- BACKGROUND STATEMENT
Lending is one of the main functions of the Banks. Banks extend credits to their customers in the form of loans, overdraft and advances. The sum of these credits forms the debt or credit portfolios of the financial institutions. Debts are presented as liabilities to the customers as they are under obligation to pay interest and principal upon maturity (Edwin, 2005).
One outstanding problem in lending is that some customers fail to pay the interest and principal as agreed in the loan contract. This constitutes a major risk element to Banks, shareholders and the financial system as a whole. Credit risk as noted by Ehbodaghe (1995) is the chance that those extended credit by an organization will not repay with the result that the moment, the risk with the largest loss incidence to Nigerian Banks. For example, at the end of 1990, total classified (bad and doubtful) loans and advances which could not be recovered by Banks stood at N11.9 billion. This represented 44.2% of the total Bank loans and 43.8% of total Banks shareholder’s funds Ehbodaghe (995).
Similarly, Adeyemi (2005) observed that as at June 2004, nonperforming assets (i.e bad debt) constituted 19.5% of total loans and advance granted by Banks in Nigeria. Situation as reported here hinders the performance pf many Banks in the country and cause distress in the system hence Banks require effective and efficient credit management strategies in order to cope with the environment. Personal observations over the years indicate that some Banks in the midst of this problems are still performing very well. This implies that such Banks have adopted more effective and efficient credit management techniques which give them competitive advantage over others. One of such banks is UBA. It therefore became necessary to appraise the credit management techniques of this bank in order to identify their strength factors and recommend same to the other banks for improved performance.
The focus of this work has been on an appraisal of credit management techniques in UBA Gboko. As noted above, the choice of this topic was informed by the observed high level performance and stability of the Bank.