CHAPTER ONE

1.1   BACKGROUND OF THE STUDY

        The main aim of setting of any business organization is to maximize profit. This can be achieved through an efficient management of it human and material resources so as to bring about increased output.

        In order to attain this noble objective of profit maximization business organization need to have some degree of effectiveness in their credit management. This is necessary because it is the only way that the business owner can be able to remain buoyant financially so that pressing obligation of the organization will be met.

        Credit management was encouraged by this rising increase in the size of business. The industrial revolution in Europe in the early nineteenth century brought about technological advancement in most business organizations.

        The result was an increased production of goods and service. These are then the need for entrepreneurs to obtain from financial institution so as to be meet up with various costs that usually occur in the production process. It then becomes necessary for such financial institution to issue credit since most business was unable to produce the whole bulk of the goods on cash basis.

        Business organization must set standard to facilitate the recovery of its cash on time these set down rules and regulation has a profound effect on both parties, i.e financial institutions and the customers, this is the constitute effectiveness of credit management in such financial institution.

        The word credit is derived from the Latin word credo which means to believe or brush credit period allowed for payment of goods and services already delivered to the customers.

        Faith is an important pre-requisite in the management of credit because if you trust somebody that means you already have faith in that particular person. So faith serves as a motivating factor in the process of granting credit to a customer, this can only change at the process of granting credit to a customer, this can only change if the customer should abuse the confidence reposed on him along the line. Therefore there is usually element of risk when carrying out credit transaction since there is usually the uncertainty of payment.

1.2   OBJECTIVE OF THE STUDY

The aim and objective of this project is to assess in-depth, the credit management techniques being employed in United Bank for Africa Plc. Idah branch office and to what extent it has helped in the external economic development of the organization.

        This project work also aim at investigating And finding out the appropriate policy or technique to be adopted in the credit management of United Bank for Africa Plc Idah branch office manage its credit via their policies. Finally the study aim at management at providing reasonable suggestion on how credit can be best managed in Untied Bank for Africa Plc. Idah branch office so as to enhance the concept of effectiveness in their employment.

1.3   HYPOTHESIS FORMULATION

H0: United Bank for Africa Plc Idah branch office has no effective credit management techniques.

Hi: United Bank for Africa Plc Idah branch office does give credit facilities to their customers.

Hi: United Bank for Africa Plc Idah branch office does not give credit facilities to their customers     

H0: United Bank for Africa Plc Idah branch office for credit facilities.

Hi: Customers does not patronize United Bank for Africa Plc. Idah branch office for credit facilities.

1.4   SIGNIFICANCE OF THE STUDY

Credit constitutes a vital aspect of an organization’s sales. The degree of effectiveness of the credit management of a typical service industry of particularly that United Bank for Africa Plc Idah branch office is the main idea that this project is geared towards discussing policies on the general well being of the organization. The United Bank for Africa plc Idah branch office and that of the general popular in terms of sound financial footing will also be analyzed. Thus the overall policy of the organization and with its effectiveness on the granting of credit as the salient issue in which this project tend to tackle.

        An organization without a sound credit management policy always suffers the problem of having to write some portion revenue of bad debts. This study is therefore, predicated on the fact that effectiveness of credit management is the main ingredient of success in business.

1.5   SCOPE AND LIMITATION OF THE STUDY     

        The scope of the study is looking at the nature of credit management being employed in United Bank for Africa plc Idah branch during the under review, 1994-2000. Although credit management techniques must have been in existence before period under review, but this project work is limited to 1994-2000.

        Out of the limitation of this study is the non-challant attitude of some of the respondents where they put up an uncompromising attitude to the research questions. Another limitation is that of time. This can be reviewed from the fact that other academic commitment did not really give their researcher all the study in totality.

1.6   DEFINITION OF TERMS

MANAGEMENT: This can be defined as a process by which both human and non-human resources are directed co-ordinated and controlled in such a way as to be able to achieve organizational objectives.

CREDIT MANAGEMENT: this is concerned with the regulation and control of debt obligation of a business organization.

CREDIT: This is the sum of money borrowed in agreed rate of interest; it can be of long-term or short-term. It can also be defined as the equal value of the banks equated to the value of its net earnings.

PLOICY: This can be defined as the laid down rules and regulations which organization embraces in order to achieve its objectives.

LINE OF CREDIT: This is a form of agreement between a commercial bank and a business forum that states the amount of insecured short-term credit the bank will make available to the borrow provided the bank has enough for linding.

RESOLVING CREDIT AGREEMENT

        This is a situation whereby credit is automatically received as certain conditions are fulfilled. In other words, it means that there is no need for further application for another credit provided that the conditions specified in the first credit are fulfilled accordingly.

DEBTS: These are amount of money which an individual or group of individuals have to pay to another individual or group of individuals.

BAD AND DOUBTFUL DEBT: This signifies the losses, which are loaned to an individual or group loaned to an individual that cannot be recovered back and have to be written off.

A PROBLEM LOAN: This is the type of loan in which there is a major break down in the payment agreement resulting in the under delay in recovery.

CROSS ASSETS: This is the total capital and total liabilities of a business organization.

NET WORKING ASSETS: This is the difference between current assets and current liabilities.

WORKIGN CAPITAL: This is the amount of money available in running a business

LIQUID CAPITAL: This is made up of capital that are easily convertible from one to another, these includes; stock, cash on hand and cash at bank.

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