TABLE OF CONTENTS
Title page
Approval
Dedication
Acknowledgement
Table of contents
Abstract
CHAPTER ONE
Introduction
1.1 Background of the study
1.2 Statement of the problem
1.3 Objective of the study
1.4 Research question
1.5 Significance of the study
1.6 Scope of the study
1.7 Definition of terms
CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 Brief introduction
2.2 Models and or theories of the research questions
2.3 Current literature based on the variables research question
2.4 Summary of literature review
CHAPTER THREE
3.0 Research methodology
3.1 Design of the study
3.2 Area of the study
3.3 Population of the study
3.4 Sample of the study
3.5 Source of data collection
3.6 Instrument for data collection
3.7 Reliability and validity of the instrument
3.8 Distribution and retrieval of the instrument
3.9 Method of data analysis
CHAPTER FOUR
4.0 Data presentation and analysis
4.1 Data interpretation and analysis
4.2 Test of research question
4.3 Discussion of findings
CHAPTER FIVE
5.0 Summary of findings, conclusion and recommendation
5.1 Summary of findings
5.2 Research conclusion
5.3 Recommendation
5.4 Limitation of the study
5.5 Suggestion for further studies
References
Appendix
Questionnaire
Abstract
The title of the research work loan syndication in the Nigeria Banking industry principle practice and problems ( A case study of First bank of Nigeria Plc). The major problem of the research work are delay in packaging the loan it waste a lot of time in delivering loan to the potential borrowers, there are also problem inadequate of loan syndication provided by banks to the industrialist. The objective of study are; to educate and one average borrowers to corporate in meeting the terms and condition spelt out in the loan agreement, to ascertain how delay in loan packaging can be reduced. The method of this research work are normal percentage. This involves funding the percentage of a particular information in respect to the total information received. The finding of this research work are; this is the device used to collect data such as a paper questionnaire or computer assisted interviewing system. The finding of this research made are the suitable ways by which regular payment of interest and capital associated with loan syndication be maintained. The conclusion of this research work are; the researcher therefore conclude that loan syndication is a type of lending that has more than one banks lending a huge capital to a single borrower this a type of lending is practiced generally in Nigeria banking industry and other countries of the world. The recommendation of this research work – loan syndication is practiced generally in the Nigeria banking industry. Therefore there should be more available for more banks to involves in loan syndication such as commercial bank development and merchant banks and among others.
CHAPTER ONE
INTRODUCTION
1.1 Background of the study
When a project is unusually large or complex, it may exceed the capacity of a single lender, for example, the amount of the loan may be the large, the risk too high, the collateral may be in different location or the uses of capital may require special expertise to understand and manage it. In these cases a financial institution may bring other lenders into the deal.
Usually, the loan syndication limits the liability of each lender to its share of the loan interest. In this way, each lender limits its loans amount to a managebale size and limits its risk exposure. Additionally, each lender may have a collateral interest in a unique or specialised asset from the borrowers such as a piece of equipment. Loan syndication involves a large amount of co-ordination and negotiation.
Typically, loan syndication involve a lead financial institution or syndicate agent, which organizes and administers the transaction including repayment fees, reporting and compliance and loan monitoring. Often, such transaction requires the services of a specialist why syndicate requires the services of a specialist why syndicate the loan on behalf of the borrower; identifying lenders while negotiating terms and conditions and even representing the borrower throughout disbursement.
Loan syndication fees can be expensive, ranging from 5% to 10% of the loan principal. Loan syndication can be useful too for banks to maintain a balance portfolio of loan. Assets among a variety of industries if one loan is too large, it may over weight the banks portfolio. Therefore banks may pursue a syndication to accommodate a loan and keep its portfolio in balance at the same time, loan syndication may incur a large expenses to the borrower while the syndication fee is usually financial the burden of repaying the loan syndication fee is shouldered ultimately the borrower. A syndication loan is one that provided by a group of lenders and is structured, arranged and administered by one or several commercial banks or investment banks known as lead arrangers. The syndication lean market is the dominant way for corporations to tap banks and other institutions financial capital providers for loan. The U.S market originated with the large leveraged buycut loans of the mid 1980’s and Europes market is the blossomed with the launch of the Euro in 1999. Loan syndication took a large big stand in the new millennium during the Asian economic beam when such nations as Taiwan, Japan, Malaysia, North Korea, Singapore and China which saw thousands of capital intensive project and massive industrialisation realised in these nations. And these landmark achievement were achieved with large financial leveraged forms various banks, at the most basic level arrangers of syndicate loans serve the investment banking role of raising investor funding for an issues in need of capital. The issuer pays the arranger a fee in the service and the fee increases with the complexity and risk factors of the loan. As a result, the most profitable loan are these leverage borrowers – issuers whose credit ratings are speculative grade and who are paying spreads (premiums or margin above the relevant libor in the U.S and U.K Euvibor in Europe or another base rate) sufficient to attract the interest of non-bank term loan investors.
Though this should moves up and dawn depending on market conditions. In the U.S, corporate borrowers and private equity sponsors fairly even handling drive debt issuance Europe however has for loss corporate private equity sponsors who in turn determine many of the standard and practice of loan syndication. A syndication loan offered by a group of lender (called a syndicate) who work together to provide funds for a single borrower.
The borrower could be a corporation a large project or sovereignty (such as a government) the loan may involve fixed amount a credit line or a combination of the two. Interest rates can be a fixed for the term of the loan or floating based on a benchmark rate such as the London interbank offered rate (LIBCR). Typically there is a lead bank or underwriter of the loan known as the “arranger” “agent” or “lead lender”.
This lender may be putting up a proportionally bigger share of a loan, or perform duties like dispersing cash flows amongst the other syndicate members and administrative tasks.
The main goal of syndicate lending is to spread the risk of a borrower default across multiple lenders (such as bank) or institutional investors like pension’s funds and hedge funds. Because syndicated loans tend to be much large standard bank loan, the risk of even a borrower defaulting could cripple a single lender. Syndicate loan are also used in the leveraged buoyant community fund large corporate take over with primarly debt funding. Syndicated loans can be made on a “best effort” basis, which means that if enough investor cant be found in the amount the borrower receives will be lower than originally anticipated. These loans can also be split into dual branches per bank (who found standard revolvers or lines of credit) and institution investors (who fund fixed – rate term loans)
1.2 Statement of the problem
The researcher work is faced with problems listed below;
Delay in packaging the loan it waste a lot of time in delivering loan to the potential borrower.
Another problem is that the borrower may be uncooperative in meeting terms and conditions spelt out in the loan agreement simply because too many finances are involved.
The repayment of interest and principal may be irregular to the detriment of the syndicate members in view of nonchalency and negligency on the part of the customers.
Moreso, there is stinge conditions and collateral attach to the loan syndication.
There are also problem syndication. Loan syndication provided by banks to the industrialists.
1.3 Objective of the study
The main purpose of this study are as follows;
- To ascertain and enourage borrowers to corporate in meeting the terms and conditions spelt out in the loan agreement
- To find suitable way of maintaining a regular repayment of interest and principal
iii. To find what extent the stinge conditions and collateral attach to the loan syndication have affected it.
- To find a means of improving an inadequate of loan syndication provided by banks to industrialist.
1.4 Research questions
This study is faced with the questions below;
- What are the ways by which delay in loan packaging can be reduced?
- How can the borrowers be educated and encouraged to corporate in meeting with terms and conditions spelt out in the loan syndication?
iii. What are the suitable ways by which regular payment of interest and capital associated with loan syndication be maintained.
- How can stinge conditions (collateral) attain to loan syndication be removed or reduced?
- What are the ways by which loan syndication can be provided for industrialist?
1.5 Significance of the study
The significance of the study is the fact that the finding, suggestion and recommendation arising there will be of immense benefits to banks that the further study for other researchers and students who might be interested in the area.
Finally, it will assist corporate organisation banks in dealing with the problem associated with loan syndication also it is of most important to me in the sense that it is one of the course offered in partial fulfilment of the requirement for the amount of the higher National Diploma in Banking and finance.
1.6 Scope of the study
The study lacks into the nature of loan syndication by commercial banks will lay emphasis on the processes involved in loan syndication which is from appraisal of the proposal to the problem and its economic importance.
The study does not cover the issue on international syndication but references where drawn from loan syndication.
The study covers only a few selected commercial banks in Aba.
1.7 Definition of terms
Lead banks: This is the bank of the borrowers who agrees to provide the sum the interest and participation of other banks.
Participating bank: They are other lenders that join in contributing the sum required through the loan bank they contribute less than the lead bank.
Syndication loan: This is the one that is provided by a group of leaders and is structured arranged and administered by one several commercial or investment bank as arrangers.
Hire purchase: This is a credit facility approved by the lending banks in favour of its borrowing customers for utilisation in time of need.
Import Facilities: This is where the lending banker assist its impact customer. Financially to pay for the importer goods either at the sighting of the exporters but of exchange or within specified period, it still document are to be released to import acceptance of the exporters or bill of exchange.
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