Analysis of various strategies Nigerian banking institutions use to safeguard against bad credit

Abstract

Credit transactions have been indispensable to the economic development of Nigeria and that of the world at large. Credit has been defined as the permission to use another’s capital. It also means the power to obtain goods or services by giving a promise to pay a certain sum of money at a specified date in the future. It was discovered that credit puts to use property that would otherwise lie idle, thus enabling a country to more fully employ its financial resources judiciously. It was also discovered that bank credit is as old as banking business because credit giving is one of the principal functions of commercial bank all over the world. The various reasons for giving out credit were identified. Also causes of credit default  were evaluated – these includes; economic recession, character of the borrower, faulty credit analysis, excessive capital commitment and adverse finding. The study shows that various ways should adequately evaluate their customers before giving out loans, should demand for adequate collateral security, insist on credit insurance, should know the proposed project for which bank loan is required, should have adequate credit policy, banks should also tackle the problem of insider abuse. While the regulatory bodies should help to instill financial discipline in both borrowers and Nigerian banks.

Keywords: Bad Credit, analysis of credit, credit default, borrowing, lending culture, economic downturn