APPRAISING THE ROLE OF AN ACCOUNTANT IN LOAN AND CREDIT CONTROL MANAGEMENT A CASE STUDY OF UBA BANK UYO 2009-2011
CHAPTER
1
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The business of banking focuses mainly on
acceptance of deposits from members of the public (i.e. bank customers) and
matching the deposits available to borrowers in the form of loans for
investments and consumption purposes. Constraints of accounting measurement
provide practical guidelines to reduce the volume and cost of reporting
accounting information without reducing its value to decision makers. Thus,
lending is one of the key functions of commercial banks.
Loans represent investments and usually constitute
the largest assets of banks. Both individuals and institutions demand for loan.
The households seek lendable funds from bank when the excess of income over
expenditure is negative (Mbat, 1995:89). The beauty of this role is that credit
control principles are the same whatever industry you work in and you can move
into different sectors, with enough experience you could even become a
consultant and share your experience
with others. The need for loanable fund is a result of the non-synchronization between
receipts and payments during the normal course of business transactions. The
bank in granting loans to household, individuals or business firms takes into
consideration factors such as liquidity risk, repayment method, and the purpose
of such loans (Mbat, 1995).
Loans and advances are mostly short-termed. The
quality of loan portfolio depends on credit analysis undertaken by the loan officer.
The credit analysis function is to ensure that loan granted has a good
qualitative composition. The qualitative element of bank loans include high
liquidity quotient, minimum risk, and appropriate maturity structure. These
quantitative elements are necessary to guarantee repayment on demand or on
maturity. Accounting services are indispensable in any organization. Whether
big or small, profit oriented or non-profit oriented, all organization require
judicious management of scare researches in order to achieve targeted plans and
objectives. Hence, they all need the services of an accountant. Neither a firm
of medical doctors nor that of lawyers can obtain a reasonable magnitude of
loan from a bank without being required
to present its audited accounts to the bank to analyze its ability to repay the
debt. T When credit controls exit, the bank requires effective and efficient
management strategies, otherwise, the said loans degenerate into debt. In this
study, the main focus is on the management of loans/credit control in
commercial bank. In order to facilitate this research, UBA, PLC has been
selected for a case study.
1.2 STATEMENT OF THE PROBLEMS
As observed above, loan is an investment to a
bank. Just like any other investment, there are inherent risks. These risks
include the risk of default and inflation or purchasing power risk. Thus, there
would be need decisions to be guided by professional advice (Ejiogu, 2002). In
agreement with the opinion of Ejiogu above, Edimnce (2004) opine that the
accountant as a professional is necessary in loans and credit controls and
management. However, Mgbada (2007) question the unique role played by the
accountant in loans and credit control and management by saying that banks
still achieve better control and management of loans and credit without the
services of the accountant. Are accountant necessary in loans and credit controls
and management? What role do accountant play in the control and management of
loans and credit? This research is designed to answer these questions.
1.3 OBJECTIVE OF THE STUDY
The objectives of this research are:
(i)
To examine the role of the accountant
in loans and credit management in UBA
Plc.
(ii)
To determine the influence of the role
played by the accountant in loans
and credit management in UBA.
(iii) To examine the relationship between the
amount of loan granted and the
management of loans and credit in UBA.
1.4 RESEARCH QUESTIONS
(1) Are Accountants responsible for securing the
money being disbursed to customers?
(2)
What are the contributions made by the
accountants of UBA towards the
enhancement of loans a credit control?
(3)
What are the problems encountered by
the accountants of
UBA
while performing their duties of loans and credit control management.
1.5 RESEARCH HYPOTHESES
1. The
role of the accountants does not have any significant influence on loans and credit management in UBA, Plc.
2. There is no significant relationship between the amount of loans granted
and the management of loans and credit in UBA, Plc.
3. Fund
diversion does not affect loans and credit management in UBA, Plc.
1.6 SIGNIFICANCE OF THE STUDY
It is hardly an exaggeration that the
difference between the success and the failure in the banking industry is in
the effective management of loans and credit control. With the research work, it
will provide an additional source of secondary data to potential researchers
who may come by it. The findings in this study would be used as a blue-print
for other researchers on loans and credit controls strategy adjustment and
modifications by banks and other financial
institutions that may have access to it.
1.7 SCOPE OF THE STUDY
This research work focuses on the United Bank of
Africa (UBA), Uyo branch, Akwa Ibom State. The research work has also x-ray the
roles of accountants in loan/credit control and management in the bank stated
above.
Also apart from conducting desk research, the
researcher has sampled the opinion of accountants on ways to chockmate their problems.
1.8 LIMITATIONS OF THE STUDY
The
limitations of this study include some of unavoidable constraints and problems
encountered in the process. They are as follows:
(i)
Finance:
The problem of finance was not left out in the course of research to this study.
(ii) Time: Since this study
is one of the many courses offered by the researcher, the researcher was
constrained by time to carry out an indent research on the study.
(iii) Non-Challant Attitude of
Bank Officials: The reluctance of bank officials to reveal information on
the need for this study for fear of breach of duty of secrecy to customers,
exposure of banks administrative short-comings.
(iv) Non-Availability of
Records: This one of the most important limiting factors in the course of
the study. This includes the problems of easily getting the appropriate data
due to bureaucracy which hiders the information flow in the country.
(v) Ignorance of Respondent/
Borrowers: Most bank customers were semi-illiterates and most often it was difficult
the collect adequate data required from them.
1.9 BRIEF HISTORY OF UNITED BANK FOR AFRICA
United Bank for Africa (UBA) dates back to 1949
when the British and French Bank Limited (BFB) commenced business in Nigeria
following Nigeria’s independence from Britain, UBA was incorporated in 1961 to
take over the business for BFA.
Today’s United Bank for Africa Plc (UBA) is a
product of the merger of Nigeria’s third and fifth largest banks, namely the
old UBA and the former standard Trust Bank Plc, and a subsequent acquisition of
the erstwhile continental Trust bank Limited (CTR). Since its historical
emergence from the merger of former standard Trust Bank and UBA Plc. The UBA
group has positioned itself to be Nigeria’s dominant bank and a lending player
on the Africa continent.
l.10 ORGANISATION OF
THE STUDY
This study was organized into five chapters.
Chapter one contains the introduction which is made up of the background to the
study, statement of the problem, objectives of the study, Research questions,
Research hypothesis, significance of the study, Scope of the study, Limitation
of the study, brief history of UBA and organization of the study.
Chapter two dealt with review of the related
literature, while chapter three shows the research methods used in carrying out
the design. Chapter four, the data’s collected were presented analyzed and
interpreted. Chapter five consists of the summary, conclusion and
recommendations.
DEFINITION OF TERMS
ACCOUNTABILITY:
Responsibility of giving an explanation when need arises to ensure that money
and other resource have not been wasted but properly and lawfully used for the
benefit and welfare of the owners, (Ekpo: 2002)
CONTROLLER
– Chief accounting executive of an organization. The controller is in charge of
the accounting department.
CREDIT ANALYSIS:
process of determining, before a line of credit is extended, whether a credit
applicant meets the firm’s credit standards of those of a leader and what
amount of credit the applicant should receive (Ekanem, 2008).
CREDIT MANAGEMENT:
Is a term used to identify accounting functions usually conducted under the
umbrella of Accounts receivables (Mattila, 2002).
LOANS:
Is a credit arrangement a security is pledged and must be repaid with interest
over a stipulated period of time (Ekanem, 2008).
OVER DRAFTS:
This is a credit arrangement by banks to their customer to withdraw money over
and above that what he has in the account. (Mbat, 1995).