THE IMPACT OF ACCOUNTING INFORMATION ON BANK LENDING DECISION

ABSTRACT

 

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.

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