Extenuating Loans Non-Performance, Best Practice Perspective of Banks in Bono East of Ghana

International Journal of Research and Innovation in Social Science (IJRISS) | Volume IV, Issue IV, April 2020 | ISSN 2454–6186

Extenuating Loans Non-Performance, Best Practice Perspective of Banks in Bono East of Ghana

Ezekiel Nibenong Seudib¹, Felix Tengan Dassah², Stephen Kwasi Adjei^3
1Accounts Department of Offuman BACCSOD Ltd, Ghana
²Our Lady of Grace Senior High School, Mamponteng, Ghana
³University of Energy & Natural Resources, Sunyani Ghana

Abstract:- Pandemonium in the Banking industry which emanates largely from loans portfolios is eventually catching the attention of stakeholders of banks. Perpetual loan defaulters are predators of financial institutions as they comb round for banks with feebler systems to play their tricks on. It is therefore important for banks to build and maintain a continuous resilient system that will either expose or cut them off. The study fundamentally examined best practices that have been embraced by Banks for mitigation of loans non-performance. The purposive sampling method of data collection was used to select ten credit administrators from five banks within the Bono East region of Ghana.Questionnaire and structured interview are the main instruments that were used for the data collection. The data collected was analysed using the ‘Statistical Product and Service Solution’ (SPSS). The findings from the research indicates that, insisting on collateral security with an affidavit cover by banks to be used to secure each loan granted, coupled with active monitoring is an effective way of preventing loan from going bad. Also, giving clear credit payment schedules to clients together with regular sending of written notices to loan defaulters were found to be effective credit collection strategies. On the basis of the findings, it was recommended that management of banks within the Bono East Region and beyond must come out with a credit risk management policy that is geared towards the granting of current loans whiles cutting down drastically the approval of loans which have the possibility of becoming doubtful or loss in the long run; by ensuring that clients provide collateral security before credit(s) endorsement.

Keywords: Non-performing Loan, Extenuation, Best Practice, Banks Perspective

I. INTRODUCTION

The impact of loan default in recent times has rendered many financial institutions in Ghana insolvent. The struggle of meeting the needed capital requirement of GH¢400 million declared by the Bank of Ghana in 2017 on the part of many of the banks is attributable to loans default. It is therefore important for banks and for that matter those in the Bono East Region to reconsider their credit management practices by employing best practices and possibly taking into consideration; internal control measures, loan appraisal and loan risk management policies to decrease the rate of credit default.

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