Project Abstract

Abstract
Credit management is a critical function in the banking sector, as it directly impacts the financial stability and profitability of commercial banks. This research project evaluates the credit management practices of Union Bank of Nigeria and examines the incidence of bad debt within the institution. The study utilizes a mixed-methods approach, combining quantitative analysis of financial data with qualitative interviews and surveys to gain a comprehensive understanding of the factors influencing credit management and bad debt. The research findings reveal that Union Bank of Nigeria has implemented various credit management strategies, including credit scoring models, risk assessment tools, and credit monitoring systems. However, the incidence of bad debt within the bank remains a significant concern, with a high proportion of non-performing loans affecting the bank's financial performance. The study identifies several key factors contributing to the occurrence of bad debt, including inadequate credit assessment processes, weak collateral management, economic downturns, and ineffective debt recovery mechanisms. Furthermore, the research highlights the importance of effective credit risk management practices in mitigating the impact of bad debt on commercial banks. Recommendations are provided to Union Bank of Nigeria to enhance its credit management processes, including the adoption of more robust credit assessment criteria, improved collateral valuation techniques, and the implementation of proactive debt recovery strategies. Additionally, the study emphasizes the need for ongoing monitoring and evaluation of credit portfolios to identify potential risks and address them in a timely manner. Overall, this research project contributes to the existing literature on credit management and bad debt in the Nigerian banking sector, providing valuable insights for policymakers, regulators, and banking professionals. By enhancing credit management practices and reducing the incidence of bad debt, commercial banks can improve their financial performance, strengthen their risk management frameworks, and maintain long-term sustainability in a competitive banking environment.

Project Overview

In a modern Economy there is distinction between the surplus economic unit and the deficit in consequences a separation of the saving investment mechanism. This has necessitated the existence of financial institution whose job includes the transfer of fund from sales to investors. One such institution is the commercial bank.  The intermediating roles of the banks places them in a position of trustees of the saving of the widely dispersed surplus economic unit as well the determinant of the rate and shape of economic development.  The techniques employed banks in this intermediating function should provide them with perfect acknowledge of the out come of a lending such that funds will be allocated to investment in which the probability of full repayment is certain. However, in practice no such tools can be found in the decision of the lending bank virtually all lending decision are made under condition of uncertainty. They risk and uncertain associated with lending decisions. Situation are so great that the concepts of risk and risk analysis need to be employed by lending banker in order to facilitate sound decision making and judgment.

The increasing trend of provision for bad and doubtful debts most commercial bank is a major source of concern not only to management but also to the  share holder who are becoming more aware of the damage posed by these debts. Bad debt destroy part of the earning assets of bank such as loans and advance which have been described as the main source of earning and also determine the liquidity and solvency of banks.  In the other words bad debt in commercial bank generate two major problem that is profitability problems. Bad debt emotive words to bankers. Because they represent losses to banks.  There are various reason for the occurrence of bad debt and its impart on the banking operation.

CAUSES OF BAD DEBT: The causes of bad debt could be based on four main classified causative agents. They are a follows. Borrowers/Customers

Banks

Government

Nature related factors

1. BORROWERS/CUSTOMERS:

IGNORANCE: Customer are ignorance for the fact that bank like other commercial ventures are out to make profit by selling their product (loan) instead they understood it to be a place where government and other will- to –do people stove they money. Consequently, they regard any amount borrowed to be “ national case” them as an articles purchased which must be paid for on the part of our etiles in white they gratuity which should not be repaid.  Again some customer/borrower over invest the loan approved on infrastructure to the betterment of actual purpose. This creates a situation factor thereby occasioning bad debts.

1.  BANKS

This concerns efficient disbursement and amortizing

schedule be bank. This relate to poor evaluation of customers; The first point which readily come to mind for this bad debt is poor evaluation of customer by the supervision before giving out loan to them. The pre requisite for giving out loan is on the consideration of the following.

CHARACTER: The likelihood that customer will try to honour obligation

CAPACITY: The subjective appraisal of the customer ability to pay.

COLLATERAL: assets that customer may offer as security to obtain credit

Condition: Impact on general or specific economic trend.

(ii) High Interest chargeable by bank sometimes occasioned a

situation of bad debt because the interest adds to increase the amount to be repaid.

(iii)  Absence of forum by bank for enlightenment education of

customers resulting to bar to procedure on report lodgment for joint solution.

(iv) Improper evaluation of profit by ban