Beyond Loan Appraisal: The Role of Credit Monitoring and Recovery Practices in Reducing Non-Performing Loans in an Emerging Economy (Published)
This study examines how various dimensions of credit management, specifically customer loan appraisal, credit control and monitoring, and credit collection policies, influence non-performing loans within the Nigerian banking sector. To achieve this, the research adopts a cross-sectional survey design, utilizing exploratory factor analysis to identify underlying dimensions of credit management, while simultaneously employing regression analysis to assess their impact on loan quality. The findings reveal that customer loan appraisal does not significantly reduce non-performing loans, suggesting that pre-lending assessment alone is insufficient. Conversely, credit control and monitoring, alongside credit collection policies, are shown to significantly reduce non-performing loans. Furthermore, the analysis indicates that borrower support, advisory services, collateral assessment, and robust follow-up and recovery efforts are critical to mitigating loan deterioration; in contrast, compromises in credit administration contribute to an increase in non-performing loans.
Keywords: Credit Risk Management, Non-Performing Loans, credit collection; credit monitoring, loan appraisal, loan recovery