CHAPTER FOUR
DATA ANALYSIS AND PRESENTANTION
4.0 Introduction
This chapter presents the findings of the study. The findings were presented according to the objectives of the study which included; The types of risks affecting the loan portfolio performance , the extent to which the exposure to risks affect Credit monitoring of loan portfolio and the strategies used in credit risk control on loan portfolio performance. The presentation and the interpretation were done with the help of tables, pie charts and narrative text as below;
4.1 Findings on background of respondents
4.1.1 Findings on the gender of respondents
| Gender of the respondents | |||||
| Frequency | Percent | Valid Percent | Cumulative Percent | ||
| Valid | Male | 30 | 65.2 | 65.2 | 65.2 |
| Female | 16 | 34.8 | 34.8 | 100.0 | |
| Total | 46 | 100.0 | 100.0 | ||
Source: primary data
According to the results in the study most of the respondents were male (65%), while the female were only 35% , this results indicates that the largest percentage of employees in centenary bank are male.
4.1.2 Findings on marital status of respondents
| Marital status of the respondents | |||||
| Frequency | Percent | Valid Percent | Cumulative Percent | ||
| Valid | Single | 32 | 69.6 | 69.6 | 69.6 |
| Married | 14 | 30.4 | 30.4 | 100.0 | |
| Total | 46 | 100.0 | 100.0 | ||
Source: primary data
According to the results in the table findings indicates that 70% of the respondents were single, this indicates that the largest percentage of the respondents in the study are single while the married were 30%.
4.1.3 Findings on the educational level of respondents
| Academic qualification of the respondents | |||||
| Frequency | Percent | Valid Percent | Cumulative Percent | ||
| Valid | Diploma | 8 | 17.4 | 17.4 | 17.4 |
| First degree | 31 | 67.4 | 67.4 | 84.8 | |
| Masters degree | 7 | 15.2 | 15.2 | 100.0 | |
| Total | 46 | 100.0 | 100.0 | ||
Source: primary data
According to the results in the table 67% of the respondents are first degree holders, 17% diploma and only 15% masters’ degree, the findings further indicates that most of the respondents are first degree holders.
Graphical representation of the educational level of respondents
Source: primary data
The results in the study indicates that majority of the respondents were first degree holders , while some respondents had diploma and masters degree qualification.
4.1.4 Findings on working experience of respondents
| working experience of respondents | |||||
| Frequency | Percent | Valid Percent | Cumulative Percent | ||
| Valid | Less than 5 years | 12 | 26.1 | 26.1 | 26.1 |
| Between 6-10 years | 29 | 63.0 | 63.0 | 89.1 | |
| Over 11 years | 5 | 10.9 | 10.9 | 100.0 | |
| Total | 46 | 100.0 | 100.0 | ||
Source: primary data
According to the results in the study most of the respondents have worked for a duration of 6-10 years, while 26% have worked for less than 5 years and 11% have worked for over 11 years.
Source: primary data
4.1.5 Findings on the responsibility of respondents
| Frequency | Percent | Valid Percent | Cumulative Percent | ||
| Valid | Teller | 11 | 23.9 | 23.9 | 23.9 |
| Customer care | 13 | 28.3 | 28.3 | 52.2 | |
| Loans officer | 14 | 30.4 | 30.4 | 82.6 | |
| Supervisor | 8 | 17.4 | 17.4 | 100.0 | |
| Total | 46 | 100.0 | 100.0 | ||
Source: primary data
According to the results in the study most of the respondents assert that they work as loans officer, 30%, customer care 28% , teller 24% and only 17% were supervisor, this is study indicates that most of the respondents have the subject knowledge on the topic.
Pie chart showing on the responsibility of respondents
Source: primary data
4.2 FINDINGS ON THE CREDIT MONITORING
| Descriptive Statistics | |||||
| N | Minimum | Maximum | Mean | Std. Deviation | |
| The bank does identify and monitor actual and potential concentrations of credit. | 46 | 1 | 4 | 1.72 | 1.068 |
| The bank establishes underwritten standards that require compensating strength from borrowers | 46 | 1 | 4 | 1.74 | .929 |
| The bank loans are commensurate with the risk bearing capacity of the institution | 46 | 1 | 2 | 1.37 | .488 |
| The bank has laws, regulations and policies concerning the issuing of loans | 46 | 1 | 5 | 2.33 | 1.446 |
| Valid N (listwise) | 46 | ||||
Source: primary data
The findings in the study indicates that The bank does identify and monitor actual and potential concentrations of credit, this is supported by the mean value of 1.72.
The results indicates that the bank establishes underwritten standards that require compensating strength from borrowers, this is indicates by the mean value of 1.74 showing that most of the respondents strongly agreed.
The findings in the study indicates that The bank loans are commensurate with the risk bearing capacity of the institution, this is indicated by the mean value of 1.37, showing that most of the respondents strongly agreed.
The findings in the study shows that most of the respondents strongly agreed that The bank has laws, regulations and policies concerning the issuing of loans, this laws helps the bank to protect itself against bad loans.
4.3 Findings on Credit control
| Descriptive Statistics | |||||
| N | Minimum | Maximum | Mean | Std. Deviation | |
| The bank conducts collateral evaluation | 46 | 1 | 4 | 1.74 | 1.084 |
| individual borrowers The bank sets limits to | 46 | 1 | 5 | 2.15 | 1.299 |
| The bank spells out the loan terms and conditions in order to ensure control | 46 | 1 | 4 | 1.63 | 1.019 |
| There is constant need for a critical evaluation of credit risk assessment | 46 | 1 | 5 | 1.87 | 1.147 |
| There is a standardized method used by financial institutions in order to ensure control | 46 | 1 | 5 | 2.39 | 1.453 |
| The bank has in place a collection action in order to ensure control. | 46 | 1 | 4 | 1.87 | 1.087 |
| Valid N (listwise) | 46 | ||||
Source: primary data
The findings in the table indicate that most of the respondents strongly agreed that the bank conducts collateral evaluation; this response is supported by a mean value of 1.74.
The findings of the study indicates that majority of the respondents strongly agreed that individual borrowers The bank sets limits , this results indicates that the bank is working to control credit to maximized its profitability.
According to the findings in the study the results show that majority of the respondents strongly agreed that the bank spells out the loan terms and conditions in order to ensure control, this is supported by the mean value of 1.019.
The findings in the study shows that majority of the respondents strongly agreed that there is constant need for a critical evaluation of credit risk assessment; this is indicated by a mean value of 1.147.
The study shows that most of the respondents assert that there is a standardized method used by financial institutions in order to ensure control.
According to the study the mean value of 1.087 , indicates that most of the respondents hold the view that the bank has in place a collection action in order to ensure control.
4.4 Types of control
| Descriptive Statistics | |||||
| N | Minimum | Maximum | Mean | Std. Deviation | |
| The bank allows the borrower to select a currency they prefer to use in each role over period | 46 | 1 | 5 | 1.74 | 1.219 |
| The level of transaction risk depends on the adequacy of information systems and controls | 46 | 1 | 4 | 1.33 | .701 |
| The level of interest risk attributed to the bank lending activities depends on the composition of its loan portfolio. | 46 | 1 | 4 | 1.65 | .900 |
| The effective management of liquidity risk requires that there be close ties to and good information flow from the lending function. | 46 | 1 | 2 | 1.24 | .431 |
| Most of the developments that improve the loan portfolios, liquidity have implications for price risk. | 46 | 1 | 4 | 1.78 | .728 |
| The banks are the largest and most obvious sources of credit risk. | 46 | 1 | 2 | 1.59 | .498 |
| Valid N (listwise) | 46 | ||||
Source: Primary Data
According to the findings in the study most of the respondents assert that the bank allows the borrower to select a currency they prefer to use in each role over period, this was also supported by a majority of respondents as evidenced by a mean value of 1.74.
The findings in the table above indicates that The level of transaction risk depends on the adequacy of information systems and controls this is represented by a mean value of 1.33.
The results shows that The level of interest risk attributed to the bank lending activities depends on the composition of its loan portfolio, this is supported by trghe fact that most of the respondents supported the fact as it is in the mean value of 1.65.
The study further indicates that most of the respondents assert that the effective management of liquidity risk requires that there be close ties to and good information flow from the lending function as shown by a mean value of 1.24.
The findings in the study further demonstrates that Most of the developments that improve the loan portfolios, liquidity have implications for price risk as supported by a mean value of 1.78.
The study also further shows that the mean value of 1.59 indicates that the banks are the largest and most obvious sources of credit risk.
4.5 Findings on performance of loan portfolio
| Descriptive Statistics | |||||
| N | Minimum | Maximum | Mean | Std. Deviation | |
| There is reduced cost on debt collection | 46 | 2 | 5 | 4.09 | .865 |
| The bank has a very favorable loan repayment system | 46 | 1 | 4 | 1.54 | .836 |
| Our clients have proper usage of the borrowed money. | 46 | 1 | 2 | 1.65 | .482 |
| Customers repay loans in time | 46 | 1 | 2 | 1.65 | .482 |
| The bank often writes off bad loans | 46 | 1 | 3 | 1.67 | .701 |
| I manage my clients well | 46 | 1 | 2 | 1.43 | .501 |
| Valid N (listwise) | 46 | ||||
Source: primary data
The findings in the study shows that there is high cost on debt collection, this is indicated by a high mean value of 4.09.
The results in the table above indicates that majority of the respondents assert that the bank has a very favorable loan repayment system, this resultrs shows that the bank has different ways of managing bad debtors as evidenced by the mean value of 1.54.
The study indicates that the bank clients have proper usage of the borrowed money, this results also indicates that the bank has a way of ensuring that the money is given to the right client tgo avoid loss of its money , the clients only who are going to put the banks money into the right use.
The results in the study indicates that majority of the respondents assert that the respondents assert that Customers repay loans in time.
The findings in the study indicates that most of the respondents strongly agreed that the bank the bank often writes off bad loans.
The findings in the study shows that centenary bank manage3s its clients well as shown by the mean value of, 1.43 in the table.
CHAPTER FIVE
DISCUSSION, RECOMMENDATION AND CONCLUSION OF FINDINGS
5.0 Introduction
The purpose of this chapter is to discuss the findings, draw conclusions to the results presented in chapter four. The chapter also contains recommendations and conclusions according to the objectives of the study. It finally ends with suggestions for further research.
5.1.1 FINDINGS ON THE CREDIT MONITORING
The results shows that the bank does identify and monitor actual and potential concentrations of credit, this is also in line with Villalonga (2008) found out that banks have focused on oversight of individual loans in managing their overall credit risk. While this focus is important, banks should also view credit risk management in terms of portfolio segments and the entire portfolio. The focus on managing individual credit risk did not avert the credit crisis of the 1980s. However, with the portfolio approach to risk management practices, banks might have at least reduced their losses.
The results indicates that the bank establishes underwritten standards that require compensating strength from borrowers these results also further agrees with Delong (2008) observed that in regards to credit risk as a type of risk, most banks, loans are the largest and most obvious sources of credit risk. However, there are other pockets of credit risk both on and off the balance sheet, such as the investment portfolio, overdrafts and letters of credit.
The findings in the study indicates that the bank loans are commensurate with the risk bearing capacity of the institution this is also in line with, Conment and Jarrell, (2006) who found out that the level of interest risk attributed to the banks’ lending activities depends on the composition of its loan portfolio and the disagreement to which the terms of its loan (for example maturity rate structure, embedded options) expose the banks’ revenue stream to changes in rates.
5.1.2 Findings on credit control
The findings in the study shows that respondents strongly agreed that the bank conducts collateral evaluation this is also in line with Lins&Servacs (2009) who assert that Monitoring a risk is always a crucial part in risk management process, and as suggested by, quantifying credit risk can be complicated due to the lack of sufficient historical data and diversity of involved borrowers and the variety in default causes with the dramatic development of technology credit risk measurement evolves greatly during the last 20 years.
The findings of the study indicates that majority of the respondents strongly agreed that individual borrowers the bank sets limits this is also in line with Keeley (2006) pointed out that in the wake of the global financial crisis; banks are under increasing pressure to improve credit risk management, especially as the lack of effective credit risk management was one of factors that helped to trigger the economic downturn. With regulators seeking higher capital requirements and liquidity buffers, the cost of doing business is increasing for banks worldwide.
According to the findings in the study the results show that majority of the respondents strongly agreed that the bank spells out the loan terms and conditions in order to ensure control, this is supported by Sapienza (2009) observed that managers need to monitor credit risks by assessing the creditworthiness of customers using a standardized method in order to facilitate loan approvals and maintain ongoing credit compliance.
The findings in the study shows that majority of the respondents strongly agreed that there is constant need for a critical evaluation of credit risk assessment this is also in line with Sapienza(2009) that credit risk monitoring enables banks to achieve significant credit risk benefits. From making better lending decisions through comprehensive credit assessment, to tracking risk exposure with in depth portfolio monitoring, to improving risk adjusted performance through efficient capital management, banks can rely on Ambit’s Comprehensive solution to manage credit risk more effectively and achieve regulatory compliance more easily.
5.3 Findings on Loan Portfolio
The findings in the study shows that there is high cost on debt collection, this is also in line with Winston (2009) who pointed out that credit risk is by far the most significant risk faced by banks and the success of their business depends on accurate measurement and efficient control of this risk to a greater extent than other risk
The results in the study majority of the respondents assert that the bank has a very favorable loan repayment system this is also in line with (Demirgic, 2009) who stated that to measure and control credit risk, there are a number of ratio employed by researchers, the ratio of loan loss reserves to gross loan (LOSRES) is a measure of banks asset quality that indicates how much of the total portfolio has been provided for but not charged off. Indicator shows that the higher the ratio the poorer the quality and therefore the higher the risk of the loan portfolio will be.
The study indicates that the bank clients have proper usage of the borrowed money; this is also in line with Allen & Gale (2009) pointed out that in regards to credit risk control, event-based triggers and predictive technologies can be extremely effective navigational tools in the environment just described. Predictive technologies can identify such upcoming storms as bankruptcy, higher delinquencies, and losses. Predictive technologies then allow the skipper to make appropriate changes in course and then track progress towards the shore.
5.4 Recommendations
The study recommends that finance trust bank should develop appropriate loan recovery policies to reduce on the loses faced by the bank due to loan defaulters
The study further recommends the management of finance trust to critically analyze the borrowers before advancing a loan facility to them.
5.5 conclusions
The study concludes that the management of finance trust should invest more on their loan recovery department to reduce on the amount of loan written off.
Finance trust should set up strict rules to enable background checks before a client gets a loan.
5.6 Areas of further study
The study recommends the following areas of further study;
Investigate the influence of technology on performance of finance institution
The relationship between effective management and performance of financial institution
The techniques to improve on the performance of employees in a financial institution
