Credit Management Strategies and Loan Performance of Selected Deposit Money Banks in Ogun State, Nigeria

Volume 8, Issue 6, June 2023 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
Credit Management Strategies and Loan

Performance of Selected Deposit Money
Banks in Ogun State, Nigeria
Akande, FolorunsoIlesanmi , PhD., Maduemem, Nkemjika Salome, ACA
Department of Finance Babcock University, Ilishan-Remo, Nigeria
Abstract:- The banking industry is important as it Banks mobilize deposits to extend to book risk assets
contributes to the financial performance of numerous in form of credit facilities with the aim of collecting back
sectors of the economy. Banks provide deposit services, such loans with interests that form the bulk of their revenue.
advisory as well as loan facilities. The exchange rate is However, when such loans given out by the banks are not
currently rising and this in turn affects banks’ interest paid at the required time or not paid at all, they become non-
rates and adversely reduces the purchasing power of performing loans (NPL) or bad loans. Credit management
citizens. The objective of this study was to examine the analyzes the pace at which the loans are funded and the risk
effect of credit management on the loan performance of or cost of default to enable administrative decision be made.
selected deposit money banks in Ogun State, Nigeria. A credit facility is deemed non-performing when; interest or
This study adopted cross-sectional survey research principal is past due for more than 90 days; or interest past
design. The examined independent variable is credit due for 91 days or more have been capitalised, rescheduled
management, measured by credit terms and conditions, or rolled over into a new loan; or off balance sheet
credit collection policy, credit policy, credit control, obligations crystallise (CBN 2019).According to Computer
credit appraisal/documentation, and credit monitoring and Enterprise Investigations Conference (CEIC), Nigerian
while the dependent variable is loan performance, non-Performing loans (NPL) stood at 11.4% as against
measured by timely loan repayment rates, number of 6.01% at the end of the fourth quarter in 2020. However,
loans closed by customer and number of loans extended. this is still 20% above the regulatory limits of 5% set by the
Primary data for the variableswere sourced from country’s apex bank.
questionnaires and analysis was run with SPSS (IBM
Statistical Package for the Social Sciences). The findings Kure, Adigun and Okedigba (2017) revealed that
of the study revealed that there was a significant effect of credit expansion, inflation, and lending rates were the main
credit management on loan performance of selected NPL causing factors. They suggested that improvements in
DMBs in Ogun, Nigeria excluding the moderating the production environment may be able to slow the increase
variables. The results of the study further revealed that of NPLs, given the evidence of a negative inverse
credit management negatively affected loan relationship between economic growth and NPLs. They also
performance, inclusive of moderating variables in submitted that, decline in credit and bank assets, increase in
Nigeria. The study concluded that credit management risk taking by banks and reduction in economic growth
have a positive relationship on the loan performance of affect the going concern of banks.Abubakar, Suleiman,
selected DMBs in Ogun, Nigeria. It was recommended Usman and Mijinyawa (2018) opined that credit risk is a
that the CBN ensure the adequate monitoring of major risk that impends the going concern of banks and
borrowers on a database. The study also recommended other financial institutions that engage in disbursing loans.
that public and private stakeholders should ensure the Kalui and Kiawa (2015) agreed that if credit risk
properly utilization and repay their loan facilities. management is weak it would pose a key reason of several
corporate disasters. Credit management incorporates the
Keywords:- Credit Management, Loan Performance, systems, procedures, and controls which banks enforce for
Nigeria, Deposit Money Banks. the collection of loans effectively and efficiently and thus
minimizes the menace of non-performing loans. Credit risk
I. INTRODUCTION exposes banks through direct lending and duties to issue
credit facilities, letters of guarantee, letters of credit,
Banks have continually performed the intermediary of securities purchased under reverse repurchase agreements,
mobilizing funds from the surplus to deficit sectors thereby bank deposits, brokerage activities, and irrevocable fund
enhancing saving-investment function in the economy. transfers to third parties via electronic payment systems that
Nigeria's financial system consists of a compendium of is prone to settlement risk (Zenith Bank, 2016).
markets, tools, operators, and institutions that interact to
provide financial services to their varied customers.The Akinselure and Akinola (2019), Alobari, Naenwi,
country’s financial system comprises of 2991 bureau de Zukbee and Grend (2018); and Uwalomwa, Uwuigbe and
change, 22 commercial banks, 6 development finance Oyewo (2015) agreed that a major risk affecting banks and
institutions, 5 discount houses, 20 finance Companies, 5 its environments is credit. Davis and Ngozi (2019) studied
merchant banks, 975 micro-finance banks, 3 non-interest credit risk and economic growth in Nigeria and concluded
banks, 33 primary mortgage institutions and 3 payment that lending and borrowing are activists of growth of the
service banks (Central Bank of Nigeria, 2021). economy. Credit management, according to Kolapo, Ayeni,
IJISRT23JUN548 www.ijisrt.com 592

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and Oke (2012), is an endogenous basis for loan  How do cost of funds, insider abuse and organizational
performance.Muthoni, Mwangi, and Muathe (2020) structure affect the loan performance of selected deposit
discovered that debt collection and lending policies had a money banks in Ogun State?
positive impact on loan performance of Kenyan commercial
banks, which can reduce the volume of non-performing C. Hypotheses
loans. According to Ayunku and Uzochukwu (2020), non- The main proposition of this study was that credit
performing loans, loan loss provision, and equity to asset management has no significant effect on loan performance
ratio have a significant impact on bank of deposit money banks in Ogun State. Taking 5% level of
performance.Kennedy and Oluoch (2021) in their work significance, the sub-propositions are articulated as the
concluded that there is a positive relationship between loan following null hypotheses:
standards, credit period, and loan performance in Kenyan Ho1: Credit management has no significant effect on the
microfinance banks. According to the study, borrowers loan repayment rates of selected deposit money banks in
should be allowed to make suggestions on the type of loan Ogun State.
standards they prefer, as this can improve loan performance. Ho2: Credit management has no significant effect on the
As a result, on borrower's lending terms and conditions, a number of loans closed of selected deposit money banks in
deeper understanding of the best loan standards should be Ogun State.
involved. The study recommended that microfinance banks Ho3: Credit management has no significant effect on the
offer flexible payment options and terms during the credit number of loans extended of selected deposit money banks
period. in Ogun State.
Ho4: Cost of funds, insider abuse and organizational
Using an explanatory research design, Barus (2017) structure have no significant effect on the loan performance
investigated how asset quality affected the financial of selected deposit money banks in Ogun State.
performance of Kenyan savings and credit organizations.
According to the study, management should exercise caution II. LITERATURE REVIEW
when establishing a credit policy that will not have a
negative impact on profitability, and they should understand This section has been grouped into conceptual,
how credit policy affects the operation of their banks to empirical, and theoretical reviews:
ensure prudent use of deposits and profit maximization. The
A. Loan Performance
study also recommended that Savings and Credit Co-
Among the other risks that banks face, credit risk has a
Operative Societies (SACCOs) edit their information
significant impact on their profitability(Ndubuisi &Amedu,
because it will have a significant impact on the performance
2018). Credit risk can be assessed as the likelihood that the
of deposit taking SACCOs.
borrower will fail to fulfil its commitments as stated in the
A. Objective of the Study loan agreement (Odion, 2016). The history of the Nigerian
The study's main goal is to investigate the impact of banking industry shows that most of the challenges faced
credit management on the loan performance of selected were results of rash lending that finally led to default loans
deposit money banks in Ogun State, Nigeria. The specific and some other unethical factors including approved loans
goals are as follows: that were diverted into unprofitable ventures which resulted
 Evaluate the influence of credit management on the loan to non-performing loans.
repayment rates of selected deposit money banks in of Kolapo, Ayeni, and Oke (2012)and Poudel (2012)
Ogun State agreed that these non-performing loans, especially when
 Investigate the effect of credit management on the number they are deemed lost are the utmost barriers to the
of loans closed of selected deposit money banks in of profitability and survival of banks because they hinder banks
Ogun State from reaching their set goals. Banks are aware that of rate of
 Determine the influence of credit management on the non-performing loans that can be lessened by enforcing
number of loans extended of selected deposit money logical credit policies and these policies must encompass
banks in of Ogun State. risk evaluation and monitoring. However, due to the 2005
 Appraise the moderating influence of cost of funds, banking system recapitalization and reforms program, some
insider abuse and organizational structure on the loan policies have been entrenched to enhance banks’ efficiency
performance of selected deposit money banks in of Ogun and several strategies have been instituted to reduce the
State. adverse effect of credit defaults on banks operations.
B. Research Questions Lawal, Abiola and Ikhu-Omoregbe (2017) viewed that
The research questions drawn after the listed objectives banks should mandate borrowers to provide collateral as
are as follows: security for the loans and riskier customers should provide
 How does credit management affect the loan repayment huge collateral and should be charged high-interest rates to
rates of selected deposit money banks in Ogun State? encompass the high risk. On the contrary, Aigbomian and
 How does credit management affect the number of loans Akinlosotu opined that rising interest rates increase the
closed of selected deposit money banks in Ogun State? likelihood of loan default. Banks are run by humans and
 How does credit management affect the number of loans thus experience challenges for some reasons which could be
extended of selected deposit money banks in Ogun directly linked to weak credit terms and appraisals, poor
State? portfolio risk management, poor cognizance of changes in

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economy or other conditions that can give rise to a decrease C. Collection Policy
in the creditworthiness of a bank's counterparties (Nwude& A credit collection policy should outline the terms and
Okeke, 2018). conditions for loans and credit facilities in clear writing
(Antoine, 2015). Business Dictionary, 2022 added that there
Loan performance includes payment rates, the number should be customer qualification standards, the procedure
of borrowing clients, security pledged, and the rate of for making collections, and the actions to be taken in the
arrears recovery (Basel, 2006). The loan repayment rate event of a borrower breach.The creation of collection
encompasses the initial loan rate, cash or early payment policies is difficult in the context of credit management. In
discount, as well as the amount or rate of late payment the event of loan defaults, the implementation of these
penalty discount for cash or early payment and the amount policies offers opportunities for loan recovery. According to
or rate of late payment penalty (Gurley & Shaw, 1960); but Ogunlade and Oseni (2018), a strong policy is more
Afolabi (2021) opined that credit management strategies effective at recovering debt than a lax one, but banks can
have no effect on the lending rate and Kangogo&Olweny improve their collection practices by loosening up their rigid
(2015) agreed that the only price mechanism is interest rates. standards just a little to collect credit effectively. They also
In the case of loan restructuring, Akwu (2013) opined that stated that the application of guaranteed policies offers
the loan rate may be reviewed and restructured; this new rate opportunities for debt recovery in the event of loan defaults,
is called the loan re-application rate. Also, loan performance contributing to good credit management.Credit risk
is evaluated by the number of successfully closed loans (that management and collection practices can enhance the
is loans that were successfully paid) and loans that were financial performance of commercial banks (Kagoyire and
extended due to restructuring (Sung, Thomas, Hyungchan& Shukla, 2016). Gatuhu (2013) concurred that client
Mohammad, 2021). evaluation, credit risk management, and collection policies
are important indicators of financial performance.
B. Credit Terms/Condition
In credit analysis, the terms and conditions under which D. Credit Policy
the loan will be granted must be clearly stated (Nyawera, Banks must establish and execute credit policies to guide
2013). A loan proposal may satisfy all the requirements of a its lending decisions in line with its general corporate
good introduction, but economic conditions may deem the objectives. These corporate objectives should influence its
extension of the credit unwise. Hence, banks attempt to overall banking operations including liquidity management,
perform some forecasting of economic trends. The aim is to profitability posture and earning capacity, bank portfolio
ascertain those areas in the economic environment that management, service delivery and level efficiency (Akwu,
might affect the ability of the borrower to repay in. It is 2013).
significant to note that the longer the maturity of the loan,
the more the necessity for economic forecasting. Loans are Credit management is the most important aspect of
regularly backed by a loan agreement between the bank and banking operations asides liquidity considerations. It
the borrower. The conditions to be met before acquiring a regulates and guarantees the survival and safety of a bank.
loan is called conditions precedent to drawdown (Akwu, Credit policies are very vital in various operational policies
2013). of a bank. It provides the framework for the entire credit
management process (Antoine, 2015).
This agreement will normally state the terms and
conditions of the loan, and other important features such as: The main aim for policy is to certify operational
a preamble which contains the parties to the loan and the reliability and adherence to consistent and sound practices.
purpose of the loan; the loan amount, the lifetime and A sound policy contributes to a bank’s success by
maturity of the loan is usually well specified; repayment supporting swift and good credit decisions. The scope of
schedule (term loans generally specify that a repayment credit policies should comprise the receivers of the credit,
schedule be in the form of an annuity); interest rate (this is the lenders, how the grant the credit facilities, the pricing of
usually specified and may vary from fixed rates to floating the credit, the amount of credit and the structure for its
rates);security/guarantee (there are usually specifications for distribution.
collateral but when a revolving credit agreement that does
not require collaterals is converted into a term loan, the Credit policies are documented by banks in the form of
borrower may then have to secure the loan according to the credit manuals. The manuals state the course of action,
conditions of the loan agreement); representations and procedures and guides to successful lending. A properly
warranties;and covenants of the borrower (this usually documented manual consists of lending policies,
contains affirmative covenants, the negative covenant and instructions, procedures and all relevant correspondence on
other restrictive clauses.An example of a restrictive credit matters and management that would be frequently
clause/negative clause are restrictions on the borrower from reviewed by management based on evolving needs and
special actions such as increasing its dividend payments, trends in the industry, fluctuations in environmental factors
making loans to its officers and/or directors, and purchasing and other variations because of monetary authorities as the
or leasing fixed assets); events of default/acceleration clause need arise.
and miscellaneous matters.

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The absence of a properly articulated, formally written added that credit appraisal, training of staff and setting credit
policy document coupled with the failure of credit officers, standards and terms to offset the possibility for loss to
managers, and directors to monitor the implementation and improve financial performance.
administration of bank credits, are critical factors leading to
unsuccessful bank lending or non-performing exposures and The factors that impact a client can be classified into
credits. personal, cultural, social and economic factors (Ouma,
1996).Ahamed and Ali, (2015), Kule, Kamukama &
It must be emphasized here that putting sound policies Kijjambu (2020), Moti et al(2012) call them the “five Cs” of
into practice calls for the establishment of an effective lending: consisting of character, capacity, capital, condition
organization and the adoption of appropriate procedures. and collateral. The collateral is usually obtained before
References has shown that most banks do not have a clearly disbursement of funds and should maintain or preferably
spelt out and official policy framework, hence credit increase its valve over time. This is because most customers
decision-making is ad-hoc and thus cumbersome, leading to become uncooperative in the performance of the security,
loan losses and impairment of capital adequacy. where they have already received the money. Moti et al
opined that client appraisal helps MFIs to improve loan
E. Credit Control performance, as they get to know their customers and the
Credit control, according to Myers and Brealey (2003), is character of the client is important in client appraisal. This
the set of practices and policies used by a business to agreed with the conclusion that character has a significant
maintain the best possible amount of credit and manage it relationship with loan performance. This can be accredited
well. Credit control is concerned with the post-endorsement to the fact that the success of any individual greatly depends
and monitoring of the credit facility to certify that each on the character.
credit is predominantly at par during the lifespan of the
credit. It is very important to monitor the facility after it has G. Credit Monitoring
been disbursed to guarantee that the borrower fulfils the Credit monitoring is a key part of credit reviews. The
stipulated conditions, the facilities are used for the purpose idea behind credit monitoring involves continuous and
for which they were given and any default or adverse drifts regular interactions with the borrower to identify their issues
in the borrower’s business or forecasts are evaluated and and future forecasts, the rate of activities and the capabilities
necessary actions taken before things get out of hand. of the borrower. The previous financial records and credit
worthiness are also closely appraised to discover the
Credit control also involves ensuring some key credit outcomes of the borrower and the reasons of any
returns as required by the Banking Act for the aim of irregularities from the prior forecasts. The capacity to wisely
observing the banks total obligations to customers in a and effectively manage customer credit lines is a key
certain period. Banks are required to implement solid credit- component of effective credit management (Kagoyire&
granting procedures, rigorously adhere to the know your Shukla, 2016).
customer (KYC) system, implement effective means for
measuring and monitoring credit, and make sure that credit Banks need to develop and implement SMART
risk is effectively controlled (Nwanna&Oguezue, 2017). (specific, measurable,achievable, realisticand timely)
methods and information systems to trail borrowers’ loans.
As a mean of credit control, banks plan to increase the Credit monitoring is the responsibility of the relationship
credit scoring criteria. The rate of loan applications manager. It is a means for efficient and effective credit
disbursed in Q4 2020 decreased as banks increased their administration in the banking sector. Non-performing loans
credit scoring criteria and they plan to increase the loan can easily be spotted out if the loan facility has been
applications in Q1 2021 (CBN, 2020). The problem of loan thoroughly monitored via the banker’s expertise, knowledge
default, which results from poor credit control, reduces the of the customer business and faith in the customer can be a
lending capacity of a bank. guide in taking a decision to how far the customer can be
supported before declaring the loan as bad.
F. Credit Appraisal/Documentation
Ahamed and Ali (2015) viewed that credit appraisal is When a non-performing loan is identified, the
one of the factors that will affect the credit management and relationship manager would have to contact the borrower. In
the ability to fund the loan including financial projections, some cases, the borrower may need support due to financial
economic forecasting, environmental analysis and the credit crisis or some other issues. The relationship manager and the
worthiness and status of the borrower. It may include the credit department would have to restructure the loan (Akwu,
collation of information that will have a key influence on the 2013). A modification or waiver of some of the terms and
credit appraisal and the research of the information collected condition of loan facility in a way not to affect interest
these factors the criteria for creditworthiness. payable on the loan. An additional collateral can be
requested from the bank or an extension of the loan
Chick(2018)opined that a credit appraisal technique repayment period; these are done to ensure the bank does
should include credit analysis of the borrower, the aim of the not lose its money.
credit, source of repayment; the performance and repayment
history of borrower; assessment and evaluation of the
repayment capability of debtor; the proposed terms and
conditions as well as covenants; perfection and
enforceability of collateral assignments. Mwangi (2012)

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III. REGULATORY CREDIT MANAGEMENT of the impact of the credit risk).According to Coyle
STRATEGIES (2000), the following are indicators of credit risk
deterioration: customer delay in payment, lack of capital
 The Central Bank of Nigeria's (CBN) Credit Risk adequacy, lack of liquidity, bad report from the Credit
Management System (RMS): This was createdwith a Bureau and down-rating by credit rating agencies.
legal backing by the CBN Act No. 24 of 1991 in response
to the requirement for a central database from which to IV. THEORETICAL REVIEW
gather consolidated credit data on borrowers. This
occurred because some borrowers obtained new loans A. Information Asymmetry Theory
from other banks despite having committed and unpaid Information asymmetry theory was propounded by three
debts to those banks. economists George Akerlof, Michael Spence and Joseph
 Asset Management Corporation of Nigeria (AMCON): Stiglitz in 1970(Kuloba and Ombaba, 2019). The theory
In July 2010, the Federal government formed this with the explains the basic details both parties’ potential risks and
aid of an act of the National Assembly. Kolapo, Ayeni, returns associated with the loan facility. Banks face a state
and Oke (2012) claim that the goal of the organization's of information asymmetry when assessing lending they do
founding was to offer a long-term solution to the recurrent not have all the information about the borrower. Information
issues with non-performing loans that plagued Nigerian asymmetry explains two potential risks for the banks: moral
banks. The second phase of Nigeria's banking reforms hazard (monitoring business performance) and adverse
which entails the removal of toxic assets or non- selection (making errors in lending decisions). To prevent
performing loans from the books of the "bedridden" banks this, the ‘5cs’ (character, capacity, capital, collateral and
was only introduced by the federal government (Alalade, conditions) must be thoroughly assessed(Kule, Kamukama&
Binuyo, and Oguntodu (2014). This was done to address Kijjambu,2020)
the issue of hardcore debt.
Auronen (2003) agreed with this theory by revealing
 According to them, this resulted in the creation of that information asymmetry is essential for ensuring the
AMCON by the Central Bank of Nigeria (CBN), one of desired effects are achieved thus reducing the chances of
whose functions was to own an interest in banks from default greatly. Kassim and Rahman (2018) added that
whom they could buy bad debt. In other words, AMCON borrower-specific moral hazards such as non-disclosure of
was founded to acquire the non-performing loans from the full information on existing credit provisions can increase
banks, gather the principal collateral, fill in the remaining the danger of defaults among borrowers.Ćura, Pepur and
capital gaps, and receive equity or preferred shares in the Poposki (2013) revealed that the problem of information
banks that failed the audit test, thereby facilitating merger asymmetry results in both adverse selection and moral
and acquisition deals and strategic alliances. hazard; and due to low efficiency, bank management tends
 The Prudential Guidelines: This was established in an to involve in more risky credits. Kuloba&Ombaba (2019)
attempt to address the issue of credit risk. The CBN issued added that the disadvantages of asymmetric information are
the guidelines for commercial, merchant and non-interest that it may have adverse consequences after contrary choice
banks and it is called the New Prudential Guidelines for and a bank may experience loss due to risk not disclosed at
licensed banks 2010 and this happened barely two months the time of the transaction.
after the first prudential guidelines was issued. The
Prudential guidelines is a body of specific rules or an This theory is relevant to this study because both
agreed behaviour either imposed by some government or parties are bound by utmost good faith and should disclose
external agency that controls the activities and business or every information that can affect the execution of the loan
operation of the institutions (Nwankwo, 1991). Basically, and its performance.
the guidelines as revised talks about: the classification of
licensed bank credit portfolio, provision for non- B. Commercial Loan Theory
performing facilities, the requirements for disclosure of Adam Smith, in 1776 was one of the scholars that
credit portfolio, recognition of interest accrued, propounded the theory of real bills doctrine or the
classification of other assets (which includes impersonal commercial loan theory in his book entitled ‘Wealth of
accounts, suspense accounts, cheques purchased) and Nations’ (Taiwo, Ucheaga, Achugamonu, Adetiloye, Okoye
appraisal of off-balance sheet engagement (examples &Agwu, 2017). The theory states that a commercial bank
include letters of credits, bonds, guarantees, indemnities, should approve only short-term self-liquidating productive
acceptances, and pending or protracted litigations). loans to business organizations. Self-liquidating loans are
 The Basel Committee on Banking Supervision (2000): loans proposed to finance the production and evolution of
The following are the elements of credit management: goods through the successive phases of production, storage,
Identification of the credit risk (in tackling the issue of transportation and distribution.
credit risk, this is the first step and it involves identifying
the root of the risk and its possible cause), Measurement This theory also adds that whensoever commercial
of the credit risk (this involves a critical look at the banks make short-term self-liquidating productive loans, the
magnitude of the risk); Rating of the credit risk (this central bank should lend to the banks on the security of such
involves weighing the risk to see if it is one that can be short-term loans and ensure the apt degree of liquidity for
over-looked or not); Assessment of credit risk each bank and appropriate money supply for the economy.
deterioration level (this has to do with assessing the depth Chinweoda, Onuora, Ikechukwu and Ngozika (2020) agreed
to the theory by opining that the principle guarantees that the

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appropriate degree of liquidity for each bank and appropriate form or not in liquid (bonds and securities) form. It is
money supply for the whole economy. Hosna and Manzura, obvious that there can be no liquidity without saving.
(2009) added that thecommercial loan theory is geared to
influence persuasively both the bank lending and the general This theory is significant in the study of bank liquidity
economic activities. management because every DMB needs to understand the
motives for tying down liquid capital and the implications
These short-term self-liquidating productive loans on the profitability.
acquire three major advantages: they acquire liquidity so
they automatically liquidate themselves, as they mature in D. Shiftability Theory
the short run and are for productive ambitions, there is no This theory as cited by Ejoh, Okpa, and Egbe (2014) was
risk of their running to bad debts and such loans are high on propounded by Harold Moulton in 1915. It states that for an
productivity and earn income for the banks. asset to be perfectly shiftable, it must be directly transferable
without any capital loss when there is a need for liquidity. It
Kargi (2011) opposed this theory by opining that it is specifically used for short term market investments, like
fails to take cognisance of the credit needs of Nigeria’s treasury bills and bills of exchange which can be directly
developing economy. It has not encouraged banks to fund sold whenever there is a need to raise funds by banks.
the acquisition of plants, equipment, land, and home- However, generally when all banks require liquidity, the
ownership. For a theory to uphold that all loans should be shiftability theory needs all banks to acquire such assets
liquidated in the normal course of business, shows that it did which can be shifted on to the central bank which is the
not recognize the relative stability of bank deposits. Ibe lender of the last resort. This theory maintains that banks
(2013) added that the theory had a disadvantage; that no could effectively protect themselves against massive deposit
loan is self-liquidating meaning that a loan given to a retailer withdrawals by holding, as a form of liquidity reserve, credit
is not self-liquidating if the items purchased are not sold to instruments for which there existed a ready secondary
the final consumer. For a loan to be profitable it must market. Included in this liquidity reserve were commercial
engage a third party which would be the consumer. papers, prime bankers’ acceptances and most importantly as
it turned out, treasury bills. Under normal conditions all
This theory is applicable to DMBs because loans these instruments met the tests of marketability because of
mature in the short run and are for productive ambitions, their short term to maturity.
consequently there is no risk of their running to bad debts
and such loans are high on productivity and earn income for Ugwu, Ugwoke, Egbere, Asogwa and Orji (2020)
the banks. agreed with this theory and stated that it has some positive
elements of truth because banks can presently obtain sound
C. Liquidity Preference Theory assets which can be shifted on to other banks. Shares and
The liquidity preference theory was propounded by John debentures of large enterprises are welcomed as liquid assets
Maynard Keynes in his book ‘Money’ in 1936 to explain accompanied by treasury bills and bills of exchange. This
determination of the interest rate by the supply and demand has motivated term lending by banks. Moti, Masinde &
for money(Ugwu, Ugwoke, Egbere, Asogwaand Orji, 2020). Mugenda, (2012) opined that this theory assumes that assets
The theory highlights three purposes for holding cash need not be tied on only self-liquidating bills, but also held
namely;transanctionary, speculative and precautionary. in other shiftable open-market assets, such as government
securities.
The demand for money as an asset was theorized to
depend on the interest foregone by not holding bonds and Kargi (2011) on the other hand opposed the theory by
other less liquid assets. Interest rates, he says, cannot be a stating that while one bank might acquire desired liquidity
reward for saving as such because, if an individual pile his by transferring assets, this could not be the same for all
savings in cash, keeping it under his mattress, he will banks combined. As liquid assets, major firms' shares and
receive no interest, although he has nevertheless refrained debentures, as well as treasury notes and bills of exchange
from consuming all his current income. Instead of a reward are encouraged to be transferred from one bank to another.
for saving, interest, in the Keynesian analysis, is a reward Dassie (2018) added that the shiftability theory ignored the
for parting with liquidity. fact that assets cannot be transferred to others during a
severe financial crisis and that if all banks shift their
Okpara (2010) supported the theory by stating that financial assets at the same time, it would affect both credit
demand for cash is to meet current assets and business providers and debtors.
transactions. Andabai (2010) added that it is the expectation
of changes in bond price or current market rates that This theory is relevant to the study because it enables
determine the speculative demand for money. banks to protect themselves from being cash trapped by
holding assets that could be shifted or sold to other lenders
Agarwal (2022) criticized the theory of liquidity or investors for cash.
preference on the ground that it is too narrow as an
explanation of the rate of interest, because it unduly treats
interest rate as the price necessary to overcome the desire for
liquidity. Robertson (1926) expressed similar views by
adding that a man first earns an income, then saves a part of
it, and thereafter decides whether to keep it in liquid (cash)

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E. Buffer’s Theory of Capital Adequacy lead to non-performing loans and thereby affect banks
Capital adequacy theory was postulated by Berger and profit. Kajola, Olabisi, Adedeji and Babatolu (2018)
DeYoung (1997). They viewed that banks may hold large submitted that banks charge repayment rates to cover for the
capital to explore future unforeseen investment high risk of the customers’ credit facilities. Abiola, Yahaya
opportunities. According to them, banks can opt to have a and Olaiya (2021), Serwadda (2018) and Njoku, Ezeudu and
capital buffer to reduce the likelihood of their capital Ifeanyichukwu (2017) viewed that credit management can
dropping below the statutory requirement, mainly if the ratio be seen as an essential part of credits and without it, good
is very unsteady. Another possible reason for holding buffer loans and other credits can turn bad. Good credit
capital is related to the level of risk of the bank’s total management requires the formation and devotion to sound
capital. Buffer’s theory states that banks with their capital and efficient credit policies of the banking industry. Credits
marginally above the regulatory minimum ratios should must be approved to people who are capable of properly
always increase the capital ratio and cut risk to avoid utilizing it and repaying the loan at its maturity.
compliance penalty by the regulator.
Taiwo, Ucheaga, Achugamonu, Adetiloye, Okoye and
According to Milne and Wiley (2001), buffer is a term Agwu (2017) used multiple linear regression model to
used to show the excess capital held by the bank beyond the analyse credit risk management and its implications on bank
minimum requirement. This implies that banks are forced to performance and lending growth and concluded that the
raise the level of their capital ratio when coming close to the higher the risk, the higher the interest rate that the borrower
required minimum level assets. During financial crises, will be asked to pay on the debt. Abiola and Olausi (2014)
banks with small amount of capital may escalate systemic employed panel regression model to examine the impact of
risk and hence hamper financial stability. Conversely, if credit risk management on the commercial banks’
banks have already complied with the regulatory minimum performance in Nigeria and concluded that poor credit
capital as well as have buffer capital, then any changes in appraisal systems make banks have non-performing loans
capital requirements will have less impact on bank that exceed their loan portfolio. They, as well as and Njoku,
behaviour. Banks may prefer to hold a ‘buffer’ of excess Ezeudu and Ifeanyichukwu (2017)- added that high
capital to reduce the probability of falling under the legal repayment rates charged to borrowers was a major factor
capital requirements, especially if their capital adequacy contributing to non-performing loans. Ogboi and Unuafe
ratio is very volatile. Capital requirements constitute the (2013) on the impact of credit risk management and capital
main banking supervisory instrument in Nigeria. This theory adequacy on the financial performance of commercial banks
is relevant to this study because adequate capital helps in Nigeria added that banks expect their customers to repay
DMBs in discharging effectively their primary function of the principal and interest on an agreed date.
preventing bank failure by absorbing losses. It is also seen
as a way of providing the ultimate protection against Soyemi, Ogunleye and Ashogbon (2014) used ordinary
insolvency arising from the risk in banking sector. It is the least square regression to analyze risk management practices
least amount necessary to inspire and sustain confidence in and financial performance and noted that credit risk is a vital
the banks, keep it open and operating so that time and form of risk faced by banks as financial intermediaries, of
earnings can absorb losses without being forced into costly which money deposited in banks for safe keeping by
liquidation and enable banking industry to take full individuals or organizations is loaned out to borrowers. If
advantage of its profitable growth opportunities. these loans are not properly managed the bank may not be
able to repay the depositors when they come back for their
F. Theoretical Framework money. Abdullahi (2013) stated that banks should ensure
This study reviewed five theories in literature: that loans are adequately monitored and reviewed regularly
Information Asymmetry Theory, Commercial Loan Theory, to assess the level of its risk. Siyanbola and Adebayo (2021)
Liquidity Preference Theory, Shiftability Theory and Theory added that the consequences of some banks’ downfall were
of Capital Adequacy. Considering credit management and a result of insolvencies, which could be attributed to the
loan performance of selected deposit money banks in Ogun high rate of non-performing loans. Danjuma, Kola, Magaji
state, the Information Asymmetry Theory reinforces this and Kumshe (2016) opined that the high level of non-
research, as transparency and non-concealment of material performing loans is linked with poor and ineffective credit
information by the borrower can determine if the loan would managements.
be granted. Full disclosure of information makes it easier for
banks to determine the credit worthiness of a client; this will Boahene, Dasah and Agyei (2012) argued that if banks
determine the likely loan performance of the client. increase their repayment rates on loans it will become more
difficult for the borrowers to repay because they will have to
V. EMPIRICAL REVIEW pay back higher amounts to the banks. When the borrowers
are already not repaying the smaller amounts, it may become
A. Credit Management and Loan Repayment Rates impossible to repay huge of amounts of interest. Sindani,
Ajao and Oseyomon (2019) in their study of credit risk (2012) in the study of fraud and money laundering in the
management and performance of deposit money banks in East Africa financial services industry and Moti, Masinde,
Nigeria opined that inferior credit policies and non- Mugenda and Sindani (2012)in their study of effectiveness
compliance to established banking procedures are credit of credit management system on loan performance:
management issues. Nwanna and Oguezue (2017) added that Empirical evidence from micro finance sector in Kenya also
credit management is very key and poor management will agreed with this. Alalade, Binuyo and Oguntodu (2014)

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added that in a quest to ensure adequate and sound credit how a collection policy affects the operation of their banks
management, banks have been granting loans at high rates. to ensure judicious utilization of deposits and maximization
Okafor, Okafor and Isibor (2021) concluded that there is a of profit. He concluded that improper credit risk
need to strengthen bank lending rate policies through management reduce the bank profitability, affects the quality
effective and efficient regulation and supervisory of its assets and increase loan losses and non-performing
framework. This showed that the loan repayment rates have loan which may eventually lead to financial distress.
a high significant relationship with credit management. Syed
(2017) on the contrary opined that profitability, which can Muthoni, Mwangi and Muathe (2020) in the credit
be traced to good credit management can be as a result of management practices and loan performance: empirical
high interest rates due to higher credit risk and fees or evidence from commercial banks in Kenya revealed that the
commissions charged by the banks. effectiveness of the credit policy will be based on the
minimization or elimination of defaults on loan repayment.
Afriyie and Akotey (2012) further stated that that rural Balgova, Nies and Plekhanov (2016) studied the influence
banks do not have effective established measures to deal of NPLs on economic performance and opined that a
with credit management. What they do is that they move the reduction in non-performing loans has a significant positive
cost on loan default to other customers in the form of higher influence on banks. Otieno and Nyagol (2016) explored how
loan repayment rate. Al Zaidanin and Al Zaidanin (2021) credit management practices affect loan performance. The
concluded that banks perform poorly due to their inability to results showed that the measurement of credit management
manage their credit activities and may have to liquidate or had a significant negative correlation with the performance
merge to prevent large loan losses. They added that some measures. The research however did not explore how credit
banks fail to monitor and appraise their credits from time to management affected loan performance but rather looked at
time, and hence will not know the performance status of the performance in general of which the results can only be
loan.This is very key in credit management and banks have applied on performance.
to adopt the practice of regularly evaluating the credit
facilities they disburse to customers in order to prevent poor Ahmed and Malik (2015) examined loan performance
loan performance. The rates at which the loans are given out and CRM taking empirical evidence from Pakistan using
should not be too low nor high, but subtle enough for the multiple regression analysis and found that client appraisal
borrowers to be able to meet up. High rates can discourage and credit terms had a significant positive influence on the
the borrowers and their failure to cope will result in bad loan performance whereas collection policy and credit risks
loans. had a positive but insignificant influence on the loan
performance. Ofonyelu and Alimi (2013) studied how the
Alalade, Agbatogun, Cole and Adekunle (2015) bank’s risk on borrowers affected NPLs using descriptive
analysed the function of credit risk management in the value research design and found that NPLs could be reduced
creation process among Nigerian commercial banks between through credit analysis which involves analytical
2006-2010 using panel data. The findings revealed that manipulation. Gakure, Ngugi, Ndwiga and Waithaka (2012)
credit risk management has a significant impact on examined credit management techniques and banks
commercial bank financial performance, recommending that performance of unsecured loans using descriptive research
maintaining a low level of non-performing loans in relation design and revealed that credit management techniques had
to loan and advance provision will improve financial a positive effect on the bank’s performance.
performance by increasing return on equity. Ogilo (2012)
analysed the impact of credit risk management on the Pamela (2012) examined to what extent the credit
financial performance of commercial banks and also terms and access to credit have affected financial
attempted to establish if there exists any relationship performance of SMEs in Uganda, the results indicated a
between the credit risk management determinants by use of significant positive association among the variables of credit
CAMEL (capital adequacy, asset quality, management terms. She concluded that credit terms contribute 33.1% of
efficiency and liquidity) indicators and financial the variance in financial performance. Arora (2013)
performance of commercial banks in Kenya. The study identified the factors that contribute to credit risk analysis
found out that there is a strong impact between the CAMEL and performance in Indian banks and revealed that credit
components on the financial performance of commercial worthiness analysis and collateral requirements are the two
banks. important factors whenanalyzing credit risk in the Indian
banking sector. The results also indicate that there is
Chick (2018) analyzed the impact of credit significant correlation between the credit risk management
management on the financial performance of microfinance and the performance of Banks in India. Mafumbo (2020) in
institutions and concluded that flexible repayment periods the study of credit management, credit policy and financial
reduce the rate of credit default; penalty for late payment performance of commercial banks in Uganda recommended
enhances customers’ commitment to loan repayment that banks should use a moderate credit policy as a stringent
schedules; use of customer credit application forms credit will undermine the financial performance.
improves monitoring and evaluation of loan portfolios;
interest rates charged affect the performance of loans in Kiplimo and Kalio, (2014) in the study of Effect of
MFIs. Olawale (2015) recommended that management Credit Risk Management Practices on Loan Performance in
needs to be cautious in setting up collection policy that will MFIs in Baringo County examined the influence of credit
not negatively affect profitability and they need to know management strategies on loan performance of MFBs in

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Kenya. By employing a descriptive research design based on borrower to increase their chance of rehabilitation. This
a survey of banks in the Baringo County, the study revealed rearrangement of debt typically embraces additional
a strong relationship between client appraisals and loan financial support so as to alter the time horizon of the loan,
performance and that credit management strategies grace periods, etc. and is mostly common in dealing with
significantly influence loan performance. Jakubik and viable borrowers. In extending credits to customers, some
Moinescu (2015) in assessing optimal credit growth for an investigations need to be done and some questions
emerging banking system opined that macroeconomic answered, questions like: do banks provide for unforeseen
variables such as economic growth enhances the capacity to bad debts, do they assess and monitor the risk, do they set
repay. Conversely, financial market variables such as the credit limits, do they know how the loans are being utilized,
exchange rate and interest rates lower capacity for what is the size of individual and corporate credit exposures,
repayment. how was the previous loss and recovery experience,
including the adequacy and timeliness of provisions
B. Credit Management and Number of Loans Extended (International Auditing Practices Committee, 1990).
Loan sizes and loan policies have significant effects on
its default. Preliminary loan appraisals determine whether a Farayibi (2016) added that credit decisions should
loan will be defaulted or not. The default mostly arises when establish if loans should be extended and what the maximum
customers use false information or means to acquire loans amount of credit should be. He also cited Barltrop and
from the lending institutions. The collaterals have a McNaughton (2003) who stated that surprisingly many
significant impact on the bank lending behaviour and bank banks in developing countries do not have formal credit
performance. Good lending policies and careful credit policies and procedures that defined the bank’s loan
practices are essential for banks to accomplish their credit products and the conditions under which such facilities
functions effectively and efficiently and at the same time should be extended to potential borrowers and Gimbason
minimize or eliminate the risk inherent in any extension of (2004) added that whenever some credit facilities were
credit (Kargi, 2011). extended to friends of the Board members, ten percent
(10%) or more of such loans were offered as kickbacks and
Omwenga and Omar (2017) opined that whenever were never repaid, thus leading to bad loans. International
commercial property prices move up, property-related loans Auditing and Assurance Standards Board (2009) confirmed
are less likely to default. Therefore, when loan loss that organizations depend on extensions or waivers of loans.
provisions declines, loan quality improves. Meanwhile,
banks are willing to extend additional credit to borrowers Ejoh, Okpa, and Egbe (2014) stated that it is very
(particularly in the commercial property sector), and the risk essential for banks to critically assess the customers who
premium tends to be lower. To avoid the potential adverse demand the extension of loans before they can be granted.
selection problem, the loan would have to be extended. Credit management policies help banks’ credit departments
in the extension of loans, overseen by rules and guidelines
Njiforti, Lawong and Kevin (2015) added that the established by top management. Agu and Basil (2013)
extent to which the financial system supports diversification opined that management should analyse the nature of risk
of a nation’s economy depends on whether financial carefully before extending credit. For agricultural lending,
institutions extend loans to non-volatile productive sectors the rate could be pegged at 5% while banks that extended
as well as the extent of the loan defaults. A developmental such credits to farmers should be allowed to recoup their
state committed to industrialization must look towards loss margin through tax rebate among other incentives.
diversifying its economy for inclusive and sustainable Ramadayanti and Kosasih (2021) revealed that the higher
growth. Most of the expanded credit were used to purchase the risk, the higher the risk margin, and this will reduce the
equities in many cases, in the stock of domestic commercial level of income and will in turn affect the amount of credit
banks that were extending the credit. extended. Rukundo (2019) concluded that credit
management challenges do not only affect loan performance
Over the years, the Nigerian banking sector has but they also have high implications. This is due to the fact
concentrated its effort to extending loans to only specific that, other potential borrowers may fail to access credit
sectors of the economy which is believed to be volatile and facilities since part of the funds that could have been
is capable of driving instability in the financial system. The extended as loans by banks are still tied up due to default of
oil and gas sector has dominated loan access from the clients from repaying.
Nigerian banking sector as revealed by the portfolio of loans
of AMCON in the various sectors. The need for loan C. Cost of Funds, Insider Abuse, Organizational Structure
diversification by the Nigerian Financial system is further and Loan Performance
necessitated given the experience of the banking sector in An increase in credit risk will increase the marginal cost
2009. This results from huge loans extended to operators in of debt and equity, which in turn increases the cost of funds
the downstream oil and gas sector by commercial banks in for the bank. Cost of funds refers to how much banks spend
Nigeria attracted by the huge revenue generated from the in order to obtain money to lend to their customers. Sanusi
sector, thereby, crowding out other less volatile productive (2002) as cited by Abiola and Olausi (2014) observed that
sectors of the economy (Adeolu, 2015). the increased number of banks overstretched their existing
human resources capacity which resulted into many
Akpan (2013) added that the restructuring approach of problems such as poor credit appraisal system, financial
loans typically maintains the loan relationship with the crimes, accumulation of poor asset quality among others and
borrower, tactically extending the relationship with the

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this led to increase in the number of distressed banks. Other credibility and competence of most bank management team
factors identified are bad management, adverse ownership which have been subject of debate in recent time. Okoro
influences and other forms of insider abuses coupled with (2018) commended the central bank to issue efficient
political considerations and prolonged court process monetary policies that would strengthen transparency,
especially as regards debts recovery. integrity and curtail insider abuses on customers’ accounts
in bank. Ogbor and Ugherughe (2018) further stated that the
Umoh (2002) also cited by Abiola and Olausi (2014) Central Bank of Nigeria published details of the extent of
opined that some banks could endure a persistent run, even which insider abuse negatively affects banks.
as depositors withdraw their funds, the bank losses and in
the absence of liquidity, the bank will involuntary sooner or Ugoani and Ogu (2021) stated that additional practices
later stop approving loans. Thus, the risks faced by banks should be put in place to detect and prevent insider abuse.
are endogenous, associated with the nature of banking They added that the high rate of non-performing loans could
business itself, whilst others are exogenous to the banking be attributed to insider abuse and unethical banking
system. practices. Security valuation is crucial for good credit
management and anything to the contrary could give room
Insider abuse in banks is quite high and keeps to insider abuse, including improper granting of loans to
increasing, causing the downfall of many banks in recent directors, insiders, and political interest groups.
years. Insider abuse has often been a factor, especially in the
participation by bank officers and directors in the trend of For successful operations and minimization of insider
loan fraud activities (Federal Bureau of Investigation, 2013). abuse, banks are constantly implementing changes in their
While regulators have long been interested in identifying the organizational structure. These changes are due to various
methods and extent of insider abuse, Minimum Security internal and external factors. Organizational structures
Devices and Procedure (1996) consistently found that within the banks are complex and specific for the banking
economic downturns were seldom the sole cause of bank sector, as well as for each bank (Angelkoska, 2021). To
failures, and that management and insider abuse also played implement the necessary and planned change in the
a large role in the failures (U.S. Government Printing Office, organizational structure of a bank, a special team for
2022). implementation of the change should be formed.
Trusted individuals or close affiliates sometimes Opportunities for insider abuse can occur because of
breach their fiduciary duties and trade on inside information, the ease of accessing information and the complexity of
seized opportunities, engaged in deals or used the bank organizational structures and unfortunately, organizational
information for personal advantage. An example of insider structure cannot predict such (Puspithaa, &Yasab, 2018).
abuse includes granting loans in excess of the regulated Justification by management, employees, and those in
amount. It also includes a wider range where an insider acts charge of governance, enables them to engage or detect
or fails to act when the bank is harmed, takes on additional fraud (Statement of Auditing Standards 99, 2002). In this
risk or loses an opportunity and where the insider somehow case the organizational structure would have to change.
benefits because of his position (Clarke, 1988). Okafor and Organizational restructuring means changes in the
Asuzu (2018) added that the high exposure of some governance structure for increasing efficiency and
Nigerian banks was could be attributed to poor credit effectiveness of the employee operating in such working
management practices, due to excessive exposure to the environment. Thus, achieving desired result depend on the
stock market, non-performing loans, weak internal control, behaviour of the employee toward the restructuring process
insider abuse and lack of adequate disclosure. (Idris & Abu-Abdissamad, 2018).
Insider abuse occurs when an insider benefits Organizations restructure is to improve from a
personally from some actions he/she takes as part of his/her negative condition. Changes in the structure of organizations
position at the bank (the violation must be accompanied by can be done through conscious management action aimed at
personal gain to the insider to be considered abusive). achieving personal, financial, strategic and/or operational
Insider fraud is a criminal act such as embezzlement, objectives (Idris& Abu-Abdissamad,2018). Organizational
falsifying documents, and check kiting, but insider abuse restructuring involves significant changes in the institutional
and insider fraud are distinct and should not be mistaken frameworkof the firm, including redesigning of boundaries,
(Federal Deposit Insurance Corporation, 1994). flattening of management levels, spreading of the span of
control, reducing product diversification, revising
Ajao and Oseyomon (2019) opined that the increase in compensation, reforming corporate governance, and
high non-performing loans was as a result of gross insider downsizing employment.
abuses, non-adherence to established credit policies, the

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Credit Management Loan Performance
Credit Terms/Condition
Loan Repayment Rates
Collection Policy
Credit Policy
Credit Control
Number Of Loans Closed
Credit
Appraisal/Documentation
Credit Monitoring
Number Of Loans Extended
Cost of Funds
Insider Abuse
Organisational Structure
Fig. 1: Conceptual Framework
Source: Author’s computation 2022
VI. METHODOLOGY Merchant Banks with national operating licence: 6
A. Research Design Most of the major commercial banks with international

To appraise the effect of credit management and loan and national operating licence including United bank for
performance of selected deposit money banks in Ogun state, Africa, Zenith Bank Plc, GTBank Limited, Access Bank Plc,
Nigeria, this study will adopt cross-sectional survey research Union Bank, Wema Bank Plc, First Bank of Nigeria Plc,
design.A cross- sectional survey has to do with the First City Monument Bank Plc, Sterling Bank Plc are
collection and collation of data and information from represented in Ogun State.
respondents at different locations and at different times
(Levin, 2006). A structured questionnaire will be used to C. Sample size and sampling Technique
collect data from credit officers, relationship managers and The sample size for this study will be seven out of the 32
branch managers of selected Nigerian top rated Deposit Deposit Money Banks and the ones selected are the
Money Banks in Ogun State. commercial banks with both national and international
operating licence. Therefore, this study has pre-empted that
B. Population the outcome of the research based on this sample would be
The population for this study is 32 Deposit Money Banks representative of the industry. The sample was selected
(DMBs) in Nigeria by the updated list of CBN as at 30th based on the ranking done by Nairametrics and Owogram;
June 2021. The DMBs are categorised into 5 as follows: two leading financial resource companies, for top 10 banks
Commercial Banks with international operating in Nigeria on the premise of market capitalisation,
licence: 8; profitability, total assets, brand esteem, branch network,
Commercial Banks with national operating licence: 11; customer satisfaction, total number of Automatic Teller
Commercial Banks with regional operating licence: 4; Machines (ATM) and national reputation. The top 10 banks
Non-interest banking with national operating licence: in Nigeria as at December, 2021 based on the rankings of
1; these 2 companies were, Zenith bank, GTBank, First Bank,
Non-interest Banks with regional operating licence: 2 Acess Bank, United Bank for Africa (UBA), Union Bank,
and Fidelity Bank, Ecobank, Sterling Bank, and Wema Bank.

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professionally constructed, then face validity is ensured.
In the survey study, the opinions of the respondents Content validity presupposes that the domain of the study
from the credit, relationship and risk management personnel has been adequately covered. In this research, the questions
of the selected banks was considered important and relevant were drawn on each segment of credit management and loan
to get the required data because the roles of this set of bank performance for adequate coverage. In terms of construct
workers relate very closely to the area of study. validity, the questionnaire being administered conforms to
the ideas or the hypothesis being measured. The target
D. Method of Data Collection respondents were skillfully selected for the final results to
Primary data will be used in this research. The primary conform with the concept under study. In this study,
data will be obtained by conducting field survey through attention focused on experienced bank workers in the
administration of structured questionnaire on respondents relevant areas relating to the research, namely the credit
from the credit officers, relationship managers, and branch officers, relationship and branch managers.
managers from the seven selected banks. The survey will be
done to obtain first-hand information from bank officers in G. Method of Data Analysis
officers’ cadre. Descriptive statistics (mean, maximum, minimum,
standard error, skewness) and correlation coefficients will be
The questionnaire contained three distinctive parts; the employed to analyse the data. The analysis of the primary
first part covered the demographic information about the data was targeted at addressing the objective of this study. A
respondents, the second part covered questions on six-point Likert scale (1 to 6) is applied to appraise the
independent variables, while the third part covers the effect of credit management on loan performance of DMBs
dependent and moderating variables in order to extract in Ogun State.
information on influence of credit management on loan
performance of selected Ogun State. Salawu (2015) employed Relative
Importance/Significance Index (RII) and Mean Index Score
E. Research Instrument (MIS) in data analysis using a five-point Likert scale (1 to 5)
A structured questionnaire will be used in this research to to appraise the effectiveness of auditor independence
appraise the influence of credit management on loan regulations in Nigeria. The RII and MIS were used by
performance of selected DMBs Ogun State. The Salawu (2015) for ranking and assessment of twelve
questionnaire was divided into three sections: different auditor independence regulations according to their
effectiveness given the following formulas:
Section A covered the demographic factors that helped ∑W
to gain an insight into the background of different  The relative importance / significance index, RII = A∗N
respondents in terms of gender, age, marital status, ∑W
 Mean Index score, MIS = = N , where W represents the
educational qualification, and job rank. These demographic
factors assisted to clearly bring out different views and given weighting by the respondents to each regulation
assessment of the various respondents as they influence their which ranges from 1 to 5.
perception to various issues of credit management and loan A is the highest weight which is 5 in this case, while N
performance. represents total number of responses. The RII value had a
Sections B was divided into six segments each of range from 0 to 1 (i.e. 0 ≤ RII ≤ 1); the higher the value of
which posed questions on factors that constitute the RII, the more important/effective was the regulation
independent variables. This is an important aspect of the considered. The weighting was determined as follows:
study to establish the opinions of respondents in regard to Weight = ∑Wi = ∑(i*ni) where i is the Likert scale point
various issues on credit management. Credit management (e.g. 5), and ni is the number of respondents choosing the
practices were highlighted by Ogunlade and Oseni (2018) as Likert scale point.
covering credit terms and conditions, credit collection The same analytical method of MIS employed above
policy, credit policy, credit control, client was adopted for this research. The MIS was used for
appraisal/documentation and credit monitoring. assessment of different credit management variables with
Section C was divided into four segments, each of the use of six Likert scale (1 to 6) for the factors selected
which posed questions on factors that constitute dependent using the numerical scores. In this case the weighting was
and moderating variables. They include loan performance, determined as follows: Weight = ∑Wi = ∑(i*ni ) where i is
cost of funds, insider abuse and organisational structure. the Likert scale point (e.g. 6), and ni is the number of
respondents choosing the Likert scale point. The analysis of
F. Validity Test the weightings are:VH = very high (6), H = high (5), MH =
Validity test is a process used to determine whether the moderately high (4), ML = moderately low (3), L = Low (2),
instrument being used to collect data measures what it is and VL (1). Credit management will be incorporated into the
expected to and the evidence justifies it (Sekaran, 2003). equation and regressed against the loan performance of
From the perspective of Bryman and Bell (2011), validity selected DMBs for the specified Model.
test is the extent to which an instrument actually measures
the aspects that it was supposed to measure. Validity is H. Models Specification
assessed from different perspectives. When an expert The variables in this study are loan performance as
opinion is sought as to whether the questionnaire is dependent variable, credit management as independent
variable, while cost of funds, insider abuse and

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organisational structure constitute the moderating variables. abuseand organisational structure on the relationship
The interrelationship as functional summary is given below between credit management and loan performance.
to test the research hypothesis:
 Dependent variables: Loan performance measured by The paper adhered strictly to ethics of research which
timely loan repayment rates, number of loans closed by includes anonymity and confidentiality during the data
customer and number of loans extended. gathering process, respondents’ right to discontinue
 Independent variables: Credit management proxied by, participating in the study, and non-falsification/manipulation
credit terms and conditions, credit collection policy, credit of data. Also, extant scholars’ works were duly referenced
policy, credit control, credit appraisal/documentation, and and acknowledged wherever they were used.
credit monitoring.
VII. SUMMARY OF THE STUDY
 Moderating variables: cost of funds, insider abuse, and
organisational structure. The first chapter commenced with the background to
the study followed by the statement based on the identified
The relationship between the dependent and
problems and gaps in the credit management and loan
independent variables are presented in the following
performance relationship. Accordingly, the main objective
functions:
of the study was to examine the effect of credit management
Main function: Y = f(X)
on the loan performance of selected deposit money banks in
Where, Ogun State, Nigeria. Four objectives, research questions and
Y = Dependent variable: Loan Performance (LP) research hypotheses were formulated.
X= Independent Variable: Credit Management (CMT).
The second chapter of the study was centred around
Z = Moderating variables: Cost of funds, Insider
the assessment of relevant and correlated literature. The
abuse, and Organisational structure.
literature review covered conceptual, theoretical, empirical
Functional Relationship reviews, and the conceptual framework. Previous studies on
credit management on the loan performance were
Y = f(x1, x2, x3, x4, x5, x6, x*z) extensively reviewed and summarized in this chapter. The
(equation…...1) chapter concluded with the established gaps in literature.
Y = f(x1)= Credit terms/conditions (CTC) Chapter three highlighted the methodology employed.
(equation…...2) The chapter was divided into research design, sources of
Y = f(x2)= Collection policy (CLP) data, model specification, estimation techniques, data
(equation…...3) description, a’priori expectations, and ethical consideration
Y = f(x3) = Credit policy (CP) sections.
(equation…...4)
Y = f(x4) = Credit control (CC) Chapter four addressed the data analysis and
(equation…...5) discussion of findings of the study. Starting with descriptive
Y = f(x5) = Credit appraisal/documentation (CAD) analysis sub section. This subsection was used to understand
(equation…...6) the inherent statistical nature of the variables employed.
Y = f(x6) = Credit monitoring (CM) Empirical analysis was performed in proportion to the
(equation…...7) objectives of the study and analysis was employed to test the
X*Z = X*(CF, IA, OS) formulated hypotheses.
(equation…...8)
CF = Cost of funds The fifth chapter includes the summary, the findings
IA = Insider abuse and the implications of the study. Conclusions and
OS = Organizational structure recommendations were drawn in proportion to the findings
Y = ∞ + β1Xi + β2Zi + βizX*Z+ µi of the study. The chapter also highlighted the limitation of
Y = ∞ + β1CTC+ β2CLP+β3CP + β4CC + β5CAD + the study, its contribution to existing knowledge and the
β6CM + X*(CF+IA+OS)+ µi (equation….9) suggestions for extra research.
Where: VIII. SUMMARY OF FINDINGS
β1 represents the coefficient connecting the The study employed mean, maximum, minimum,
independent variable (X) to the outcome (Y), when the standard deviations, Cronbach Alpha statistic, and
moderator (Z) = 0, β2 is the coefficient relating the questionnaires for the dependent, moderating and
moderator (Z), to the outcome, when X = 0, α0 is the independent variables. The main objective of the
intercept in the equation, and µi is the residual in the studyexamined the effect of credit management on the loan
equation. performance of selected deposit money banks in Ogun State,
Nigeria. The result of the analysis showed that banks
The hypotheses were tested at 95% confidence interval understood the importance and implication of credit terms
using moderated (hierarchical) multiple regression analysis. and conditions, credit collection policy, credit policy, credit
The apriori expectation was anchored on a positive and control, client appraisal, documentation and credit
significant moderating effect of cost of funds, insider

ISSN No:-2456-2165
monitoring, loan performance, cost of fund (affordability) Nigerian government should implement penalties on banks
andorganisational structure. that practice them.
From the analysis, it was seen that credit management has a
significant positive impact on loan performance. Hence, we REFERENCES
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DRAFT QUESTIONNAIRE
 Credit Management and Loan Performance of SELECTED Deposit Money Banks in Ogun State
Dear Respondent,
I am a postgraduate student in the Department of Finance at Babcock University, researching the above topic. Your consent is
highly needed in the completion of this study by filling the questionnaire. All information given will be treated
withconfidentiality. Kindly return the questionnaire at your earliest convenient time.
Please answer the following questions by ticking the one you consider most appropriate among the alternatives.
Thank you for your sincere cooperation
Nkemjika Maduemem
SECTION A:
DEMOGRAPHIC INFORMATION
Instruction: Please answer the statement below by ticking (√) the option which best describes your agreement.
1. Gender: Male [ ] Female [ ].
2. Age: (a) 20- 24yrs[ ] (b) 25-30 [ ] (c)31-35 [ ] (d) 36-40 [ ] (e) 41-45 [ ] (f) 46-50 [ ] (g) 51-55 [ ]
(h) 56-60 [ ] (i) 61 – 65 [ ].
3. Marital Status: Single ( ) Married ( ) Divorced ( ) Widow/Widower ( ).
4. Educational Qualification:(a) OND/NCE [ ] (b) B.Sc. /HND [ ] (c) M.Sc. /MBA [ ] others please specify
…………………………………………................
5. Rank: (a) Lower level manager [ ] (b) Middle level manager [ ] (c) Senior manager[ ].
SECTION B
Kindly mark the suitable columnthatexpresses your judgement on the objects stated in all variables.
VH = very high, H = high, MH = moderately high, ML = moderately low, L = Low, VL = very low.
A Credit terms/Condition VH H MH ML L VL
1 Clear credit terms are disclosed
2 Credit terms on amount are known
3 Terms are spelt out in loan repayment schedules
4 Terms/Condition indicate type of interest charged
5 Terms indicate collateral and guarantees for loans
6 Terms spelt out other charges imposed on loans
B Credit Collection Policy VH H MH ML L VL
1 Collection policy is in place to manage receivables
2 There are incentives and rewards for early repayment
3 Penalties exist for late/missed repayment schedules
4 New/poorly performing loans have tighter collection terms
5 Customers are notified when repayments are due
C Credit Policy VH H MH ML L VL
1 Credit policy in place to manage credit risk
2 Credit policy determines the loan limit
3 Policy regulate the volume of credit issue
4 Credit policy looks at cash flow over years
5 Policy considers customers’ market
D Credit Control VH H MH ML L VL
1 Account receivable turnover ratio
2 Promise to pay
3 Collection effectiveness
4 Average age of Debt or Days sales outstanding
5 Profit per account
E Client Appraisal/Documentation VH H MH ML L VL
1 Obtain credit history report of the borrower
2 Borrower’s ability to repay

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3 Borrower’s collateral base
4 Borrower’s integrity/confidence to repay
5 Reference with other business partners
6 Borrowers financial net worth
F Credit Monitoring VH H MH ML L VL
1 Real time data analysis is conducted
2 Point in time analysis
3 Borrower vulnerability test
4 Analysis of borrower’s debt service coverage ratio
5 Liquidation/insolvencies test
SECTION C
Kindly mark the suitable columnthatexpresses your judgement on the objects stated in all variables.
VH = very high, H = high, MH = moderately high, ML = moderately low, L = Low, VL= very low.
A Loan Performance VH H MH ML L VL
1 Loan recovery rates
2 Timely repayment rates
3 Loan reapplication rates
4 Number of loans closed per consumer
5 Number of loans extended
B Cost of Fund (Affordability) VH H MH ML L VL
1 Loan valuation cost
2 Loan charge
3 Loan hidden charges
4 Loan collateralization cost
5 Loan realization cost
6 Loan restructuring
C Insider Abuse (related party) VH H MH ML L VL
1 Manipulation in sale/purchase of loan pools
2 Inappropriate or fraudulent loan arrangements
3 Fictitious loans
4 Bribes/kickbacks arising from lending
5 Loans tied to favours for friends/family
D Organisational Structure VH H MH ML L VL
1 Shared value system
2 Pragmatism
3 Uncertainty Avoidance
4 Corporate collectivism
5 Adaptability capacity
APPENDIX II
ANALYSIS 1 - CM AND LP
Variables Entered/Removeda
Model Variables Entered Variables Removed Method
b
1 CREDIT MANAGEMENT . Enter
a. Dependent Variable: LOAN PERFORMANCE
b. All requested variables entered.
Model Summaryb
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .704a .496 .493 .54168
a. Predictors: (Constant), CREDIT MANAGEMENT
b. Dependent Variable: LOAN PERFORMANCE

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a
ANOVA
Model Sum of Squares df Mean Square F Sig.
1 Regression 42.758 1 42.758 145.725 .000b
Residual 43.426 148 .293
Total 86.184 149
b. Predictors: (Constant), CREDIT MANAGEMENT
Coefficientsa
Unstandardized Coefficients Standardized Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) .730 .289 2.526 .013
CREDIT MANAGEMENT .768 .064 .704 12.072 .000
Residuals Statisticsa
Minimum Maximum Mean Std. Deviation N
Predicted Value 2.5474 5.3380 4.1747 .53569 150
Residual -1.48515 1.72724 .00000 .53986 150
Std. Predicted Value -3.038 2.172 .000 1.000 150
Std. Residual -2.742 3.189 .000 .997 150

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ANALYSIS 1 – CM COMPONENTS AND LP (RELATIVE EFFECT)
Model Summaryb
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .747a .558 .540 .51586
a. Predictors: (Constant), CREDIT MONITORING, COLLECTION POLICY, CREDIT
TERMS, CREDIT CONTROL, CREDIT POLICY, CLIENT APPRAISAL
b. Dependent Variable: LOAN PERFORMANCE
ANOVAa
1 Regression 48.130 6 8.022 30.145 .000b
Residual 38.053 143 .266
Total 86.184 149
b. Predictors: (Constant), CREDIT MONITORING, COLLECTION POLICY, CREDIT TERMS,
CREDIT CONTROL, CREDIT POLICY, CLIENT APPRAISAL
Coefficientsa
Standardized
Unstandardized Coefficients Coefficients
1 (Constant) .961 .288 3.337 .001
CREDIT TERMS -.026 .065 -.030 -.401 .689
COLLECTION POLICY .126 .070 .132 1.782 .077
CREDIT POLICY .042 .086 .048 .492 .624
CREDIT CONTROL .134 .070 .151 1.914 .058
CLIENT APPRAISAL .071 .083 .085 .852 .396
CREDIT MONITORING .395 .075 .476 5.293 .000

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a
Residuals Statistics
Minimum Maximum Mean Std. Deviation N
Predicted Value 2.4652 5.4121 4.1747 .56835 150
Residual -1.71459 1.62120 .00000 .50536 150
Std. Predicted Value -3.008 2.177 .000 1.000 150
Std. Residual -3.324 3.143 .000 .980 150

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ANALYSIS 1 – CM AND LP (CORRELATION)
Correlations
LOAN CREDIT
PERFORMANCE MANAGEMENT
LOAN PERFORMANCE Pearson Correlation 1 .704**
Sig. (2-tailed) .000
N 150 150
CREDIT Pearson Correlation .704** 1
MANAGEMENT Sig. (2-tailed) .000
N 150 150
**. Correlation is significant at the 0.01 level (2-tailed).
ANALYSIS 1 – CM AND LP (RELATIVE CORRELATION COEFFICIENT)
Correlations
LOAN CREDIT COLLECTION CREDIT CREDIT CLIENT CREDIT
PERFORMANCE TERMS POLICY POLICY CONTROL APPRAISAL MONITORING
LOAN Pearson 1 .424** .517** .559** .574** .595** .712**
PERFORMANCE Correlation
Sig. (2- .000 .000 .000 .000 .000 .000
tailed)
N 150 150 150 150 150 150 150
CREDIT TERMS Pearson .424** 1 .411** .643** .481** .549** .523**
Correlation
Sig. (2- .000 .000 .000 .000 .000 .000
tailed)
N 150 150 150 150 150 150 150
COLLECTION Pearson .517** .411** 1 .543** .587** .411** .519**
POLICY Correlation
Sig. (2- .000 .000 .000 .000 .000 .000
tailed)
N 150 150 150 150 150 150 150

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CREDIT Pearson .559** .643** .543** 1 .604** .748** .637**
POLICY Correlation
Sig. (2- .000 .000 .000 .000 .000 .000
tailed)
N 150 150 150 150 150 150 150
**
CREDIT Pearson .574 .481** .587** .604** 1 .563** .593**
CONTROL Correlation
Sig. (2- .000 .000 .000 .000 .000 .000
tailed)
N 150 150 150 150 150 150 150
CLIENT Pearson .595** .549** .411** .748** .563** 1 .737**
APPRAISAL Correlation
Sig. (2- .000 .000 .000 .000 .000 .000
tailed)
N 150 150 150 150 150 150 150
CREDIT Pearson .712** .523** .519** .637** .593** .737** 1
MONITORING Correlation
Sig. (2- .000 .000 .000 .000 .000 .000
tailed)
N 150 150 150 150 150 150 150
**. Correlation is significant at the 0.01 level (2-tailed).
ANALYSIS 2 CM, LP &COF

1 CREDIT . Enter
MANAGEMENTb
2 COST OF FUNDSb . Enter
3 CM*COFb . Enter
Model Summary
Change Statistics
Adjusted R Std. Error of R Square
Model R R Square Square the Estimate Change F Change df1 df2 Sig. F Change
1 .704a .496 .493 .54168 .496 145.725 1 148 .000
2 .761b .579 .573 .49709 .082 28.742 1 147 .000
3 .773c .597 .589 .48762 .019 6.767 1 146 .010
b. Predictors: (Constant), CREDIT MANAGEMENT, COST OF FUNDS
c. Predictors: (Constant), CREDIT MANAGEMENT, COST OF FUNDS, CM*COF
ANOVAa
1 Regression 42.758 1 42.758 145.725 .000b
Residual 43.426 148 .293
Total 86.184 149
2 Regression 49.860 2 24.930 100.891 .000c
Residual 36.323 147 .247
Total 86.184 149
3 Regression 51.469 3 17.156 72.156 .000d
Residual 34.714 146 .238
Total 86.184 149
c. Predictors: (Constant), CREDIT MANAGEMENT, COST OF FUNDS
d. Predictors: (Constant), CREDIT MANAGEMENT, COST OF FUNDS, CM*COF

ISSN No:-2456-2165
a
Coefficients
1 (Constant) .730 .289 2.526 .013
2 (Constant) .617 .266 2.319 .022
COST OF FUNDS .261 .049 .333 5.361 .000
3 (Constant) -1.957 1.023 -1.913 .058
CREDIT MANAGEMENT 1.139 .224 1.045 5.097 .000
COST OF FUNDS 1.111 .330 1.416 3.365 .001
CM*COF -.181 .069 -1.418 -2.601 .010
Excluded Variablesa
Collinearity
Partial Statistics
Model Beta In t Sig. Correlation Tolerance
1 COST OF FUNDS .333b 5.361 .000 .404 .743
CM*COF .397b 4.863 .000 .372 .443
2 CM*COF -1.418c -2.601 .010 -.210 .009
b. Predictors in the Model: (Constant), CREDIT MANAGEMENT
c. Predictors in the Model: (Constant), CREDIT MANAGEMENT, COST OF FUNDS
ANALYSIS 3 CM, LP & IA
1 CREDIT MANAGEMENTb . Enter
2 INSIDER ABUSEb . Enter
3 CM*IAb . Enter
Model Summary
Change Statistics
1 .704a .496 .493 .54168 .496 145.725 1 148 .000
2 .736b .542 .536 .51802 .046 14.827 1 147 .000
3 .753c .567 .559 .50533 .025 8.475 1 146 .004
b. Predictors: (Constant), CREDIT MANAGEMENT, INSIDER ABUSE
c. Predictors: (Constant), CREDIT MANAGEMENT, INSIDER ABUSE, CM*IA
ANOVAa
1 Regression 42.758 1 42.758 145.725 .000b
Residual 43.426 148 .293
Total 86.184 149
2 Regression 46.737 2 23.369 87.084 .000c
Residual 39.447 147 .268
Total 86.184 149
3 Regression 48.901 3 16.300 63.833 .000d
Residual 37.283 146 .255
Total 86.184 149

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c. Predictors: (Constant), CREDIT MANAGEMENT, INSIDER ABUSE
d. Predictors: (Constant), CREDIT MANAGEMENT, INSIDER ABUSE, CM*IA
Coefficientsa
Standardized
1 (Constant) .730 .289 2.526 .013
2 (Constant) .316 .296 1.065 .289
INSIDER ABUSE .124 .032 .216 3.851 .000
3 (Constant) -1.557 .705 -2.208 .029
INSIDER ABUSE .893 .266 1.560 3.356 .001
CM*IA -.167 .057 -1.359 -2.911 .004
Excluded Variablesa
Partial Collinearity Statistics
1 INSIDER ABUSE .216b 3.851 .000 .303 .985
CM*IA .197b 3.458 .001 .274 .977
2 CM*IA -1.359c -2.911 .004 -.234 .014
c. Predictors in the Model: (Constant), CREDIT MANAGEMENT, INSIDER ABUSE
ANALYSIS 4 CM, LP AND OC
Variables
Model Variables Entered Removed Method
b
1 CREDIT MANAGEMENT . Enter
2 ORGANIZATIONAL CULTUREb . Enter
3 CM*OCb . Enter
Model Summary
Change Statistics
1 .704a .496 .493 .54168 .496 145.725 1 148 .000
2 .713b .508 .502 .53684 .012 3.678 1 147 .057
c
3 .719 .517 .507 .53415 .008 2.484 1 146 .117
b. Predictors: (Constant), CREDIT MANAGEMENT, ORGANIZATIONAL CULTURE
c. Predictors: (Constant), CREDIT MANAGEMENT, ORGANIZATIONAL CULTURE, CM*OC

ISSN No:-2456-2165
a
ANOVA
1 Regression 42.758 1 42.758 145.725 .000b
Residual 43.426 148 .293
Total 86.184 149
2 Regression 43.818 2 21.909 76.021 .000c
Residual 42.365 147 .288
Total 86.184 149
3 Regression 44.527 3 14.842 52.020 .000d
Residual 41.657 146 .285
Total 86.184 149
c. Predictors: (Constant), CREDIT MANAGEMENT, ORGANIZATIONAL CULTURE
d. Predictors: (Constant), CREDIT MANAGEMENT, ORGANIZATIONAL CULTURE, CM*OC
Coefficientsa
Model B Std. Error Beta T Sig.
1 (Constant) .730 .289 2.526 .013
2 (Constant) .720 .286 2.514 .013
ORGANIZATIONAL .053 .028 .118 1.918 .057
CULTURE
3 (Constant) -1.073 1.173 -.915 .362
ORGANIZATIONAL .588 .341 1.311 1.727 .086
CULTURE
CM*OC -.114 .072 -1.360 -1.576 .117
Excluded Variablesa
Collinearity
Partial Statistics
1 ORGANIZATIONAL .118b 1.918 .057 .156 .880
CULTURE
CM*OC .125b 1.782 .077 .145 .680
2 CM*OC -1.360c -1.576 .117 -.129 .004
c. Predictors in the Model: (Constant), CREDIT MANAGEMENT, ORGANIZATIONAL CULTURE
ANALYSIS 5 CM& LP WITH OC AND IA AS COMBINED MODERATOR
2 ORGANIZATIONAL CULTUREb . Enter
4 CM*OC*IAb . Enter

ISSN No:-2456-2165
Model Summary
Change Statistics
1 .704a .496 .493 .54168 .496 145.725 1 148 .000
2 .713b .508 .502 .53684 .012 3.678 1 147 .057
3 .737c .544 .534 .51900 .035 11.281 1 146 .001
4 .737d .544 .531 .52067 .000 .064 1 145 .800
b. Predictors: (Constant), CREDIT MANAGEMENT, ORGANIZATIONAL CULTURE
c. Predictors: (Constant), CREDIT MANAGEMENT, ORGANIZATIONAL CULTURE, INSIDER ABUSE
d. Predictors: (Constant), CREDIT MANAGEMENT, ORGANIZATIONAL CULTURE, INSIDER ABUSE, CM*OC*IA
ANOVAa
1 Regression 42.758 1 42.758145.725 .000b
Residual 43.426 148 .293
Total 86.184 149
2 Regression 43.818 2 21.909 76.021 .000c
Residual 42.365 147 .288
Total 86.184 149
3 Regression 46.857 3 15.619 57.985 .000d
Residual 39.327 146 .269
Total 86.184 149
4 Regression 46.874 4 11.719 43.226 .000e
Residual 39.309 145 .271
Total 86.184 149
c. Predictors: (Constant), CREDIT MANAGEMENT, ORGANIZATIONAL CULTURE
d. Predictors: (Constant), CREDIT MANAGEMENT, ORGANIZATIONAL CULTURE, INSIDER ABUSE
e. Predictors: (Constant), CREDIT MANAGEMENT, ORGANIZATIONAL CULTURE, INSIDER ABUSE,
CM*OC*IA
Coefficientsa
Standardized
1 (Constant) .730 .289 2.526 .013
2 (Constant) .720 .286 2.514 .013
ORGANIZATIONAL .053 .028 .118 1.918 .057
CULTURE
3 (Constant) .339 .299 1.135 .258
ORGANIZATIONAL .019 .029 .043 .667 .506
CULTURE
INSIDER ABUSE .116 .034 .202 3.359 .001
4 (Constant) .273 .397 .689 .492
ORGANIZATIONAL .033 .061 .073 .537 .592
CULTURE
INSIDER ABUSE .130 .066 .227 1.973 .050
CM*OC*IA -.001 .003 -.047 -.253 .800

ISSN No:-2456-2165
a
Excluded Variables
Collinearity
Partial Statistics
Model Beta In T Sig. Correlation Tolerance
1 ORGANIZATIONAL .118b 1.918 .057 .156 .880
CULTURE
INSIDER ABUSE .216b 3.851 .000 .303 .985
CM*OC*IA .184b 3.166 .002 .253 .953
2 INSIDER ABUSE .202c 3.359 .001 .268 .862
CM*OC*IA .265c 2.690 .008 .217 .330
3 CM*OC*IA -.047d -.253 .800 -.021 .091
c. Predictors in the Model: (Constant), CREDIT MANAGEMENT, ORGANIZATIONAL CULTURE
d. Predictors in the Model: (Constant), CREDIT MANAGEMENT, ORGANIZATIONAL CULTURE, INSIDER
ABUSE
ANALYSIS 6 CM& LP WITH IA AND COF AS COMBINED MODERATOR
3 COST OF FUNDSb . Enter
4 CM*IA*COFb . Enter
Model Summary
Change Statistics
R Adjusted R Std. Error of the R Square F Sig. F
Model R Square Square Estimate Change Change df1 df2 Change
a
1 .704 .496 .493 .54168 .496 145.725 1 148 .000
2 .736b .542 .536 .51802 .046 14.827 1 147 .000
3 .768c .590 .582 .49170 .048 17.157 1 146 .000
4 .782d .611 .600 .48071 .021 7.754 1 145 .006
b. Predictors: (Constant), CREDIT MANAGEMENT, INSIDER ABUSE
c. Predictors: (Constant), CREDIT MANAGEMENT, INSIDER ABUSE, COST OF FUNDS
d. Predictors: (Constant), CREDIT MANAGEMENT, INSIDER ABUSE, COST OF FUNDS, CM*IA*COF
ANOVAa
1 Regression 42.758 1 42.758 145.725 .000b
Residual 43.426 148 .293
Total 86.184 149
2 Regression 46.737 2 23.369 87.084 .000c
Residual 39.447 147 .268
Total 86.184 149
3 Regression 50.885 3 16.962 70.156 .000d
Residual 35.299 146 .242
Total 86.184 149
4 Regression 52.677 4 13.169 56.989 .000e
Residual 33.507 145 .231
Total 86.184 149
c. Predictors: (Constant), CREDIT MANAGEMENT, INSIDER ABUSE

ISSN No:-2456-2165
d. Predictors: (Constant), CREDIT MANAGEMENT, INSIDER ABUSE, COST OF FUNDS
e. Predictors: (Constant), CREDIT MANAGEMENT, INSIDER ABUSE, COST OF FUNDS,
CM*IA*COF
Coefficientsa
Standardized
1 (Constant) .730 .289 2.526 .013
2 (Constant) .316 .296 1.065 .289
INSIDER ABUSE .124 .032 .216 3.851 .000
3 (Constant) .406 .282 1.439 .152
INSIDER ABUSE .069 .033 .120 2.059 .041
COST OF FUNDS .218 .053 .278 4.142 .000
4 (Constant) -.826 .521 -1.584 .115
INSIDER ABUSE .351 .107 .614 3.295 .001
COST OF FUNDS .374 .076 .477 4.916 .000
CM*IA*COF -.015 .005 -.620 -2.785 .006
Excluded Variablesa
Collinearity
Partial Statistics
1 INSIDER ABUSE .216b 3.851 .000 .303 .985
COST OF FUNDS .333b 5.361 .000 .404 .743
CM*IA*COF .232b 4.024 .000 .315 .931
2 COST OF FUNDS .278c 4.142 .000 .324 .624
CM*IA*COF .187c 1.151 .252 .095 .118
3 CM*IA*COF -.620d -2.785 .006 -.225 .054
c. Predictors in the Model: (Constant), CREDIT MANAGEMENT, INSIDER ABUSE
d. Predictors in the Model: (Constant), CREDIT MANAGEMENT, INSIDER ABUSE, COST OF FUNDS
CRONBACH ALPHA RESULT CT
Reliability Statistics
Cronbach's Alpha N of Items
.858 6
CCP
.791 5
CP
.927 5
CC
.873 5

ISSN No:-2456-2165
CA
.933 6
CM
.943 5
LP
.859 5
COF
.949 6
IA
.976 5
OC
.910 4

Credit Management Strategies and Loan Performance of Selected Deposit Money Banks in Ogun State, Nigeria

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What is the objective of the study?

What is the objective of the study?

What variables were examined in the study?

What variables were examined in the study?

Volume 8, Issue 6, June 2023 International Journal of Innovative Science and Research Technology

Credit Management Strategies and Loan

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Number Of Loans Extended

Fig. 1: Conceptual Framework

Source: Author’s computation 2022

VI. METHODOLOGY Merchant Banks with national operating licence: 6

A. Research Design Most of the major commercial banks with international

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Where: VIII. SUMMARY OF FINDINGS

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ANALYSIS 1 – CM COMPONENTS AND LP (RELATIVE EFFECT)

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ANALYSIS 1 – CM AND LP (CORRELATION)

ANALYSIS 1 – CM AND LP (RELATIVE CORRELATION COEFFICIENT)

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ANALYSIS 2 CM, LP &COF

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ANALYSIS 3 CM, LP & IA

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ANALYSIS 4 CM, LP AND OC

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ANALYSIS 5 CM& LP WITH OC AND IA AS COMBINED MODERATOR

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ANALYSIS 6 CM& LP WITH IA AND COF AS COMBINED MODERATOR

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CRONBACH ALPHA RESULT CT

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