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APPRAISING THE ROLE OF AN ACCOUNTANT IN LOAN AND CREDIT CONTROL MANAGEMENT

CHAPTER ONE

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   OBJECTIVES 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.

1.10 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).  

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