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Risk as we know it, is an action taken with varied and unlimited certainty, when applied in the course of lending several options and end points are obtained.

Why do you lent?

As bankers we lend to fill the gap created from those having deficit to those having surplus, but at a profit.

In the course of lending, several things have to be noted, investigated, amitiorated and controlled, ranging from industry risk, credit risk, price risk, micro economic instability, fluctuation in govt policy, globalization etc.

In chapter one of this study, we shall attempt to introduce the concept of risk and illusidate on its core and periferials.

Chapter two comprise of the literature review whereby we shall by to harmonize past and present data/events as regards to risk as expanciated by several leading authors and authorities.

Chapter three comprises of the made made at which the questionnaires were distributed, oral & written interview carried out and mode at which information were sourced.

Chapter four is a theoretical frame work, going by the result of three and backed up by literature review of two, we obtain an inmate theory as per risk with regards to the best possible method, technique, criteria, methodology of handling risk and we now apply such in the practical sense or various credit request made in the banking sector.

Chapter five borders on the outcome of the application of the theory, the gliches observed and the recommended solutions towards a best possible and in order to safeguard bank fund and equally not render ourselves (i.e the credit officers) liable for professional negligenceincompetence, which may have dial consequences.


1.0              INTRODUCTION


Banking can be aptly described as a high-risk business. For this reason a lot of attention is directed at risk management in banking. The need of such emphasis on risk management becomes even more urgent as banks go apple with large volumes of non-performing assets. This thinking is shared by Rose (1987:54), who points out that while the 1950s focused on techniques for the management of banks assets and the 1960s and 1970s emphasized liability management banking in the eighties was concerned with risk-how to measure risk and how to control risk for the betterment of banks and its customers. This view of risk remains true and on issue for bank management in the lending functions.

It is obvious that the subject matter of “risk” assume considerable importance in determing business success and failures, especially in banking of course, the conventional approach to appreciating that fact in financial management is often linked to inverse between the plausible business outcomes, a high risk heads to more profit value and vice versa.

In banking strictly speaking, we can extend this argument to imply that the more a bank achieves and retains liquidity (less risk) the less it gains in profitability (less returns).

Unfortunately, Uncertainty-another variable also affects business outcomes is not easily understood as in the case of ‘risk” yet we must reckon with the decisive dicey and irrational subjective chances, what do we exactly mean by the term “risk” and “uncertainty”? The answer to these questions forms the basis for the discussion of the overview, which comprise of impact and implications of the term for bank management.

1.2                                      STATEMENT OF PROBLEMS:

The risk of lending can be innumerable sometimes intractable. But there are also riskless loan in the sense that such loans are more than 100% cash collateralized In any case, the number characteristics of risk can only be analyzed meaningfully in the content of specified loans.

For this reason clearing the lending doubts begins with:-

1.        Risk identification

2.        Discovering and knowing the risk including their structure and incidence.

3.         Enabling financial analyst identify in his credit report that a particular loan request can be associated with certain risks.

4.        Enable the analysts conceivably identify and give an indication of their nature (risk) and characteristics.

5.        Idently and integrating risk inherent in the so called 5os of lending (credit)

6.         Finally, getting over the hump in CAMEL.

1.3                                      PURPOSEOBJECTIVE OF THE STUDY

The purpose of the study is to.

1.        Check the effect of lending on bank risk

2.        To weigh the relationship between risk and lending

3.        To check the effect of risk associated with bad debt as regards growth in the banking sector.

4.        To analyses the credit process and issues

5.        To analyze the need for security documentation of credit.

1.4                                      RESEARCH QUESTIONS

An indepth look into the following questions would present sufficient solution to the problems of study.

1.                  What is the effect of lending in the banking sector.

2.                  What is the relationship between risk and lending as regards growth in the banking sector

3.                  What are credit processes and issue

4.                  Is there any need for security documentation of credit?

1.5                                      STATEMENT OF HYPOTHESIS

In this research work we shall formulate a policy that is based on the assumption that lending if well articulated and efficiently executed can serve as a potent tool in the banking sector.

The following are the hypothesis of the study.

Ho:  The blending and risks of lending if properly taken cannot boost the growing rate of banks in Nigeria.

Hi:  The lending and risk of lending if properly taken can boost the growing rate of banks in Nigeria.

Ho:  There exist a negative relationship between risk and lending.

Hi:    There exist a positive relationship between risk and lending.

Ho:    Grow in the banking sector is not affected by crisis of bad debt.

Hi:    Credit processed and issue should not be greatly looked into by


Hi:     Credit processes and issue should be greatly looked into.

Ho:     There is need for security documentation by banks.

Hi:      There is need for security documentation by banks.

1.6                                      SIGNIFICANC OF STUDY

Without an indepth look into risk management banks survival will be greatly threatened. This is one of the reasons why some banks fold up since there are no adequate information on risk management as regards lending in banks.

Thus, this study is directed at throwing more light into the need for an overview of risk associated with bank lending i.e risk management and control in the bank sector.

The findings of the study will be useful to the following:

1.                  Existing banks as well as those yet to be established.

2.                  The management of the selected banks chosen for the study of risk management and control.

Specially, this study will provide information and relevant data to the bank management to enable her cope with the task of development in the midst of credit risk. The study is also justified as it would be relevant due to its usefulness to loan officers as well as the generality of banks who would also bear the strain of loan recovery, including the fact that the study will also make it possible to examine hoe bad debt reduction will be achieved and sustainable banking growth and also make the bank management and generality of banks to be aware of what role they have to play in the extension of credit.

1.7                                      DEFINITION OF TERMS:-

RISK:       Risk is the possibility of loss, injury, disadvantage or destruction.

RISK MANAGEMENT:     Risk management is the sum of all proactive management – directed activities within a program that are intended to acceptable accommodate the possibility of failures in elements of the program.

LENDING:     Lending is the extension of credit to investor  who ware in most need of the money for investment purposes.

CREDIT:     Credit is the permission to delay payment for goods or services until after they have been received.

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