STRACT
?One of the major functions of a commercial financial institutions is to provide loans, as well as making investments for our businesses, education etc. to their customers which could provide long term economic growth and improve living standards. However, any contributions made by commercial banks directly affects our interest rates, which in turn, hinders the economy’s inflationary gap. Therefore, this study examines the impact of banks lending rates towards inflation in Nigeria. Literature review clearly suggest a present relationship between these two variables using interest rates as an intermediary, as well as a proxy variable. After collecting a random sample survey of 100 respondents in Nile University of Nigeria, the study discovered a direct relationship between interest rate and inflation, emphasizing a possible bi-variate causal relationship between them. The study therefore recommends the consideration of a fixed exchange rate policy to be re-introduced.
Keywords: Inflation, Interest rates, Commercial Banks
CHAPTER ONE: INTRODUCTION
1.1?Background.
The financial sector is an instrumental mechanism that fueled the trade, commerce and industry sector, which acts as one of the main contributors to any economy including Nigeria. According to the Nigerian Bureau of Statistics quarterly reports (2007), the overall contribution of the financial sector to the overall Gross Domestic Product (GDP) in Nigeria was 3.37% as at the fourth quarter of 2017, which made it to be regarded as one of the top-tier GDP contributors in the Nigerian non-oil sector. In addition, the financial sector has one of the highest improved growth rate amongst other non-oil sectors within the country since its recovery from the economic recession that occurred in 2016, recording an average quarterly growth rate of 10.02% from the second quarter of 2016 to the fourth quarter of 2017. However, due to the economic recession that occurred between 2014 and 2016, the growth rate of the financial and banking sector retarded severely, which directly affected its overall contribution to the country’s GDP, from 3.54% in mid-2016, to 3.37 presently.
Having presented the above statistics, we can suggest that even though the financial sector have faced challenges during the economic recession, making the banking sector somewhat inactive, the sector have made efforts to improve in terms of providing financial services to both individuals and at a macroeconomic level, including providing loans to businesses, human capital and environment, which has in turn, influenced key macroeconomic indicators in the country, especially GDP and inflation.
Therefore, we are going to examine the impact of commercial-bank lending rates on inflation in Nigeria, the mechanism that causes both variables to react when one of them changes, and how the government, as well as the commercial banks can utilize our findings in creating an enabling macroeconomic stability, and better monetary policies imposed by the country’s central bank.
1.2?Statement of the Problem
?In our previous section, we were able to emphasize on the contribution of our financial sector in general to Nigeria’s overall income, and its dominance in the non-oil industry. We also expressed the relationship between the services of commercial banks and macroeconomic indicators (GDP and inflation) in Nigeria. The statement of the problem arises as banks continue to provide loans to its customers, the interest rate begins to rise which may have a direct effect on inflation, reducing the real-value of domestic commodities and services in a long run. Therefore, the main thrust of our study will be to analyze the impact of bank lending rates towards inflation in Nigeria and use our findings to suggest possible solutions of the problem of balancing interest rates with our consumer price index, which will in turn, improve income as well as living conditions in Nigeria.
1.3?Objectives of the Study
This research aims to achieve the following objectives.
To
1. determine the impact of commercial bank’s lending rates on inflation in Nigeria.
2. Make necessary recommendations based on the findings on how to adjust interest rates such that it will have minimum negative impact on inflation.
1.4?Research Questions
The research questions on this study are,
1. Do commercial banks’ lending rate have an impact on inflation in Nigeria?
2. Are the lending requirements of commercial banks adequate to make for effective credit management?
1.5?Research Hypothesis of the Study
The hypothesis to be tested in this study will be as follows:
Ho: Change in bank lending rate has no significant impact on inflation rate in Nigeria.
H1: Change in bank lending rate has significant impact on inflation rate in Nigeria.
1.6 Significance of the Study
The results of this research work will serve as a guide to the monetary authorities in Nigeria in appreciating the full impact of the deregulation for making any necessary adjustments and to serve as a guide in future policy formulation.
It is also hoped that, the study will bring to their knowledge the operations and impacts which interest rate deregulation policy has had on them in mapping out of survival strategies under the prevailing economic circumstances.
Finally,
the results of this study will equally be of use to government and policy makers in formulating policies on economic stabilization and to know the best strategies to adopt in fighting inflation. Above all these, the study shall be of importance to future researchers in the field of economics since it is simply an academic exercise.
1.7?Scope and Limitations of the study
The entire study covers the overall research questions and objectives as specified above. It will not only cover the issues concerning inflation and banks’ lending rates, it will also cover growth rate, monetary policy implementations and the relevance of government intervention. The study will capture key variables and establish a relationship between them, covering a random selection of 100 adult respondents. This study is however, hindered by the following limitations
1. This study did not treat in detail the mechanism of interest rates and the variables affecting it, but it sufficiently brings out the salient points necessary for achieving the objectives of the study.
2. Problem of data collection from the financial institutions especially that of the apex bank and other commercial banks due to the bureaucratic conditions they have in these institutions.
CHAPTER TWO: LITERATURE REVIEW
2.1?The Theoretical Review
Among the theories that seek to explain the determination of interest rate are as follows:
i. The Classical or real theory.
ii. The loanable funds or neo-classical theory.
iii. The Keynesian or liquidity preferences theory.
iv. The neo-Keynesian or fiscal theory and
v. Hick Hansen synthesis or modern theory of interest.
The classical theorists are of the view that interest rate is determined by demand for saving to invest and supply of savings. The rate of interest is determined by the equilibrium of saving and investment. The theory seeks to explain the determination of the rate of interest by real factors like productivity and thrift that is, productivity of capital goods and savings of goods. They are of the view that the rate of interest is thus determined y the demand for savings to invest in capital goods and supply of savings (Adekanye, 2002).
The loanable funds theorists according to Adekanye (1984; 85), believed in the time preference explanation of how interest arises. The Neo-classical theory states “interest is the price paid for the use of loanable fund”. Like the classical and Keynesians theories, it asserts that, the rate of interest is determined by the equilibrium between demand and supply of loanable funds that the supply of loanable funds comes from savings while the demand for loanable funds comes from investment.
Also, the Keynesian or liquidity preference theory according to Paflredman et al (1984) is of the view that, it is the liquidity preference and supply of money that determines the rate of interest.
2.2?EMPIRICAL LITERATURE
CHAPTER THREE: METHODOLOGY
?This research procedure will take a strategy that will comprehensively explain how commercial banks’ lending rates are able to influence the general consumer price indices in Nigeria, having reviewed past studies about the subject matter in the previous chapter. In addition, our strategy will enable us to make necessary recommendations on how to adjust interest rates such that it will have a minimum negative impact on inflation. Therefore, our research design will adapt a descriptive analysis, in order to solve or research problem.
?Our research design would consist of a simple-random sampling technique, where a survey was carried out by distributing questionnaires that is directly related to the subject matter, using Nile University of Nigeria, Jabi, Abuja FCT as the experimental/treatment location. This location was selected because of its middle-income, working class and adolescent/youth demographics; which will yield to a more desirable and efficient result that should suffice in our decision-making process.
?Our target group consisted of a random sample of 100 respondents/observations, taking into consideration of their age groups, Gender, Marital Status, Educational Qualifications and Work Experiences according to their level of skill, which was collected and documented in June 2014, a period where bank rates and inflation was relatively stable.
?Achieving our research objective would be highly dependent on a series of statistical data, as well as a statistical test. Data collected and calculated were demographic statistics, observed frequency and observed cumulative frequency distribution, central tendencies (i.e., mean, mode, median, variance and standard deviation), Aggregates, and probability distributions (i.e., expected frequencies and expected output) for analysis and interpretation, which will be carried out in the following chapter. The statistical test would involve the chi-square distribution where the observed and the expected frequencies and output will be compared so that the decision on whether or not to reject our null hypothesis will be made.
CHAPTER FOUR:
PRESENTATION, ANALYSIS AND DISCUSSION
4.1?INTRODUCTION
This chapter deals with the presentation, analysis and discussion of the data that were collected from the administration of questionnaire for this study.
A total number of 100 questionnaires were distributed, completed and returned. For simplicity sake in analyzing this data, tables and simple percentage method were used to analyze personal bio-data of the respondents while chi-square method of data analysis was used to test whether to reject or not reject the null hypotheses formulated.
4.2?DATA PRESENTATION
Table 1: Showing the Distribution of the Respondents according to Gender
Gender
Frequency
Percentage
Male
83
83%
Female
17
17%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
According to table one above, 83% of the respondents are male while 17% of the respondents are female.
Table 2: Showing the Distribution of Respondents according to Age
Age Range
Frequency
Percentage
21-30yrs
20
20%
31-40yrs
57
57%
41-50yrs
18
18%
51yrs above
05
05%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
According to table two above, 20% of the respondents are within the age range of 21-30years, 57% are between 31-40years of age, 18% are between 41-50years of the age while the remaining 05% of the respondents are between 51years and above.
Table 3: Showing the Distribution of Respondents according to Marital Status
Marital Status
Frequency
Percentage
Single
40
40%
Married
55
55%
Divorced
03
03%
Widow
02
02%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
According to table three above 40% of the respondents are single, 55% are family men and women, 03% are divorcee while the remaining 02% of the respondents are widow.
Table 4: Showing the Distribution of Respondents according to Level of Education
Level of Education
Frequency
Percentage
No formal Education
00
00%
Primary Education
00
00%
Secondary Education
20
20%
Tertiary Education
80
80%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
A look at table four above reveals that, 00% of the respondents had no formal education, 00% had primary education, 20% had secondary education while 80% which is the highest percentage are the graduates from various higher institution of learning. However, based on this result, the responses of this study will be looked at, from the literate perspectives.
Table 5: Showing the Distribution of Respondents according to Year of Experience
Experience
Frequency
Percentage
1-5year
11
11%
6-10years
25
25%
11-15years
42
42%
16-20years
15
15%
21years above Total
07 100
07%
100%
Source: Author’s Field Survey, 2014.
Discussion
According to table five above, 11% of the respondents are between 1-5 years of experience, 25% are between 6-10 years, 42% are between 11-15 years, 15% are between 16-20 years while the remaining 07% had job experience of 21years and above.
4.3?DATA ANALYSIS
Table 6: Showing that one of the effects of bank lending on inflation is that monetary growth does fuel high price generally.
Responses
Frequency
Percentage
SA
40
40%
A
50
50%
U
02
02%
D
05
05%
SD
03
03%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
According to table six above, 40% of the respondents strongly agreed, 50% agreed, 02% undecided, 05% disagreed while the remaining 03% strongly disagreed. This means that, monetary growth which is one of the effects of bank lending on inflation, does fuel high price generally.
Table 7:?Showing that the stock of money that relates most closely to inflation consists primarily of deposits that businesses and households have at commercial banks.
Responses
Frequency
Percentage
SA
55
55%
A
30
30%
U
00
00%
D
11
11%
SD
04
04%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
Table seven above indicated that, 55% of the respondents strongly agreed, 30% agreed, 0.0% are unable to decide, 11% disagreed and 04% of the respondents strongly disagreed. This revealed that, deposits that businesses and households have at commercial banks are the stocks of money that relate most closely to inflation.
Table 8: Showing that an increase in bank loans allow households and businesses to increase their spending, thereby resulting to increase in significant inflation.
Responses
Frequency
Percentage
SA
24
24%
A
57
57%
U
00
00%
D
10
10%
SD
09
09%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
According to table eight above, 24% of the respondents strongly agreed, 57% agreed, 0.0% was unable to decide, 10% disagreed while the remaining 09% of the respondents strongly disagreed. This means that, an increase in bank loans allow households and businesses to increase their spending, thereby resulting to increase in significant inflation.
Table 9: Showing that as far as commercial banking is concerned, inflation erodes the value of the depositor’s savings as well as that of bank’s loans.
Responses
Frequency
Percentage
SA
36
36%
A
60
60%
U
00
00%
D
04
04%
SD
00
00%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
The result of table nine above indicated that, 36% of the respondents strongly agreed, 60% agreed, 0.0% were unable to decide, 04% disagreed while 00% of the respondents strongly disagreed. This pin-pointed that inflation erodes the value of the depositor’s savings as well as that of bank’s loans.
Table 10: Showing that a rise in the interest rate increases the tenure of a loan. As the term becomes too long, there is possibility of paying a lump sum.
Responses
Frequency
Percentage
SA
50
50%
A
43
43%
U
04
04%
D
09
09%
SD
03
03%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
According to table ten above, 50% of the respondents strongly agreed, 43% agreed, 04% undecided, 09% disagreed while the remaining 03% of the respondents strongly disagreed. This means that the larger percentage of the respondents supported the notion.
Table 11: Showing interest rate as a big factor when it comes to debt, especially when repaying a debt.
Responses
Frequency
Percentage
SA
27
27%
A
62
62%
U
03
03%
D
05
05%
SD
03
03%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
Table eleven above indicated that, 27% of the respondents strongly agreed, 62% agreed, 03% undecided, 05% disagreed and the remaining 03% of the respondents strongly disagreed. This revealed that the highest percentage of the respondents supported the notion.
Table 12: Showing that the higher the interest rate, the higher the finance charges will be. When paying off debt, higher interest rate hurts.
Responses
Frequency
Percentage
SA
51
51%
A
33
33%
U
01
01%
D
10
10%
SD
05
05%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
According to table twelve above, 51% of the respondents strongly agreed, 33% agreed, 01% was unable to decide, 10% disagreed and the remaining 05% of the respondents strongly disagreed. This indicated that the highest percentage of the respondents believed that the higher the interest rate, the higher the finance charges will be. When paying off debt, higher interest rate hurts.
Table 13: Showing that as an economy’s debt load grows – and that debt turns bad – interest rates must double in high levels.
Responses
Frequency
Percentage
SA
53
53%
A
35
35%
U
03
03%
D
04
04%
SD
05
05%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
Table thirteen above shows that, 53% of the respondents strongly agreed, 35% agreed, 03% were unable to decide, 04% disagreed and the remaining 05% of the respondents strongly disagreed. This revealed that the highest percentage of the respondents were in support of the notion.
Table 14: Showing that one of the requirements of some banks in releasing loan is letter of domiciliation of salary or guarantee of employer.
Responses
Frequency
Percentage
SA
62
62%
A
30
30%
U
00
00%
D
03
03%
SD
05
05%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
According to table fourteen above, 62% of the respondents strongly agreed, 30% agreed, 00% undecided, 03% disagreed while 05% of the respondents strongly disagreed. This indicated that the largest percentage of the respondents supported the notion.
Table 15: Showing that another factor for granting loan has to do with the evidence of confirmation of appointment.
Responses
Frequency
Percentage
SA
52
52%
A
41
41%
U
02
02%
D
02
02%
SD
03
03%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
According to table fifteen above, 52% of the respondents strongly agreed, 41% agreed, 02% were unable to decide, 02% disagreed while the remaining 03% of the respondents strongly disagreed. This showed that the evidence of confirmation of appointment is another requirement for releasing loan by commercial banks.
Table 16: Showing that another notable requirement is the submission of copies of three month’s pay slips and staff identity card.
Responses
Frequency
Percentage
SA
42
42%
A
51
51%
U
01
01%
D
04
04%
SD
02
02%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
Table sixteen above indicated that, 42% of the respondents strongly agreed, 51% agreed, 01% were unable to decide, 04% disagreed while the remaining 02% of the respondents strongly disagreed. This revealed that the highest percentage of the respondents were in support of the notion.
Table 17: Showing that customer’s application for loan letter is as well a vital requirement to consider.
Responses
Frequency
Percentage
SA
30
30%
A
56
56%
U
02
02%
D
05
05%
SD
07
07%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
The above table which is the seventeenth table indicated that, 30% of the respondents strongly agreed, 56% agreed, 02% undecided, 05% disagreed while the remaining 07% of the respondents strongly disagreed. This pinpointed that the notion was supported by the highest percentage of the respondents.
Table 18: Showing that effective credit management by commercial banks is paramount to reducing global market tumble and bank lending freeze.
Responses
Frequency
Percentage
SA
34
34%
A
52
52%
U
04
04%
D
08
08%
SD
02
02%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
According to table eighteen above, 34% of the respondents strongly agreed, 52% agreed, 04% undecided, 08% disagreed and 02% of the respondents strongly disagreed. This indicated that effective credit management by commercial banks is paramount to reducing global market tumble and bank lending freeze.
Table 19: Showing that commercial banks are required to hold reserves equal to a share of their checkable deposit.
Responses
Frequency
Percentage
SA
48
48%
A
44
44%
U
05
05%
D
03
03%
SD
00
00%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
Table nineteen above reveals that, 48.0% of the respondents strongly agreed, 44% agreed, 05% were unable to decide, 03% disagreed and 00% of the respondents strongly disagreed. This means that the highest percentage of the respondents supported the notion.
Table 20: Showing that it is as well of necessity for credit management by banks so as to successfully manage today’s credit crisis.
Responses
Frequency
Percentage
SA
40
40%
A
50
50%
U
00
00%
D
05
05%
SD
05
05%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
According to table twenty above, it was revealed that 40% of the respondents strongly agreed, 50% agreed, 00% undecided, 05% disagreed and the remaining 05% of the respondents strongly disagreed. This result made it explicit that it is of necessity by banks to create credit management so as to successfully manage today’s credit crisis.
Table 21: Showing that effective credit management is as well needed in order to check credit and receivables which have been stepped to center stage.
Responses
Frequency
Percentage
SA
59
59%
A
41
41%
U
00
00%
D
00
00%
SD
00
00%
Total
100
100%
Source: Author’s Field Survey, 2014.
Discussion
According to table twenty-one above, 59% of the respondents strongly agreed, 41% agreed, 00% undecided, 00% disagreed and 00% of the respondents strongly disagreed. This indicated that all the respondents supported that effective credit management is as well needed in order to check credit and receivables which have been stepped to center stage.
4.3?TESTING OF HYPOTHESIS
Ho: The change in bank lending rate has no significant impact on inflation.
Hi: The change in bank lending rate has significant impact on inflation.
0ptions
Observed Frequency
Expected Frequency
O – E
(O – E)2
(O – E)2
E
SA
51
20.0
31.0
961
48.05
A
33
20.0
13.0
169
8.45
U
01
20.0
-19.0
361
18.05
D
10
20.0
-10.0
100
5.0
SD
05
20.0
-15.0
225
11.25
Total
100
100.0
1816
90.80
Source: Author’s Field Survey, 2014.
Expected result = 51+33+1+10+5 = 20.0
????5
Chi-square calculated X2cal = 90.80
Degree of wisdom: (r-1) (c-1), where r=5 and c=5
Df= (5-1) (5-1)
=4 x 4
=16
At 0.05 significant levels, the table value is 26.296
DECISION RULE
If X2C ; X2T——Reject Ho
If X2C X2T (26.296), Ho will be rejected.
—- From the Decision Rule therefore; I discovered that the calculated Chi-Square is greater than the Table Chi-Square; then we reject our Null hypothesis and accept our Alternative hypothesis. This means that changes in the bank lending rate has significant impact on inflation rate in Nigeria.
CHAPTER 5:
? FINDINGS, CONCLUSIONS AND RECOMMENDATIONS.
5.1 SUMMARY OF THE FINDINGS.
A quantitative assessment of the deregulated interest rate and inflation rate during the period was undertaken using both the descriptive and the quantitative analysis to indicate that changes in Bank lending rate have caused inflation in Nigeria within the period under review. The result indicates that, changes in bank lending rate have significant impact on inflation in Nigeria.
Based on the data collected and analyzed, the following findings were made on policy implication of interest rates.
There is a relationship between interest rate and inflation. That is, inflation has steadily been on the increase despite frequent changes in interest rate.
That high interest rate and in fact, the failure of any country to pursue an optimum interest rate policy can distort macroeconomic parameters and cause serious damage to the country’s economic development.
5.2?CONCLUSIONS.
The theoretical and empirical analysis of the macro-economic structure of the Nigerian economy points to the important role being played by the deregulated interest rate. As we can see that inflation has become one of the most crucial constraints in economic management in this country despite the bold efforts been made by monetary authorities to bring down the level, and their perception that the best and perhaps the only way of doing that is by a drastic reduction in the level of bank credit does not seems balanced.
5.3?RECOMMENDATIONS
It is important to emphasize at this juncture that, the Nigerian economy like any other one is dynamic and as such we cannot expect the price level to be stable.
Accordingly, the following recommendations are hereby made:
Administrative fixed interest rates should be revitalized, that is a strictly regulated interest rates philosophy to be reintroduced. This should include a clear cut definition of monetary authorities of how interest rate should be managed.
Apart from that, the monetary authorities (CBN) should also adopt more drastic punitive measures to stem the disparity in the rates which are charged on loans and advances by different banks within the same economic circumstances or vicinity.
REFERENCES
Adebisi, Oloyede (1994), “Nigerian Banking System and Policy”, Central Bank of Nigeria Economic and Financial Review, 32(3), pp. 31-34.
Adedoyin and Sobodun (1996), “Commercial Banks Lending Activities in Nigeria”, Nigerian Financial Review, 9 (3), pp. 36 – 37.
Adekanye, F. (1987), Practical Guide to Borrowing, Graham burn
Akinlo, A.E. and Ogo-Temi, J.S. (2002), “Credit and Growth of Economic Activities in Nigeria: An Empirical Investigation”, Nigerian Journal of Banking and Financial Issues, 5, pp. 13-14.
www.sciedu.ca/ijfr International Journal of Financial Research Vol. 2, No. 2; July 2011 68 ISSN 1923-4023 E-ISSN 1923-4031
www.sciedu.ca/ijfr International Journal of Financial Research Vol. 2, No. 2; July 2011 Published by Sciedu Press 67
APPENDIX
NIGERIAN TURKISH NILE UNIVERSITY, PLOT 681, CADASTRAL ZONE C-OO RESEARCH AND INSTITUTION AREA, JABI ALI, ABUJA
Dear Respondent,
This questionnaire is aimed at obtaining data on the impact of bank lending on inflation in Nigeria. All data given shall be treated with strict confidentiality. Kindly respond to the items in this questionnaire as sincere as possible.
SECTION A: DEMOGRAPHIC DATA
Instruction: Please tick (?) the appropriate spaces to questions below.
Sex:
Male ( ) Female ( )
Age Range:
21 – 30yrs ( ), 31 – 40yrs ( ), 41 – 50yrs ( ), 51 – above ( )
Marital Status:
Married ( ), Single ( ), Divorce ( ), Widow /Widower ( )
Level of Education:
No formal education ( ), Primary Education ( ), Secondary Education ( ), Tertiary Education ( )
Year of Experience:
1 – 5yrs ( ), 6 – 10yrs ( ), 11 – 15yrs ( ), 16 – 20yrs
( ), 20yrs and above ( )
SECTION B:
Note: SA – Strongly Agree, A – Agree, U – Undecided, D – Disagree,
SD –Strongly Disagree.
S/N
DESCRIPTION OF ITEMS
SA
A
U
D
SD
1.
One of the effects of bank lending on inflation is that monetary growth does fuel high price generally.
2.
The stock of money that relates most closely to inflation consists primarily of deposits that businesses and households have at commercial banks.
3.
An increase in bank loans allows households and businesses to increase their spending, thereby resulting to increase in significant inflation.
4.
As far as commercial banking is concerned, inflation erodes the value of the depositor’s savings as well as that of bank’s loans.
5.
A rise in the interest rate increases the tenure of a loan. As the term becomes too long, there is possibility of paying a lump sum.
6.
Interest rates are a big factor when it comes to debt, especially when repaying a debt.
7.
The higher the interest rate, the higher the finance charges will be. When paying off debt, higher interest rate hurts.
8.
As an economy’s debt load grows – and that debt turns bad – interest rates must double in high levels.
9.
One of the requirements of some banks in releasing loan is letter of domiciliation of salary or guarantee of employer.
10.
Another factor has to do with the evidence of confirmation of appointment.
11.
Another notable requirement is the submission of copies of three month’s pay slips and staff identity card.
12.
Customer’s application for loan letter is as well a vital requirement to consider.
13.
Effective credit management by commercial banks is paramount to reducing global market tumble and bank lending freeze.
14.
Commercial banks are required to hold reserves equal to a share of their checkable deposit.
15.
It is as well of necessity for credit management by banks so as to successfully manage today’s credit crisis.
16.
Effective credit management is as well needed in order to check credit and receivables which have been stepped to center stage.
Changes in bank lending rate are of significant impact on inflation.
1
