AN EXAMINATION OF DEBT MANAGEMENT IN FINANCIAL INSTITUTION (A CASE STUDY OF ACCESS BANK PLC)

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ABSTRACT

This research work was undertaken to examine debt management in financial institutions. Due to high percentage of debt in financial institution especially banks, which have distress tendency and low levels of profit it have become very important than ever before to get debtor to pay their debts promptly. However, in most cases, this has proved a difficult task especially in the banking sector where credit facilities are regarded by some debtors as normal function of the banks. However, the major objectives of this study include determining the effect of bad and doubtful debt recovery used to appraise its effectiveness; to assess the validity of a good credit and to assess the measures adopted as remedy for bad debt in financial institutions as well as problem and prospect. to achieve this, non- probability sampling and simple random sample technique was used to analysis data that were collected from primary and secondary sources. After analyzing the data obtained using tables and percentages, findings were made on the issue of debt management in financial institution. This enabled the researcher to draw up conclusions and make possible recommendations. Some of which include that Access bank should always conduct seminars and training programmes on the subject of debt management in order to bring awareness and changes on matters relating to debt management. And also they should consider the credit worthiness of….

CHAPTER ONE 1.0

INTRODUCTION 1.1

BACKGROUND OF THE STUDY

Financial institutions are institutions that provide financial services for their clients or members. Probably the most important financial services provided by the financial institutions is acting as financial intermediaries. These institutions comprise of both banks and non-bank institution which both play a fundamental role in the development and growth of the economy and this is necessary to ensure its soundness as the effectiveness and efficiency in performing these roles. The main aim of this banking or financial institution is the granting of loans and the interest of this loan form part of their source of income. But in the process of granting of this loan and advances, bank default. Experience has shown that most projects in the country do not live up to expectation of the bank and the anticipated returns may elude them. And most times, the project may not be in a position to fulfill their loan drawings obligation with even the principal repayment not forth coming from their project. And this situation usually results in bad and doubtful debt. Thus putting the bank in difficult position as this debt is usually written off. In light of the above, managers of this financial institution are faced with problems of managing the limited resources due to debt default. And when this happens it is noted that the maximization of profit and maintenance of adequate liquidity which is the cardinal objective of bank will definitely be hindered. For this reason, it is important therefore for banks to initiate or come with different recovery measures to help check the issue of bad debt. The growing propensity of banks to recover their debt and reduce their credit exposure has made it necessary to address the issue of debt management in financial institutions. This study therefore intends to examine and discuss the measures prudence adopted by banks. Access Bank Plc as a financial institution is not free from these debt management activities. Though enough measure has been put in place for the prevention of debt in the bank yet it is still noted that some cases of bad debts and doubtful debts are still recorded in recent time in the Access bank. Access bank was established in 2007 by area business leaders, investors and bank management, to bring a fresh, new attitude to the Greater Omaha banking community. As an independent, locally owned bank in Omaha we do things differently – like responding to your needs faster, making local decisions and building long-lasting relationships with a personal touch. Read more about who we are, how we take care of customers and what’s expected of our employees. The bank received its license from the Central Bank of Nigeria in 1989, and listed on the Nigerian Stock Exchange in 1998. 2002: Access Bank was taken over by a core of new management led by Aigboje AigImoukhuede and Herbert Wigwe. In 2005 Access Bank acquired Marina Bank and Capital Bank (formerly commercial bank Crédit Lyonnais Nigeria) by merger. In 2007 Access Bank established a subsidiary in Banjul, The Gambia. This bank now has a head office and four branches, and the bank has pledged to open another four branches. In 2008 Access Bank acquired 88% of the shares of Omni finance Bank, which was established in 1996. It also acquired 90% of Banque Privée du Congo, which South African invest…

Bancor had been established in 1995 and reorganized in 2001. In September, Access Bank opened a subsidiary in Freetown, Sierra Leone, and then in October, the bank opened subsidiaries in Lusaka, Zambia and in London, United Kingdom. Also in 2008 Finbank (Burundi) joined the Access Bank network, but exited the group in 2014. In 2011 Access Bank was in talks with the Central Bank of Nigeria to acquire Intercontinental Bank plc. Intercontinental Bank became a subsidiary of Access Bank plc, which recapitalized the former and acquired a 75% majority interest in its stock. The combined effect of the restoration of Net Asset Value (NAV) to zero by AMCON and N50billion capital injection by Access Bank plc is that Intercontinental Bank now operates as a wellcapitalized bank, with shareholders funds of N50billion and Capital Adequacy Ratio (CAR) of 24%, well above the 10% regulatory threshold. In January 2012 Access Bank announced the conclusion of its acquisition of the former Intercontinental Bank, creating an expanded Access Bank, one of the largest four commercial banks in Nigeria with over 5.7 million customers, 309 branches and over 1,600 Automated Teller Machines (ATMs). The bank shares are quoted on the Nigerian stock exchange (NSE). With 339 branches, the bank maintains the largest branch network in the banking industry in Nigeria. At the turn of the bank century Access Bank of Nigeria Plc found itself in a unique position despite its size and reputation, there were challenges to maintain the leadership positioning a market that was dynamic as it was competitive. It was at this point that the bank launched its business transformation initiative called “century” clearly identified as an enable for the bank going forward. Access Bank of Nigeria Plc needed to adhere to the regulatory requirement imposed by the Central bank of Nigeria (CBN) as well as the common business practice followed by Nigerian banks. Since no two works is exactly the same way, the bank specific requirements were also important. The central bank increasingly proactively role in regulating the industry to bring it up to speed with international trend meant the bank had to remain agile in order to survive and come out a winner. With sophistication of customer requirement and increased competition, the bank critical requirement was not only to meet the existing demands of the customer but also to stay agile and meet the changing requirements going forward. With Accenture as Consultant, Access Bank of Nigeria embarked on a global search for strategic it partner who would enable them to make this quantum leap. An application selection model was developed, which involved looking at over 50 core bank solutions from across the world. Eventually with its finacle solution emerged as the clear winner. One of the pillar of finacle value position to Access Bank of Nigeria was it new generation solution architecture, designed to help the bank build an agile business through innovative offerings to the market and a significantly superior speed of response to customer, competitive proven track record of 100% successful implantation across the globe which offered the bank the alternative proposition of minimized risk. Access Bank of Nigeria’s unique requirements were catered to using finacle extensibility lookiong infrastructure that enables the bank to customize its specific requirement without touching the source code. This provided significant time to market advantage to the bank and enabled them to design and launch new product offerings quickly. Regular version upgrades over the years have provided increased and more sophisticated functionality to the bank as the relationship has progress. The new generation flexible architecture of finacle has ensured 24/7 operability with close to 100% uptime, a feature of immense importance in a country not for fail safe network connectivity. Finacle technological superiority and functional richness were important factors but its proven ability to scale up to Access Bank of Nigeria’s explosive growth plans was the clinch.

AN EXAMINATION OF DEBT MANAGEMENT IN FINANCIAL INSTITUTION (A CASE STUDY OF ACCESS BANK PLC)