An investment banker and a Fellow of the Institute of Chartered Accountants of Nigeria, Mr. Joel Emuan, has listed various ways to curb bad debts in the banking industry.
This was against the backdrop of rising and increasing bad debts in the banks, thus making recovery of loans difficult.
Reacting to an allegation that bank debtors don’t want to pay back their debts, the Managing Director/Chief Executive of Asset Management Corporation of Nigeria, Alhaji Ahmed Kuru, said this was prevailent among highly placed but recalcitrant debtors who use the law to stop recovery processes.
Emuan said the options to be adopted to avert the rising level of bad debts include proper screening of loan application forms, the engagement of a loan project team to monitor the disbursement, and usage of processes, to avoid diversion by the
customers.
“This is becomes necessary, especially as the electioneering year is fast approaching. There is the need for employment of experienced and qualified hands within the credit desk units in line with the enterprise risk framework of banks. This is to check
losses.
“And finally, the meticulous use of the method of debt recovery techniques, on all loans already disbursed is
mandatory.”
According to the investment banker, the banks perform their credit functions by extending credit to meet the credit needs of the community, individuals and organisations, as well as earning returns that would increase the wealth of stakeholders.
“This had led to accumulation of bad debts in the banking industry. Since some of these debts are uncollectable and unpayable by the customers, a number of factors are responsible for this situation amongst which are poor management of bank funds, poor economic policies of government, the misuse of loans by the bank customers, and poor debt collection methods,”
he said.
Reacting, Dr. Niyi Raji, Managing Director/Chief Executive of RPA Africa Limited, said there was the need for proper scrutiny of the banks’ books to know the various categories of loans that were traceable in terms of collection.
Raji, who is a former general manager of Access Bank, said, “Some loans are termed good or satisfactory, which allows for one percent provisioning according to the Banking Act and by implication, 100 percent recovery guaranteed.
“Some loans are termed substandard, which allows for 10 percent provisioning and by implication, recovery of the loan also guaranteed in the bank’s book, while others are termed doubtful, which, according to the banking act, allows for 50 per cent provisioning and 50 percent recovery rate assured and guaranteed; while others are termed ‘lost’, meaning that their recovery rate is
zero.”
He however advocated for close monitoring and adequate categorisation of loans in the banking sector, for easy
recovery.
