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
Effect of Credit Management Systems on Loan Recovery Efforts of Microfinance Banks in Akwa Ibom State (Published)
This study set out to ascertain the effect of credit management techniques on loan recovery efforts by microfinance banks. To guide the study, 3 objectives specific objectives, 3 research questions and three null hypotheses tested at 0.05 alpha levels were formulated. The study covers all microfinance companies operating in Akwa Ibom State. A descriptive survey research design was employed for the study. The population was 85 operations and marketers in microfinance banks in Akwa Ibom State that have been in existence from 2014 to 2017. The sample size was 60 and the stratified random sampling technique was employed. The research instrument used for the study was a researcher- made questionnaire tagged “Credit Management and Loan Recovery Questionnaire” (CMLRQ). The instrument developed by the researcher was face and content validated by three experts in the Faculty of Social sciences, Akwa Ibom State University. All corrections and inputs were built in to the final version of the instrument. The reliability coefficient of the instrument was determined using Cronbach alpha method after the instrument was trial-tested on 20 respondents who were part of the population but not part of the sample. The result showed reliability co-efficient of 0.78. The data generated was analyzed using regression analysis to answer the research questions and to test the null hypotheses at .05 alpha level. It was concluded that Credit appraisal, credit risk control and collection policy were found to be very important in influencing loan recovery. It was recommended among others that Microfinance banks should ensure that credit appraisal is carried out by the technical people who are experienced and competent credit officer in order to stem out those with intolerable credit risk at the earliest possible opportunity.
Keywords: Akwa Ibom State, Microfinance Banks, credit management systems, loan recovery