CHAPTER ONE

INTRODUCTION

1.0 Introduction

Despite the financial market sophistication, a loan is still dominant form of the bank placement. As a result, loan placements may also be regarded as the most significant source of a bank’s profitability. Considering that the profitability is ultimate business performance and bank loans are source of interest income, the loan-granting process management is of imperative importance. The loan-granting process follows adequate methodological guidelines as a set of mechanisms and procedures to which relevant credit documentation is being subject. Formalization of the loan-granting process improves efficiency in gathering and processing of credit documentation, but also facilitates the process of evaluation of the gathered data with a view to efficient making of credit decisions. In addition, the documentation flow is burdened with specific „check points“ within which the data relevant for the loan approval are filtered. One of the most important check points refers to the assessment of the credit-worthiness of the loan applicant. The assessment of credit-worthiness includes identification of financial capacity of a future debtor as a source of depreciation of approved loan [1].

By means of credit analysis the client’s financial standing and financial structure are examined and its character, capacity, collateral, capital and other relevant debtor’s parameters assessed with a view to efficiently assessing the degree of placement risk. In the context of parameter analysis of the credit rating, the financial indicators have a significant role. As a set of ratios derived from the relation of specific elements of the balance sheet and income statement, these financial indicators are of great analytical and informative significance. By comparing them with boundary (desirable) values, the loan repayment capacity is the determined. Beside the financial

parameters, as referential factors to assess creditworthiness, the credit analyst gives special attention to the assessment of other relevant parameters such as: the situation in a business activity concerned, economic trends at regional level, and projections with regard to economic activity trends in the

forthcoming period. The purpose of these analytical procedures is to properly assess the risk level and create the credit portfolio which is adequate from the viewpoint of the placement security and profitability [2].

It is the need for a computerized system to aid in processing of loan requests that necessitated this study on automated loan request, processing and approval system for commercial bank customers.

1.1 Statement of Problem

The following problems were identified in the existing system:

1. Many banks do not have an automated system specifically to process loan request information.
2. This situation makes it difficult to instantly determine whether a client is eligible to be granted loan.
3. It is time consuming to process loan requests using the manual method.

To solve these problems, an automated loan request, processing and approval system for commercial bank is needed to speed up the processing of  loan applications.

1.2 Aim and Objectives of the Study

The aim of the study is to develop an automated loan request, processing and approval system for commercial bank customers. The following are the objectives of the study;

1. To develop a system that will aid registration of loan requests
2. To develop a system that will aid in the processing of loan requests.
3. To develop a system that will facilitate easy retrieval of loan request records.
4. To design a system that can be used to obtain reports of loans that are approved, pending and disapproved.

1.3 Significance of the study

The study is significant in the following ways:

1. It will provide a system that will help FCMB in processing of loan requests
2. It will provide the cases study with an automated system that will enable them to quickly determine eligibility for loan requested and approved and those that are not approved.
3. It will serve as a management information system.
4. The study will also serve as a useful reference material to other researchers seeking for information pertaining the study.

1.4 Scope of the Study

This study covers developing an automated loan request, processing and approval system for commercial bank customers , a case study of First City Monument Bank, Uyo.

1.5 Organization of Research

This research work is organized into five chapters.

Chapter one is concerned with the introduction of the research study and it presents the, statement of the problem theoretical background, , aim and objectives of the study, significance of the study, scope of the study, organization of the research and definition of terms.

Chapter two focuses on the literature review, the contributions of other scholars on the subject matter is discussed.

Chapter three is concerned with the system analysis and design. It presents the description of the existing system, analysis of the proposed system and design of the proposed system is also presented in this chapter.

Chapter four presents the choice of development environment, implementation architecture, software testing, documentation, user manual and source code listing.

Chapter five focuses on the summary, conclusion and recommendations are provided in this chapter based on the study carried out.

1.6 Definition of Terms

Debt: an amount of money, a service, or an item of property that is owed to somebody

Loan: an amount of money given to somebody on the condition that it will be paid back later.

Lending: to allow a person or business to use a sum of money for a particular period of time, usually on condition that a charge interest is paid in return

Guarantor: somebody who gives a guarantee, especially a formal promise to be responsible for somebody else’s debts or obligations.