ABSTRACT
This study centered on improving the management of loanable funds in commercial banks. The study was comparative in nature, using Trade Bank of Nigeria (TBN) and Inland Bank of Nigeria (IBN). These two banks were chosen because of their accessibility, high rate of mobilization of deposits and loan defaulting. The major instrument used for data collection included oral interviews, bank records of daily operations, annual report and statement of accounts. Four hypothesis were formulated in line with the statement of the problems.
The data obtained was organized and analyzed with the use of chi-square test for goodness of fit, coefficient of correlation, percentage of loan chart and component bar chart were also used respectively where necessary. The study finally revealed if the incidence of loan default was continuously on the increase/decrease and if such increase/decrease was more in government owned banks or in privately owned banks. It also saw if such increase/decrease was higher/lower in relation to deposit mobilization. In order to find solution to the problem, it was suggested that banks should adhere strictly to the principles of good lending, improve on security valuation, ensure that men of high integrity are employed at the credit department and emphasize on prudent supervision and control of loan accounts. Other suggestions were purely focused on advisory and credit worthiness for effectiveness and proper management.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
banking institutions perform an enviable role of being an important source of capital for development. This emanates mainly from the role, which banking institutions play in mobilizing various deposits and deploying same towards feasible and viable money yielding ventures.
Banks through the provision of loans and advances, which are the lifeblood of the business community, occupy a very important position in the structure of the nations economy. The size, type and level of such profitable outlets, along with other complimentary factors contribute to the improvement of the economic well being of the country in which these banks are located. As a result of this, banking institutions have been seen as agents of economic growth and perhaps economic development. These deposits which are loanable funds can only be made available to banks, if customers make substantial deposits, which may accrue from loans and advances. This enables the banks to run its day to day administration cost remain in business and pay satisfactory dividend to its shareholders. Thus banks have a lending policy to establish the director and use of funds from shareholders deposits, to control the composition and size of loans portfolio and determine the general circumstances under which it is appropriate to make advances.
Such loans and advances, are put into productive use by borrower, which leads to increased productivity and profits. These borrowers as a result of the increased profits are able to pay back the principal as well as the interest on such loans and advances, while the bank in turn will extend such repayment as loan and advances to other potential borrowers.