CREDIT MANAGEMENT IN BANKING SECTOR(A CASE STUDY OF SKYLE BANK)
The purpose of credit in banks is to earn interest and make profit. It follows that principles of goods lending shall be concerned with ensuring, so far as possible that the borrower will be able to make scheduled payments with interest in full and within the required time period otherwise, the profit from an interest earned is reduced or even wiped out by the bad debt when the customer eventually defaults.
Credit management is concerned primarily with managing debtors and financing debts. The objectives of credit management can be stated as safe guarding the companies investments in debtors and optimizing operational cash flows. Politics and procedures must be applied for granting credit to customers, collecting payment and limiting the risk of non payments. An important function of credit management is credit control. This is primarily a process of deciding how much credit should be given to customers or borrowers and ensuring compliances with the credit terms that is given for controlling credit repayments.
- To avoid a liquidity storage from excessive investment.
- To secure an optimum balance between giving credit to make sale and the financial risks from non-payments or late payment.
1.1. BACKGROUND OF STUDY
Banking started in Nigeria in 1892. ABC was established in Lagos on mutation EDC. ABC was based in South Africa but opened a branch in Lagos to finance the shipping business of EDC which was operating steam-ship service and from that time commercial banking started and we have different ones with so many branches.
After some time, some banks were liquidating because
- Unfair Competition
- Lack of patronage
- Lack of entrepreneurship
- Lack of foresight
In a positive step to offer a counter institution, European banks, the industrial and commercial bank was established in 1929 by a group of Nigerians, this bank tried to do what the earlier British Banks were reluctant to do by offering credit liberally to Nigerian particularly Managing Directors within a years, it went into liquidation.Commercial banks are banks principally engaged in retract banking and while concentrating in large urban areas, they never spread their tentacles to virtually all the nooks and crannies of the country with same having off shore branches.
- STATEMENT OF THE PROBLEM
The problem facing the banking industries are very numerous and most of the problems are due to lack of appreciations of the crucial roles that bank plays in our economy. Such problem includes unstable micro economy within, which the banks operate. Skye bank is a well known commercial bank that offers full range of services such as lending of fund to customers, loan and overdraft to companies and also discounting bills of exchange fro national and international business men, therefore, increasing the Gross National Product (GNP). In this research, a bank without an effective credit management technique is likely to encounter the following:
- Establishing a credit policy from determining how much credit to give an on what terms.
- Dealing with late payers and non payers
- Assessing customers application for credit
- Collection procedures and credit motoring
- Security of payment of the credit
- Monitor customers payment records and receive credit terms.