The Impact Of Accounting Information On Bank Lending Decision (a Case Study Of Standard Trust Bank In Enugu)

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Title page

Approval page



Table of contents


Table of contents




1.1            Background of the study

1.2            Statement of the problem

1.3            Objective and purpose of the study

1.4            Significance of the study

1.5            Scope of the study

1.6            Research question

1.7            Definition of terms




2.1            Role of accounting information in bank lending decision

2.2            Lending principles and practices

2.3            Functions of commercial bank

2.4            Limitation of accounting data




3.1            Research design

3.2            Area of study

3.3            Population of the study

3.4            Sample and sampling technique

3.5            Research instrument

3.6            Reliability and validity of instrument

3.7            Method of data collection

3.8            Method of data analysis



4.1            Presentation And Analysis Of Data




5.1            Discussion of findings

5.2            Recommendation

5.3            Conclusion

5.4            Limitations of the study










Information is considered as a vital tool in any decision situation.  Since we are aware that commercial banks make decision regularly on application from clients for purpose of granting loans, it was conceivable that they would benefit from accounting information which clients are capable of providing.

The study was therefore an attempt to find out the extent to which commercial banks in Nigeria had used accounting information as a tool for decision making on loan application.  The researcher made use of interview and questionnaire method of data collection for the study.

The study concentrated on a sample of commercial banks located in Enugu because of time and financial constraints.  It was discovered that the commercial banks studies make appropriate use of accounting information.  However, the comprehensiveness of the use of the accounting information differed from one bank to the other.  I found out that they use the accounting information significant.  The level of comprehensiveness in the request for the accounting information in their consideration of loan application varied according to the type of clients.  It was discovered that decision on whether to loan or not to lend were modified by such factors as the personality and integrity of the borrower evidence of ability to repay and also the central bank of Nigeria credit guidelines.  Judging from the banks studied, I recommend that all commercial banks should make effective utilization of accounting information since it is one of the effective tools with which to assess both the viability of a project and the enterprise as a whole for commercial banks to utilize accounting information, I recommend that commercial banks should employ qualified financial analysts in the various loan division to carry out intensive examination of accounting information, provided by their clients.

It is also recommended that commercial banks should always insist on the provision of accounting information by the enterprise during the life of the loan so as to monitor the efficiency use of fund lent put.





          The efficiency and effectiveness of the operations as well as the overall success of an enterprise, depend to a large extent on the quality of information available to the management. Information helps management in making decision about the allocation of scarce resource between competing ends.  The business environment is a hanging one and for business to survive in such rapidly changing environment management must keep abreast with information that will enable it to plan for the attainment of pre-determined objectives.  A plan is generally regarded as a preparation for action.  Planning involves causing things to happen in a desired or particular way which otherwise would not have happened  the planning process includes:  the identification of medium and long term goals based on a   detailed analysis of feasibility within the context of the political and social values formulation of the policies and programmes or project for achieving the planned goals, others are provision of suitable organization/structure and identification of the desired type of personnel to implement the selected programme or project.  Also to monitor the end result so as to measure actual performance in relation to plan goals, of achievement and thereby improve the entire process of development looking at the planning process, it appears that for each stage, information is needed for the attainment of the organization objectives.

The accounting function helps in the accumulation of accounting data which helps management in the planning process. It also provides management with financial accounting information which serves as important tool for projecting into the future.  In order to make the desired projection for planning purpose, management needs three basic type of accounting information which are integrated in different stages of the planning process.  These are store keeping information, attention directing information and problem solving information.

The store-keeping information involves the accumulation and allocation of data ex-post for the purpose of product costing, income determination performance appraised and position evaluation.

Attention direction information involves highlighting and investigation of variances for corrective actions.  This is done by comparing ex-post results with decisions implemented ex-ante, and it is useful in the evaluation stage of planning.  Attention directing information is concerned with the control function principle of management by exception.  It bring out the problem solving information is useful in the implementation stage of planning, since it focuses on analyzing and recommending the best course of action among many alternative course. It is closely associated with management decision making process and consists of non-routine and ad-hoc and special decision.

Commercial banks have to plan also, because their planning environment also changes rapidly.  They required adequate information for the purpose of operating their business efficiently since, their profitability depends principally on the amount of loan and advance granted.

In utilizing the data presentation to them by customers for purpose of lending, the banks are interested in financial accounting information which enables them to reach an initial loan decision and also helps them to monitor progress after the advance has been made.  These places of information are those that deal with solvency, liquidity and profitability that is obtaining information that will describe a firm’s financial stand and long term viability.

The bank as users of accounting information would want to satisfy themselves that the company will be able to meet the interest payment accruing during the period of the loan and repayment of capital sum at the end of the loan period.

There are other factors considered by banks when considering loan application.  The bankers emphasizes on different aspects of his investigation depending on the expected duration of loan for a short term loan, the banker is interested in estimates of the net cash flow over the next few months, whereas for a long term advance the banker will need to be convinced that the company is financially table and that adequate profits will be earned throughout the foreseeable future.

The ability of a borrower to repay both the interest and capital sum should be the banker’s prime consideration, if for casts indicate that these condition cannot be met, the advances will not be made.

The study is therefore aimed at assessing the extent to which commercial banks in Nigeria do utilizing accounting information presented to them by their clients affecting loan proposals.





Studies have shown that commercial banks do not place as much emphasis on the viability of projects as on collaterals.  They give more emphasis to application which are backed by collateral and chattels presented by them by the customers.  It was found that mortgage (as a good example of tangible assets) were the most difficult collateral security in term of case



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