THE EFFECTIVENESS OF THE CREDIT DELIVERY

SYSTEM AND ITS IMPACT ON LOAN PERFORMANCE

ON COMMERCIAL BANKS IN GHANA: AN EMPIRICAL
STUDY OF STANBIC BANK GHANA LIMITED

ABSTRACT
Research Problem
Even though one of the major causes of serious banking
problems continues to be ineffective credit risk management,
the provision of credit remains the primary business of every
bank in the World. For this reason, credit quality is considered
a primary indicator of financial soundness and health of
banks. Interests charged on loans and advances form sizeable
part of banks Assets and Default of loans and advances poses
serious setbacks not only for borrowers and lenders but also to
the entire economy of a country. Studies of banking crises all
over the world have shown that poor loans (asset quality) are
the key factor of bank failures. Stuart (2005) stressed that the
spate of bad loans (non-performing loans) was as high as 35%
in Nigerian Commercial Banks between 1999 and 2009.Umoh
(1994) also pointed out that increasing level of non-
performing loan rates in banks books, poor loan processing,
undue interference in the loan granting process, inadequate or
absences of loan collaterals among other things, are linked
with poor and ineffective credit risk management that
negatively impact on banks profitability. As a result of the
likely huge and widespread of economic impact in connection
with banks failure, the management of credit risk is a topic of
great importance since the core activity of every bank is credit
financing. According to the bank theory, there are six (6) main
types of risks which are linked with credit policies of banks
and these are credit risk (risjk of repayment) interest risk
portfolio risk, operating risk credit deficiency risk and trade
union risk. However the most vital of these risk is the credit
risk and therefore it demands special attention and treatment .
This paper attempts to make a modest contribution to
literature on credit risk by assessing its impact on a
methodology; discussion of empirical results; and summary
and conclusions.

Research Objectives
The main objective of this paper is to assess the effectiveness of the entire Credit delivery
system and its impact on the Loan portfolio and performance of the Bank

ii. To determine the effect of client appraisal on loan performance of Stanbic Bank.
ii. To evaluate the effect of credit risk controls measures adopted by Stanbic Bank on their loan
performance.
iv. To evaluate the effectiveness of credit collection techniques being used by the bank to recover
credits granted.

Research Questions

Methodology
The research will adopt a cross sectional study approach that
seeks to define the procedures employed in managing credit
risk and the effectiveness of adopted procedures. The study
will utilise both qualitative and quantitative techniques for its
data analysis.