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CREDIT AND DEBIT MANAGEMENT The place of banks in national economy is a significant one, which acts as prime mover of the economic life of any nation. The importance and significance of banks with respect to economic and social development of a nation cannot be under emphasized. Banks are known to perform many functions of deposits; mobilization and tending which is perhaps to most significant of their functions. Indeed the two prime functions portray banks as the agent who redirects funds from the surplus sector to the deficit sector while earning a comfortable margin surplus sector and then selvey for their services as the intermediaries. Whole deposit mobilization can be categorized as a relatively executing activity. Lending is essentially a logical follow up of deposit mobilization. The banks are responsible for the safety of funds entrusted to them, while also responsible for channeling the funds to the owners. The quality of the banks fund lending decision significantly determines the banks ability to effectively play the role they have assumed. Apart from the fact that lending is a significant function of the banks. For the above reason, loans and advance have been found to constitute the largest proposition of the banks assets and assets possess the highest rate of return released to the other alternative investment. This is to determine the various techniques of methodologies of credit, the appropriate combination of these techniques so as to achieve success and minimize losses were not in banks credit and lending activities, this basic aim offers the opportunity to bridge the gap between savings and investment in the economy. Credit management also involves monitoring of operations of account at the branch bank have been taken for a ride in the past by “smart” customers, who give the impression that turnover was being done, granted by then, where all that was being done kite flying or cash recycling. Adekowary (1986) acquired that a customer who indulges in this practice usually have two or more accounts at two or more different banks or branches he draws a cheque on his account. The bank knowing fully well that there are no funds in that account with the bank, he then draws all the uncollected funds out at bank “P” and immediately deposits in bank ”x” another cheque drawn on non-existence funds in his account by bank “T”. This is a simple example of kiting, by this, it means a customer can fraudulently make use of bank funding without proper authority. Bank staff must therefore watch program operation on customers’ account closely and report unusual activities to their managers. However, some indication of kiting suspect as recently enumerated by Kotawa of (Savana Bank) as an experienced operating officer are;
- Consistent increase in deposit amount
- Excessive account activities in relation to type of account, that is, high turnover with constant daily balance.
- Depositors usually concern with daily states of account
- A pattern of daily deposit made to cover cheque received for payment on the current day and finally
- Frequent purpose of the customers related to company or other banks
OTHER QUANTITATIVE CREDIT MANAGEMENT TECHNIQUE This involves the control through loan disbursement and other drawn down conditions. Olalusi (1989) argued that no loan should be disbursed to the customer when necessary agreement forms have not been duly completed by the customer or the security document have been signed yet. Osiayemia (1981) maintained that there are dangers Inherent in providing a personal or corporate body with much or two little fund at a given moments. The loan disbursement is therefore linked with the flow cycle of the customers hence an appropriate disbursement arrangement must be applied. Also to be applied are certain empirical disbursement criteria and consideration is specific type of credit such as housing loan, agricultural loans and over draft for specific purpose.
SECURITY CONSIDERATION IN DISBURSEMENT INCLUDESLoans should not be disbursed until customers satisfied all security formalities. The danger of allowing him to drawn down the loan while he is yet to comply with the security documentation cannot be over emphasized. When drawn down has not been effected, customer is over willing to co-operate to finish the required documentation which is not always the case once he has the money. No disbursement should be allowed against anticipating approvals. Valid approvals needs to be attained from the approving authority before disbursement is allowed because jumping the gun in loan disbursement is dangerous as the banks position maybe jeopardized by opting it in a fail accomplished position. Finally all disbursement should pass through the customer’s current accounts.
DANGER SIGNALS ON BAD AND DOUBTFUL DEBTS Dangers signal are usually not lacking through sometimes they descend like sudden foundation without prior notice with experience instinct for sensing and spotting troubles. The following points will serve as a useful question;
- Excessive rigidity in the accounts for examples difficulty in obtaining cover for cheque, dividing monthly saving low or non-existence turnover on the account.
- Evidence of delay in payment of trade accounts
- Long debt in producing financial statement particularly audited account
- Heavy borrowing from other sources
- Inability to meet loan installment
- Increase in number of cheque being jopped at customer instances or returned from lack of funds
- Poor quality of current assets
- Failure to honour banks, inculcate to come for discussion particularly in the customers used to make enforcement calls at the Bank in the first.
CAUSES OF BAD DEBTS IN MICRO FINANCE BANKS In the Nigeria context, there has been increasing trends of bud and doubtful debts in the banks and bankers and their shareholders and also the government officials are begging to show concern on this issues by making pronouncements insisting on the need to correct the situation. However, for effective coverage on organized reviews the causes of bad debts in micro finance banks are as follows;.