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Problem loans management practices : Ecobank Ghana Limited as a case study

( Télécharger le fichier original )
par Katoh Hamadou Kone
Centre Africain d'Etudes Supérieures en Gestion - MBA in Banking and Finance 2004
  

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AFRICAN CENTER FOR ADVANCED STUDIES IN MANAGEMENT

ECOBANK

Ecobank Ghana Limited

PROBLEM LOANS MANAGEMENT PRACTICES:

ECOBANK GHANA LIMITED AS A CASE STUDY

By

Katoh Hamadou KONE

Being a dissertation submitted in partial fulfilment of the

requirements for the award of the

MBA in Banking and Finance

April 2006

To my Mother, for her tireless support

May the Almighty God bless and reward You for All.

Hamed

TABLE OF CONTENTS

ACKNOWLEDGEMENT vi

FOREWORD vii

EXECUTIVE SUMMARY 1

RESUME DE L'ETUDE 3

CHAPTER 1: INTRODUCTION 5

I.

Background of the study

5

II.

Purpose of the study

7

III.

Research problem

7

IV.

Research methodology

8

1.

Data collection

8

2.

Data analysis and interpretation

9

V.

Significance of the study

9

VI.

Limitations of the study

9

VII.

Structure

10

CHAPTER 2: LITERATURE REVIEW 11

I. Basic theoretical framework 11

1.

Problem loans and asymmetrical information

11

2.

Problem loans, adverse selection and moral hazard

12

3.

Problem loans and early warning systems

14

II.

Lessons from world banks crises

15

III.

Role of Supervisors and External auditors in identifying problem loans

19

1.

The role of banking supervision

20

2.

The contribution of external auditors

21

IV. «Problem loans», «Bad loans» and «Non-performing loans»: definitions and

recommended practices 22

1.

World Bank

22

2.

International Monetary Fund

24

3.

West African Monetary Union

24

4.

Bank of Ghana

25

V. Soundness problem loans management criteria 27

1.

Credit Risk Management

27

2.

Loans classification and provisioning

28

3. Remedial management 28

CHAPTER 3: CREDIT RISK MANAGEMENT PROCESSES 30

I. Credit management process 30

1.

Credit initiation

31

2.

Documentation and disbursement

32

3.

Credit administration

32

II. Problem loans management 32

1.

Early Warning Systems

33

2.

Credit classification and provisioning

34

3.

Remedial management

35

CHAPTER 4: DATA ANALYSIS AND INTERPRETATION 36

I. Data collection 36

1.

Sample selection

36

2.

Variables

37

3.

Data collection method

38

II. Data analysis methodology 39

1.

Classification

39

2.

Provisioning

39

3.

Remedial strategy

39

III. Outcome of data collection 40

1.

Classification

40

2.

Provisioning

40

3.

Remedial strategy

40

IV. Data analysis and interpretation 41

1.

Dissimilarities in classification

41

2.

Dissimilarities in remedial strategies

42

CHAPTER 5: RECOMMENDATIONS AND CONCLUSION 43

I. Pre-lending recommendations 43

1.

Industry risks

43

2.

Collateral risks

43

3.

Information system

44

4.

Size and ownership of the companies

44

5.

Portfolio growth incentives

44

6. Companies dealing with governments 45

II.

Credit monitoring

45

III.

Workout strategies

45

1.

Effective teamwork

45

2.

Incentives

45

3.

Additional risks

46

4.

External debt collectors

46

5.

Enforcement of collateral

46

IV. Conclusion 47

BIBLIOGRAPHY 48

APPENDIX 51

ACKNOWLEDGEMENT

Before starting with the study, allow me to thank people and organizations without whom this

study may not be completed.

My first words go to international institutions that created and are still supporting the MBA in Banking and Finance, especially the African Capacity Building Foundation that granted me a scholarship to attend the Program. May you keep strong to continue sustaining African development through training programs and others.

Special thanks also to the academic staff for providing us with up to date knowledge in banking and finance and the project manager and his short and dynamic team.

The Ecobank Group and particularly its subsidiary of Ghana, Ecobank Ghana Limited, played

a key role in the completion of this study. I thank the bank for its hospitality during those three months at Trade Finance and Risk Management Departments and wish you to remain a key role player in the African financial environment.

I cannot forget Mr. Theophilus Aryee, Director of my dissertation for his effective commitment to the work. To him I will say «I learnt a lot from you and expect to do more».

I end by my large family that I would like to thank for their moral and financial support. I

pray for the time to allow all of you to get the proceeds of your investment.

vi MBA in Banking and Finance

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