The role of Board of Directors and Management in Effective Credit Administration: case study of Fiaseman Rural Bank Ltd

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The banking sector has grown rapidly in recent times and has witnessed tremendous performance in the areas of lending. Granting of loans and overdrafts has always represented the largest commitment of funds to various customers of banking institutions. However, effective credit administration has always become a major problem particularly to the Rural Banks in Ghana. The general objective of the study is to establish how effective credit administration is handled by the BOD, Management, Credit Staff and Auditing Staff would enhance credit operations in Rural Banks in Ghana. The specific objectives are also to examine the lending policies of the bank, to find out why some customers find it difficult paying their loans. The study also examines the measures adopted by the Rural Banks in recovering credits granted to customers and also make suggestions and recommendations that would inform sound policies for effective credit administration. The researcher used questionnaires and interviews in gathering information for this work. Questionnaires were issued to the Board of Directors, General Manager, Customers, Branch Managers, Credit Officers and Internal Auditors. All of these people were also interviewed. The findings revealed that only three BOD are involved in the approval of loans and only two Credit Staff at the Head Office are trained. Those Credit Officers at various branches are not trained. There is also the problem of cash security being provided by loan customers. The interest rates and commitment fees are high. Also most of the loans were given to salaried customers to the detriment of agriculture and cottage industry. The study also revealed that the rate of bad debt was high due to cocoa loans which were not paid in the year 2008. In conclusion, it is an evident that the Bank’s loan portfolio contained almost loans and advances made of salaried workers which has low default rate and higher repayment. Nevertheless the bank has to pay much attention to other sectors since mining in the area can come to an end.
A Thesis submitted to the Institute of Distance Learning, Kwame Nkrumah University of Science and Technology in partial fulfillment of the requirements for the Degree of Commonwealth Executive Masters of Business Administration