An Examination of the Credit Management Practices of Rural Banks: A Case Study of Asokore Rural Bank Limited

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AUGUST, 2015
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Many rural banks have sustained heavy losses because of poor credit activities. The main objective of the research was to examine credit management practices of rural banks. Specific objectives were to assess the mechanism of granting loans at rural banks, investigate how non- Supervision of borrowers influences the loan repayment, to establish how the diversion of loan funds by borrowers leads to default in loan repayment and to ascertain the problems encountered by rural banks in credit recovery. The study adopted a descriptive research design which assisted to examine the objectives of the study. The sample size as well as the population of the study was thirty and fifty respectively. The response rate was at 100%, which comprised staff of the bank in charge of credit. Data was gathered using a questionnaire and analysed using SPSS 16 and Microsoft excel. The study found out that the loan repayment default was as a result of non supervision of borrowers of the bank staff, and also as a result of inadequate training of borrowers on utilization of loan funds before they received loans. The findings also revealed that most borrowers did not spend the loan amount on intended and agreed projects. It came out that there are gaps in the credit management of the bank, which requires immediate response to safeguard the future of the bank. The study recommends that for the bank to reduce default in loan repayments, they should monitor the borrowers regularly so as to ensure that they use the loans they received for the agreed and intended purpose. Also training of borrowers before and after receiving loans should be done focusing on areas such as business management, bookkeeping and savings. Finally, the study recommends that since there are weakness in the credit management system of the bank staff should be trained in modern and efficient appraisal and recovery method. Further studies should be done on how credit management can increase financial stability of rural banks in Ghana. This will offer a broad analysis on impact of credit on profitability in Ghana.
A Thesis submitted to the Department of Accounting and Finance, Kwame Nkrumah University of Science and Technology in partial fulfilment of the requirements for the degree of Master of Business Administration (Finance Option)