Factors that contribute to loan delinquency and its management mechanisms in five selected banks in Ghana

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Loan delinquency management has been an issue of concern for most profit-making financial institutions as borrowers are finding it hard time repaying. The objective of this study was to assess the loan delinquency management practices of five banks in Ghana (Fidelity Bank, Absa Bank, Zenith Bank, Republic Bank and Ecobank Ghana). Specifically, this study examined the mechanisms in place to manage delinquent loans by the banks, identify the effectiveness of loan management policies in the bank and identify the challenges that the bank faces in its loan management mechanisms. This was a survey design. There was the use of multi-stage random sampling method to select 200 credit staff from the Greater Accra branches of the five banks. Online questionnaires were used to collect data. It was found that all the staff were educated to at least the tertiary level and some had additional professional qualifications. It was ascertained that the clientele base had a bearing on repayment and consequently loan delinquency. Non-compliance to credit policy of the banks was also found to be a cause of delinquent loans in the bank. Among the mechanisms to manage delinquent loans were the formal training of credit staff in credit appraisal and training of borrowers on cash management practices. Based on the findings of the study, recommendations such as intensifying loan monitoring, and strictly adhering to institutional standards regarding credit policies among others were made.
A thesis submitted to the institute of distance learning, Kwame Nkrumah university of science and technology, Kumasi in partial fulfilment for the degree of master of science industrial finance and investment