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CHAPTER ONE

1.0   INTRODUCTION

The rigorous and strains of borrowing, especially in Nigeria and Africa in general are not doubt enormous. The fault is not that of the lenders (banks) alone as critics claim that the borrowing public are partly responsible for the frustrations. A large portion of the borrowing public are substantially under-educated (about borrowing with this regard, they approval heir prospective lenders unprepared and largely ignorant of the why’s and what’s of their request.  A substantial number of people who approach banks for loans have no business going to the banks to borrow in the first place.  If at all their business and needs are gerund, perhaps they should have tried their friends, relatives or associates first before going to bank to borrow.  No one can fault the bank (lender) on their criteria because the banks is also in business to stay and grow. Among all other activities of the banks lending is the most vital bank undertaking which should be carefully emphasized, may because it is the most profitable undertaking of the bank or its contribution to the economic growth of the country in general.
The federal reserves system,. Financial intermediaries, government and business can be thought of making up the financial environment within which we all strive to achieve our goals but which largely is beyond the control of any single decision unit. Due to the lack of substantial knowledge about the behaviour of this financial environment, however, we are advised to enhance that knowledge.  It seems clear to me that we all have an interest in the development of empirically substantiated theories of behaviour of a financial economy.  After-all, failure of broad section of the economy, whether  in the form of inflation, mass bank failure or in depressed business closing situation whereby large portion of the borrowing with the result that they approach their prospective lenders unprepared.          
The burden of proof is therefore in the prospective borrows  should be educated, and get educated is there fore the message of this topic.  It is a further contribution to the promotion and development of an improve business culture by helping to educate the borrowing public. The most critical Turing in a loan proposed are really simple ordinary things that many borrowers especially first time borrowers and small scale enterprises regard as unnecessary and in consequential. The borrower should know that the loan officer cares about the neatness of the documents presented, the language of ht proposal, its substance, the character of the promoters and borrowers is of consequence to the loan offer decisions criteria because he associates.  These with the ability of the borrower to perform maintain control and achieve the designed results and finally to pay back the loan.          
Areas of general interest to lenders include,
-       Personal credit record of the borrower
-       Financial history of the business
-       Growth of the business
-       Profitability of the business
-       Physical condition of the facilities and equipment
-       Experience of the key managers to reduce risks, lenders required some of the following
-       An equity pledge by the owner to the lender
-       A personal asset pledge by the owner to the lender
-       A consigning of the loan by  all principle or guarantors
-       A lien on all assets and personal property of the owes  
This study represents a modest effort to provide substantial information about that part of the financial environment which is the criteria of borrowing and repaying business loan as a guide towards economic development.
1.1     BACKGROUND OF THE DEVELOPMENT OF BANKS IN NIGERIA          
The development of banks may be divided into three period, partly arbitrarily as any such periodization may be.  A preparatory period ending in 1950 to 1960’s during which time the essential features of banking as we know them developed. At the turn of the century, the range of institution included those that specialized in exchange and merchant operation, individual money lenders, rotating credit associations and bank of British west Africa founded in 1980 by sir Alfred Jones.  Not until the beginning of the fifties, banking in the main was largely rudimentary, differing greatly from present day institutions not only in size but also in sources and use of their funds. Banking operations are more of less continued to large centers of overseers trade and even then, the banks had little contracts with nature public  except for a small amount f savings business. In 1957, the two expatriate banks   BBWA and days bank had in all forty-six branches in west africa-adding about six indigenious bank was found in 1933 and athe beginning of 1951, five more were formed and in the fifteen months between February 1951 and May 1952, not less than 18 indigenous banks were registered with one exception, they had all leased operation by 1945. Bank failure such as these, weekend public confidence in indigenous banks.  The failure of these banks appeared  to be the cause many Nigerians decided to be keeping their savings at home or in other instruments seeing banks as unreliable. Nevertheless, rapid expansion and evience of past financial heritable continued and by 1962, there were over two hundred banks offices in Nigeria.  From this, one can then say that the banking system has made undertaken over this short periods,  a remarkable penetration into domestic business and be hold it continuous operation.          
The total number of indigenous banks and other banks was 18 at the of August 1976 with 459 branch offices including offices of the six merchant banks.  The earliest attempt ot regulate the business of banking was made only in may 1952 when the first banking ordinance was passed. This ought to have been done earlier.  By then, a greater number of he public had been induced to deposit money in the banks of indigenous ownership and questionable reliability.  The most of these pseudo-banks failed mainly as a result of dishonestly and incompetent management, inflicting considerable hardships on the unfortunate. At the time of ordinance, banking in Nigeria was mainly in bank of the two British banks between then, they had a total of 26 branch located mainly in the large towns and although they had even in those days many thousands of African customers maintaining small interest bearing savings, accounts.  African current account holders were comparatively few.  The business of the British banks at that time consists of conducting the government account and those of British trading companies together with personal accounting civil servants and commercial and professional  people, mostly expatriates. The two British banks did not confine their expansion merely to the numerical total of their contract with African customers became more closer.  Not only did they in bother their new and old field press forward their essential tasks of attracting more deposits, they also moved with increasing mention into the much more field of indigenous lending.  Here, their tasks were made more difficulties and  hazardours then they would otherwise here been by the almost completed absence of acceptable tangible security for advances. For example, Nigeria has Never had a modern system of land tenure or registration most of the hand were still communicably owned and such cannot in law be assigned to a foreigner except by government consent even where forms of registration exist.          
The lack of  active interest on the African community was the subject of much  African criticism they had in succeeding year.  Thought the much of the criticism was ill-formed and unjustified, there is no doubt that it played a part in influencing the banks in later years to undertake a more deliberate and forceful penetration into African business.  It was one factor in the tremendous subsequent expansion of the number and spread of their branches throughout the country.
By 1958, ending a sizeable chain of British bank branches had been established.  These undoubtedly, proved a solid value in the general advance of the economy.  Without then, it would have been far more difficult if not almost impossible for the marketing boards for example to have arranged the orderly purchasing from the peasant growers in the remote district of steadily increasing volume of export crops which also market the period  Meanwhile, some expansion, on a comparatively small scale took peace in those few indigenous banks which weathered the storms of the early and middle fifties.  
BRIEF HISTORY OF THE COMPANY UNDER STUDY          
This project research is only limited to first banks of Nigeria plc for over a century has distinguished itself as a leading banking institution and major contributor to the economic advancement and development of Nigeria. Founded in 1894 by a shipping magnet from liver pool, sir Alfred Jones.  The bank commenced as a small, operation in the office of Elder Dempter and company in Lagos.  It was incorporated as a limited liability company on March 31, 1894 with the Head office in Liverpool.  It has a network of 315 branches spread throughout the federation including one in the city of London, the bank maintain the  largest branch network in the industry In 1957, it changed its name from bank of British west Africa to bank of west Africa in 1969.  The bank incorporated locally as the standard bank of Nigeria limited in line with the companies agree of 1968.  Changes in the name of the bank also occurred in 1979 and 1991 to first bank of Nigeria limited and first bank of Nigeria plc.  The bank has continued to increase in the number of branches growth in deposit base, asset size and size of loan and advances. Till date, first bank of Nigeria plc is still the first in all aspect of banking industry with about branches all over the country      
1.2 STATEMENT OF PROBLEMS          
  Due to the fact that the bark accept deposits from customers and pay them interest they are privilege to study the credit requirement of their customer and thus having made allowance for the liquidator ratio  to meet same, they are able to venture out into providing various loans and credit facilities to customers and the public at large. As a source of income, borrowing of loan is the fundamental goal of growth and development of the  immediate society and the county at large, it is obviously supreme to all other objectives.  First bank of Nigeria plc had reported handsome profits to justify their good advance management.  As more loanable funds are being made.  Available to the borrowing public and as more lending and credit institutions are coming into market, it is to be expected that loan default will be on the increase.  Hence, the understated are the problems facing the institutions which need the urgent attention of the management.  
i.        Over-borrowing:  Borrowing beyond the needs and capacity of the firm will like do more harm than good to the firms.
ii.       A general poor attitude to payment of debt which are in two fold,
a.       Unwillingness to pay some debtors deliberately do not wish to pay their debts even when they have the money
b.       Low priority on servicing of loans: several debtors do not consider.  It important to service loan
iii.      Poor management of the financial resources of the firm, principally indiscipline ins the utilization of the funds.
iv.      Inefficiency in the total management of the firm
v.       An unstable economic environment 
vi.      Lack of infrastructure support reassure for the lending industry to pressure their debtors e.g bankruptcy law.  
1.3    STATEMENT OF HYPOTHESIS
In order to determine the validity and reliability of the information would gather, and formulate the following hypothesis.
i.   Ho:  Borrowing of loan from the bank as a source of raising business finance has a negative effective on environment for enterprises.
     Hi:  Borrowing of loan from the banks as a  source of raising business finance create a conducive environment for enterprises
ii.  Ho:  There is  no significant relations between the banks and the customers as regard to borrowing and repaying business loan
     Hi:   There is a significant relationship between the banks and the customers as regard to borrowing and repaying business loan
iii: Ho:  Economic development is not enhanced through borrowing repayment of business loan.          
     Hi:    Economic development is enhanced through borrowing and repayment of business loan.  
iv: Ho:  The strategy of  borrowing and repaying business loan is not fairly good.
     Hi:    The strategy of borrowing and repaying business loan is good
v   Ho: customers have negative reaction towards repayment of business loans
     Hi:     Customers have positive reaction towards repayment o business loans  
1.4    OBJECTIVE OF THE STUDY
a.       To examine the criteria of borrowing and are paying business loan which act as a guide towards economic development
b.       To determine the weakness of he general public in obtaining loan for successful and make available solution
c.       To compare a the effectiveness of borrowing and repaying business loan with similar institution 
d.       To examine why banks do not grant loan to their customers easily  
1.5     IMPORTANCE OF THE STUDY
This research study would be of benefit to the banks and the general public in particular.  It is true  because after this researches, the banks and its customers will study it and have an insight into the criteria of borrowing and repaying business loan. Area of weakness and other factors that militate against the realization of the banks loan objectives will be carefully studied with a view to improving the operational efficiency.  The general public who are willing to  borrow from the banks will also realise their weakness not being able to repay their loan and a guideline for an improve in  repayment culture which they have to adopt. The study will reveal those strategy  used by the banks in granting loans to reach the predetermines corporate objectives as well as educating the borrowers when to employ the strategies. Also banks can gain an insight into the problems and their solution in the institution studied and use this as a tool to improve their operations.  On the same hand, future researchers will equally benefits from this research work.  The nations economic planners will equally benefit from this research work because of the current urge to improve the small scale business. The researcher will also benefits by having the knowledge of the banks contribution to the nation’s economy  
1.6     SCOPE AND LIMITATIONS OF THE STUDY
This project is based on the current criteria of borrowing and repaying business loan as a guide towards economic development.  The study is therefore limited to all the banks, customers in Enugu alone, though problems relating to the topic is peculiar to all banks and the general public through out the whole country.  In the course of carrying out this researcher, certain problems were encountered along the line.  It should be recalled that the data collection embraced the distribution of set of questionnaires to both the customers and staffs. The following are some of the fact that will constraints the scope and validity of the project:
i.        Time Factor: The time allocated  for the completion of the project made it impossible for the researcher at travel far in order to gather information that will make it more comprehensive and indepth study.
ii.       Communication Barrier: During personal interviews with some respondents, the researcher expended a lot of communication problems. Some respondent did not feel at ease when responding and some even feel the researcher si therefore to carry out some fraudulent act. That is to say that some respondent added sentiment and some are bias.  Their views are very important because they constitute banks customer.
iii.       Respondent prejudices:  it is a fact that the respondent prejudices would influence their responses to the questionnaire and this would  affect the validity of the research findings.
iv.       High cost of materials: High cost of material and lack of sufficient funds to carryout a large scale research projects, hence unavailable or few related literature reviews posed a problem to the study and as a student, the researcher  was conscious of fund so she manage to
v.        Use the little she has very well. the is a barrier to a more comprehensive and  in-depth project  
1.7     DEFINITION OF TERMS
Commercial banks: they are those banking that perform the following function to her customer; deposit acceptance, granting of loans and overdraft facilities , agency services safe custody facilities, providing status reports, standing order, cashing credit facilities and investment advice etc  
Customers: this is one who buys goods or services receives from person trading or other institutions like banks especially on a regular basis Bank customers are this that patronize the services rendered by that particular bank.  
FINANCIAL INTERMEDIARIES – They include both banks and non-banks that complement the activities of financing projects   LANDING: this is an act in which commercial banks rise business funds for her customers which the customers obtained in form of a loan   Borrowing: it is an act which customers borrow loan from the banks to finance their project and businesses   Repayment:  it is the process of paying back money borrowed form the financing institution including both  the borrowed and the interest

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