).
Loans and advances are mostly short-termed. The
quality of loan portfolio depends on credit analysis undertaken by the loan officer.
The credit analysis function is to ensure that loan granted has a good
qualitative composition. The qualitative element of bank loans include high
liquidity quotient, minimum risk, and appropriate maturity structure. These
quantitative elements are necessary to guarantee repayment on demand or on
maturity. Accounting services are indispensable in any organization. Whether
big or small, profit oriented or non-profit oriented, all organization require
judicious management of scare researches in order to achieve targeted plans and
objectives. Hence, they all need the services of an accountant. Neither a firm
of medical doctors nor that of lawyers can obtain a reasonable magnitude of
loan from a bank without being required
to present its audited accounts to the bank to analyze its ability to repay the
debt. T When credit controls exit, the bank requires effective and efficient
management strategies, otherwise, the said loans degenerate into debt. In this
study, the main focus is on the management of loans/credit control in
commercial bank. In order to facilitate this research, UBA, PLC has been
selected for a case study.
1.2 STATEMENT OF THE PROBLEMS
As observed above, loan is an investment to a
bank. Just like any other investment, there are inherent risks. These risks
include the risk of default and inflation or purchasing power risk. Thus, there
would be need decisions to be guided by professional advice (Ejiogu, 2002). In
agreement with the opinion of Ejiogu above, Edimnce (2004) opine that the
accountant as a professional is necessary in loans and credit controls and
management. However, Mgbada (2007) question the unique role played by the
accountant in loans and credit control and management by saying that banks
still achieve better control and management of loans and credit without the
services of the accountant. Are accountant necessary in loans and credit controls
and management? What role do accountant play in the control and management of
loans and credit? This research is designed to answer these questions.
1.3 OBJECTIVE OF THE STUDY
The objectives of this research are:
(i)
To examine the role of the accountant
in loans and credit management in UBA
Plc.
(ii)
To determine the influence of the role
played by the accountant in loans
and credit management in UBA.
(iii) To examine the relationship between the
amount of loan granted and the
management of loans and credit in UBA.
1.4 RESEARCH QUESTIONS
(1) Are Accountants responsible for securing the
money being disbursed to customers?
(2)
What are the contributions made by the
accountants of UBA towards the
enhancement of loans a credit control?
(3)
What are the problems encountered by
the accountants of
UBA
while performing their duties of loans and credit control management.
1.5 RESEARCH HYPOTHESES
1. The
role of the accountants does not have any significant influence on loans and credit management in UBA, Plc.
2. There is no significant relationship between the amount of loans granted
and the management of loans and credit in UBA, Plc.
3. Fund
diversion does not affect loans and credit management in UBA, Plc.
1.6 SIGNIFICANCE OF THE STUDY
It is hardly an exaggeration that the
difference between the success and the failure in the banking industry is in
the effective management of loans and credit control. With the research work, it
will provide an additional source of secondary data to potential researchers
who may come by it. The findings in this study would be used as a blue-print
for other researchers on loans and credit controls strategy adjustment and
modifications by banks and other financial
institutions that may have access to it.