Full Project – Automated loan record management system

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CHAPTER ONE

• Introduction

In finance institution like banks, loan is the lending of money from one individual, organization or entity to another individual, organization or entity. It entails the redistribution of financial assets over time, between the lender and the borrower (Furst et al., 2005). In a loan, the borrower initially receives or borrows an amount of money, called the principal, from the lender, and is obligated to pay back or repay an equal amount of money or the lender at a later time. Typically, the money is paid back instalments, or partial repayment in an annuity, each instalment is the same amount. The loan is generally provided at a cost, referred to as interest on the debt, which provides an incentive for the lender to engage in the loan. In a legal loan, each of these obligations and restrictions is enforced by contract, which can also place the borrower under additional restrictions known as loan covenants. Although this article focuses on monetary loans, in practice any material object might be lent. Acting as a provider of loans is one of the principal tasks for financial institutions. For other institution issuing of debt contracts such as bonds is a typical source of funding. Lending is the principal business activity for most commercial banks, the loan portfolio is typically the largest asset and the predominate source of revenue. As such, it is one of the greatest sources of risk to a bank’s safety and soundness. Whether due to lax credit standards, poor portfolio risk management, or weakness in the economy, loan portfolio problems have histories been the major cause of bank losses and failures.

Effective management of the loan portfolio and the credit function is fundamental to a bank’s safety and soundness. Loan portfolio Management (LPM) is the process by which risks that are inherent in the credit process are managed and controlled. Because review of the LPM process is so important, it is a primary supervisory activity. Assessing LPM involves evaluating the steps bank management takes to identity and control risk throughout the credit process. The assessment focuses on that management does to identify issues before they become problems. This booklet, written for the benefit of both examiners and bankers, discusses the element of an effective LPM process it emphasizes that the identification and management of risk among groups of loans may be at least as important as the risk inherent in individual loans. For decades, good loan portfolio managers have concentrated most of their effort on prudently approving loans and carefully monitoring loan performance. Although these activities  continue to be mainstays of loan portfolio management, analysis of past credit problems, such as those associated with oil and gas lending, agricultural lending, and commercial real estate lending in the 1980s, has made ir clear that portfolio managers should do more. Traditional practise rely too much on trailing indicators of credit quality such as delinquency, non-accrual, and risk rating trends. Banks have found that these indicators do not provide sufficient lead time for corrective action when there is a systematic increase in risk, and profile with more tools to analyze and control the risk (Mishler, 2004).

• Theoretical background

Using computer in an information age introduces the most recent and existing revolutionary technical advances. No matter what you plan to do whether you are working with people or with money, with words or with numbers, computer will play an important role in how jobs are completed. More than this, computers are drastically changing the very nature of society itself. In developing a computerized loan record management system, the technologies used were visual basic 6.0 is a high level programming language which evolved from the earlier Does version called Basic: Basic means beginners all-purpose symbolic instruction code, it is a relatively easy programming language to use in developing and information system. The visual basic programming language in this research act as the front end engine while the relational database act as the back and engine. The relational database use in this research is Microsoft access 2007 version.

• Statement of Problem

Many banks do not have an automated system specifically to manage loan information. This is the situation with Standout Cooperative, Ikot Ekpene since manual system is still use for loan processing. The problems can be summarized as follows:

1. Lack of automated system in Standout Cooperative Ikot Ekpene.
2. Difficulties in managing loans record which lead to poor service to the customer.

• Waste of time during loan record verification.
  • Aim and Objectives of the Study

The aim of the study is to develop a loan record management system.

The following are the objectives of the study;

1. To develop a system that will aid registration of loan records.
2. To develop a system that will serve as a database of loan records.

• To develop a system that will facilitate easy retrieval of loan records.

• Significance of Study

The significance of the study are:

• It will provide an automated system that will aid the easy recording of loan information.
• It will serve as a management information system
• The study will also serve as a useful reference material to other researchers seeking for information pertaining the study.

• Scope of the Study

This study covers automated loan management system using Standout Cooperative, Ikot Ekpene as a case study.

• Organization of the Research

This research work is organized into five chapters, chapter one is concerned with the introduction of the research study and it presents the preliminaries, theoretical background, statement of the problem, aim and objectives of the study, significance of the study, scope of the study, organization of the research and definition of terms. Chapter two focuses on the literature review, the contributions of other scholars on the subject matter is discussed. Chapter three is concerned with the system analysis and design, it analyzes the present system to identify the problems and provides information on the advantages and disadvantages of the proposed system.

The system design is also presented in this chapter. Chapter four presents the implementation and documentation. The choice of programming language, analysis of modules, choice of programming language and system requirements for implementation. Chapter five focuses on the summary, conclusion and recommendations are provided in this chapter based on the study carried out.

• Definition of Terms

Loan portfolio: is the total of all loans held by a bank or financial institution on a given day

Debt: An amount of money, a service, or an item of property that is owned to somebody.

Loan: An amount of money giving to somebody on the condition that it will be paid back later.

Lending: To allow a person or an organization to use a sum of money for particular period of time, usually on condition that a charge interest is paid in return.

Guarantor: Somebody who gives a guarantee, especially a formal promise to be responsible for somebody else’s debts or obligation.

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Full Project – Automated loan record management system