This research studied the nature, problem and prospect of the new product
developed in the banking industry from 1990-2003.
In this research work, the researcher chose four of the products and measures
the extent to which they have been able to satisfy the customers. The product
selected are smart card, international money transfer, educational scheme and
integrated banking network transaction.
Data for this research were collected through questionnaire and interviews by
bank customers and the review of existing literature on the topic using simple
random procedure and the descriptive method of research. The data so collected
were analysed using the simple percentage and the formulated hypothesis were
tested with chi-square (x2) method.
Some of the findings are the nature of the new product can measured in terms of
accessibility, speed, timeliness, simplicity and reliability.
Customers who patronize the new product are majority those who want money
transfer both locally and internationally customers derived high level of
satisfaction from the new products.
Inadequate infrastructural level in our banking industry and high cost of
installing them contributed to the problem of the new product.
Based on the findings, the following were recommended banks should come
together and establish a common data communication satellite to minimize
A parallel organization that was supplying electricity in competition with NEPA
should be allowed to evolved so that an efficient supply of electricity can be
Finally, since this study alone cannot exhaustive of this vital subject, it is
recommended for further studies.
TABLE OF CONTENTS
Background of the
Objectives of the
Significance of the
1.8 Definition of
Review of Related
Historical Development of Bank
Development of Merchant Bank in
Differentiating functions of Merchant
Cannons of Good
Analysis of principles of good
Why are Banks
Exports view and
Research design and
Sample and Sampling
Instrument for Data
Method of Data
Method of Data
Data Presentation and
Findings / Recommendations and
According to Paget (1998), a renowned banker he defined banks as “a corporation
or person (or persons) who accepts money on current account, pays cheques on
such account in demand and collects cheques for customers.”
Banks are financial institutions that are charged with the responsibility of
funds intimidation. They act as a go-between the simples funds sources and
deficit fund services. They equally act as “a dealer in capital or more properly
a dealer in money as we defined by Gulbert (1995) in performing this function,
they engage themselves with deposit acceptance and granting of loans and
advances to any needy sector of the economy or individual. Investors and
industrialist. The banks are not charcterable organization, hence they render
these services with the motive of profit making.
The banks in performing this very important duty they are faced with myriad of
problems that grows in bounds everyday in consonance with the dynamic nature of
Nigerian economy and growth. Their major problem emanated from the fact that
those customers to whom the banks lend money on agreed terms and condition
default to repay on maturity, thereby putting a wedge on the wheel of both
profit making objectives of the banks, credit expansion within the system for
economic activities and continual operations of the bank. This granted into bad
In the pre-independence era when few banks dominated the industry, cases of
loan default and bad debt were very minimal, of course, the banks management
and loan grants were carefully studied before actual disbursement by the
Today, management of many Merchant Banks are worried by the trend of
incidence of loan defaulters and bad debt been recorded. Still decisive and
obvious action have not been taken by them to at least its impact on their
operations and the effect on the economy at large which is the purpose of this
study to proffer effective suggestions on how to bring under control rate of
bad in merchant banks and particularly Ivory Merchant Bank.
Financial analysts all over the world agree that bad debt and loan default
cannot be completely eliminated in banking industry but a constant check can be
kept over every factor capable of generating this ugly experience to most
financial and non-financial institutions that engaged in funds intermediation
directly or indirectly.
It is note worthy to state here that some merchant banks in Nigeria apparently
faced by an increasingly hostile business environment are applying to the
Central Bank of Nigeria to convert to commercial banks had applied to C.B.N. as
at end of October, 1993.
Incidence of loan default in merchant banking, a very important sub-sector
leaves nobody any comfort, hence the researcher’s interest in searching the
immediate and remote causes of bad debts and how to remedy the ugly experience
so that the public confidence could be restored to the financial sector.
1.1 BACKGROUND OF THE STUDY
While reading through journals, weekly financial and business papers, on the
rate of increase in number of distress and liquidating banks, the researcher
was pulled into imaging that would become of the financial system in the future
if dotting is deliberately done to rescue the situation. We are ignorant of the
abysmal value of currency” Naria” in the past few years up to date, would you
reason out that we cannot build the Nigeria of our dream if this is coupled
with constant bank liquidation and failure.
Bank lending by way of loans, over draft, financing capital intensive projects
by way of loan syndication, trade credit finance all over the world. The
process of financial intermediation is assuming complex dimension. As they try
the live up to expectation in this regard they (banks) are confronted with
unacceptable pill of loan defaults. When granted loans are dues for payment and
without it been actually paid, such loans are regarded as being defaulted, hence
analysis of the incidence of loan default in Merchant banking.
1.2 STATEMENT OF THE PROBLEM
There is no doubt the difficulties confronting the banking industry today in
Nigeria. Every bank is striking to at least keep pace with others. In their
daily dealings as conduct pipe for money, whereby they aggregated funds and
disaggregate them it the investing public, they are met with hitches of
defaults on the part of loans and advances beneficiaries to meet their
obligations have serious consequence on the lending banker.
Therefore the banks are expected to do something very urgently to address the
problems so as to forestall it lending them to distress. The failure to refund
money borrowed by customers have big adverse effect on banking operations. Such
call for study and investigation, so that the solution could be proffered.
1.3 OBJECTIVE OF THE STUDY
To identity the causes of loan default
To identify the level of incidence of loan default and bad debt.
To determine the extent of monitoring by merchant banks of projects for which
they extended loans.
To identify the effects of loan of default in merchant banks.
To make recommendations can how loan default and bad debt will be minimized or
1.4 RESEARCH QUESTIONS
What are the measures adopted by the bank in preventing loan default occurrence?
What is the level of incidence of loan default to your bank?
How has your been able to monitor its advances granted to customers?
What do think are the causes of loan default?
1.5 RESEARCH HYPOTHESIS
After thoroughly research, it lies on the research to make the following
Incidence of loan default in merchant banks is not high.
Incidence of loan default in merchant banks is high.
Loan supervision and monitoring are not major solution to loan default in
Loan supervision and monitoring are major solution to loan default in merchant
Loan default does not lead to bank failure in merchant bank.
Loan default leads to bank failure in merchant bank.
1.6 SIGNIFICANCE OF THE STUDY
Based on guiding and recommendations that would be offered at the end of the
study, Ivory merchant bank will use it to reassess their credit analysis, loan
disbursement and recovery formular. It will also guide the treasury manager on
liquidation management to eliminate the bank running into financial distress.
It is important to state here that the research findings will be immense help
to other financial intermediaries in their daily dealings with both savings
fund borrowing public.
Implementations of the researcher’s recommendation will restore also confidence
of the public on the banking industry.
1.7 SCOPE/LIMITATION OF STUDY
The study is to be based on the contributory impact or incidence of loan
default on both expansion and operation of Ivory merchant bank in Nigeria
limited. The scope therefore precludes other innovations and products of the
bank, such as corporate finance ceasing and investment advisory services,
merchant bank loan syndication process. Investigation would be limited to the
office of Ivory merchant bank alone.
It is important therefore that further researches should be extended to
merchant bankers corporate and investment advisory services to determine their
(merchant bankers) role in accelerating industrialization and economic
development growth of Nigerian economy.
1.8 DEFINITION OF TERMS
1. Loan: A bank loan may be defined
as financial faculty granted by a bank which is in tender to be applied for
financing of a specific purpose an it usually has a defined duration and
fixed repayment programme.
2. Loan Default: This could be seen as a
situation whereby customers failed to repay the loans they borrowed from the
3. Incidence of Loan Default: This is the
rate at which borrowers could not pay back their money occurs in Ivory Merchant
4. Merchant Bank: A merchant bank is
defined by the Banking Amendment all 1979 as “any person in Nigeria, who is
engaged in wholesale banking, medium and long term financing, equipment leasing
debt factoring, investment management, issue an acceptance of bills and the
management of this trust.
5. Ivory merchant bank: This is a branch
of merchant bank formed for the purpose of lending in banking industry.
6. Bank Lending: These are basic
principle a banker should observed while granting loans and advances to
7. Criterion for Bank Lending: These are
basic factors, which a banker should put into consideration before granting
8. Finance System: Nigeria finance system
is made up of banking institution and non banking institutions.
TERMS AND CONDITIONS APPLY
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