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CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

The banking system is a very strong element of the entire edifice of the nation. A bank is simply an institution that provides the minimum banking services and which is licensed by the federal government as a banking institution. Such minimum banking services includes;

(a)  Acceptance of deposit from the general public

(b) Making payments to the depositors on demand to the extent of the money available in their accounts

(c)  Granting loans and advances to credit-worthy customers

(d)  Be involved in the clearing of cheques.

(e) Keeping current account in their books which credits and debits are entered.

The bank credit facility to customers is of two forms which are overdraft and advancesand the maximum benefit derived from this goes a long way to know how satisfied these customers are. One of the important factors for the success of a bank is customers; a bank must try to institute a credit policy that will not discourage a customer from seeking credit facility. It is observed that customers are dissuaded from obtaining credit facilities from banks as a result of stringent and complex procedures in obtaining credit facilities. In most case, loan seekers are not literate enough to cope with the complex procedures and requirements needed in obtaining credit facilities from the bank. The banks are expected to follow a rationalized credit policy based on credit standing of customers and other relevant factors should be put into consideration. Also, banks should evaluate the credit worthiness of existing customers.

1.2  Statement of  Problem

It has been observed that banks have failed in instituting an effective and efficient credit policy in meeting customers demand for credit facility and this has resulted in reduction of customers seeking credit facility. Many business have gone down the drain due to lack of fund collateral security which otherwise would have been averted. And as a result of this problem, the following questions becomes an issue to tackle, firstly does the credit policies operated by the bank favorable to customers? What effect does the credit policy have on the customers? It is an inescapable fact however that customers cannot do without these bank facilities. What are the factors which influence their decisions in obtaining these facilities? Most of the credit policies instituted by the banks are derived from regulatory framework. However, regulatory frameworks have an impact on the credit policies of the bank. Not farfetched, the interest rate has an effect on customer’s satisfaction this is as a result of the fact that the higher the interest the lower the customer’s satisfaction and the lower the interest rate the higher the customer’s satisfaction.

1.3   Objectives of the Study

This research work seeks to determine how satisfied customers are with regard to bank credit facilities. The study aims at achieving the following objectives:

1. To determine the effectiveness of credit management with a view to meeting the requirements and satisfaction of the various categories of customer’s.

2. To examine the regulatory provisions of bank in terms of granting of facilities vis-à-vis customer’s requirement.

3. To find out whether bank customers are satisfied with the granting of loans and advances.

4. To examine the effectiveness and efficiency of bank credit management in commercial banks.

1.4   Research Questions

Below are important questions for this research work:

1. Is the credit policies operated by the bank favourable to customers?

2. What effect does the credit policy have on the customers?

3. What are the factors which influences customer’s decision in obtaining these facilities?

4.  Can customers do without these bank facilities?

1.5   Statement of the Hypotheses

The following hypotheses will be formulated and tested in this study.

        Hypothesis A

Ho:  The regulatory provisions of banks in terms of granting of facilities are not favorable to customers.

H1:   The regulatory provisions of banks in terms of granting of facilities are favorable to customers.

Hypothesis B

Ho:  Bank customers are not satisfied with the granting of bank credit facility (loans and advances) procedures.

H1: Bank customers are satisfied with the granting of bank credit facility (loans and advances) procedures.

1.6   Scope of Study

This study covers bank credit facilities and how it can be used to promote or achieve better customer service delivery that guarantees customer satisfaction.

1.7   Significance of the study

This study will attempt to generate new interest in the development of bank credit facility and its customers’ satisfaction. Hence, customer’s satisfaction should be a major objective of any business establishment particularly financial institution. There is the need to evaluate the satisfaction derived by customers in the utilization of bank credit facilities. This study therefore serves as an attempt to undertake the evaluation of customer’s satisfaction. 

Other interested parties that immensely benefit and find some treasures from this study include banks, financial institutions, investors, institutions of higher learning, scholars, regulatory bodies and future researcher wishing to research into these problems.

1.8   Limitations of the Study

Time was a major constraint in this study in the sense that the time within which this project was to be submitted was too short. Also the finance available for the study was not adequate; this however limited the sample size of the study.

Lastly, the banks were not willing to volunteer information as confidential. In spite of these limitations, efforts were made to reduce their effects to ensure that the results of the study are available.

1.9   Operational Definition of Terms

Collateral: This is a form of security especially an impersonal form of security, such as life assurance policies or shares used to secure a bank loan.

Bank Loan: A specified sum of money lent by a bank to a customer, usually for a specified time and at a specified rate of interest.

Bank Interest: The interest charged by a bank to a person or company based on the daily cleared overdraft balance or a committed loan.

Overhang: The surplus shares remaining with underwriters when a new issue of shares has not been fully taken up by investors.

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