1.1 Background of the study
Banking is primarily concerned with accepting deposits from the general public (i.e., bank clients) and matching those deposits to borrowers in the form of loans for investments and consumption. Accounting measurement constraints provide realistic guidance for decreasing the volume and cost of reporting accounting data while maintaining its usefulness to decision-makers. As a result, one of the most important functions of commercial banks is lending. Loans are investments and typically make up the majority of a bank’s assets. Individuals and institutions both want to borrow money. When the surplus of income over expenditure is negative, households seek bankable funds (Mbat, 1995:89). The beauty of this position is that credit control concepts are the same regardless of industry, and you may move into different industries with enough experience. With enough experience, you could even become a consultant and share your knowledge with others. The lack of synchronization between receipts and payments during the usual course of business operations has resulted in the necessity for loanable funds. When a bank grants a loan to a home, an individual, or a business, it considers criteria such as liquidity risk, repayment method, and the loan’s purpose (Mbat, 1995).
The primary goal of business organizations is to generate wealth for their owners. The following are some examples of modern corporate organizations: Sole proprietorships, partnerships, and limited liability companies are examples of business structures. As modern businesses become more complicated (and, in many cases, worldwide), the requirement for complete, transparent, dependable, and accurate information that can be accessed rapidly grows. This is especially important because, in keeping with worldwide best practices, the gap between ownership and management has widened, and most large businesses are controlled by a diverse group of shareholders. An accountant, according to Susan Davis (2015), is a person who performs financial responsibilities relating to the collection, accuracy, recording, analysis, and presentation of financial operations for a business, organization, or enterprise. Within a company’s operations, the accountant frequently has several administrative tasks. An accountant’s function in a small business may consist solely of financial data gathering, entry, and report preparation. Those in charge of governance will be focused on ensuring that the bank has effective controls in place to ensure compliance with the new financial reporting standards, as well as avoiding the reputational, regulatory, and financial harm that could arise from major control breaches. Some banks may be subject to additional reporting obligations on the efficacy of internal controls (e.g., Section 404 of the US Sarbanes-Oxley Act), and will need to consider how the implementation of IFRS 9 would affect their compliance with those other laws. IFRS 9 will necessitate significant upfront and ongoing senior management efforts, as well as major modifications to credit risk management and financial reporting systems, processes, and internal controls, regardless of an entity’s size and complexity. Expected credit loss (ECL) projections are likely to have a significant impact on most banks’ financial statements. The ECL estimate is difficult and inherently subjective. It is based on a variety of variables that may not be accessible right now, such as forward-looking assessments of key macro-and microeconomic indicators, as well as management’s assumptions about the relationship between these forecasts and the amounts and timing of borrowers’ recoveries. These indicators indicate that there is a possibility of material bias impacting the financial statements due to the magnitude of the potential implications. This could have an impact on crucial financial and regulatory indicators. As a result, ECLs must be established in a well-managed environment. Middle-sized businesses may hire an accountant to act as a financial counselor and interpreter, presenting the company’s financial facts to both internal and external stakeholders. Third parties, including vendors, consumers, and financial institutions, are usually dealt with by the accountant.
1.2 Statement of the problem
There are risks associated with this investment, just as there are with any other. Default and inflation, or buying power risk, are examples of these risks. As a result, expert counsel would be required to make decisions (Ejiogu, 2002). Edimnce (2004) agrees with Ejiogu that loan and credit supervision and management require the services of a professional accountant. Mgbada (2007), on the other hand, calls into doubt the accountant’s unique position in loan and credit control and management, claiming that banks may still achieve better loan and credit control and management without the accountant’s help. The largest and most visible source of credit risk for most institutions is loans. Other areas of credit risk, such as the investment portfolio, overdrafts, and letters of credit, exist on and off the balance sheet. Derivatives, foreign exchange, and cash management services are just a few of the products, activities, and services that put a bank at risk. A bank’s credit risk management methods can either reduce or increase the risk of payback, i.e. the likelihood that a lender will fail to perform as agreed. The initial credit-granting process, which includes good underwriting standards, a fast, balanced approval process, and knowledgeable lending staff, is a bank’s first line of defense against excessive credit risk. Are accountants required in credit and debt administration and control? What part does accounting play in loan and credit control and management? These are the questions that this study aims to address.
1.3 Objective of the study
The following are primary objectives of this study:
1. To investigate the role of accountants in credit and loan management in microfinance banks.
2. To assess accountants’ influence on credit and loan management in microfinance banks.
3. To ascertain the impact of the accountant on achieving effective and efficient collateral security on loan issuance.
1.4 Research questions
1. What role do accountants play in credit and loan management in microfinance banks?
2. What is the influence of accountants on credit and loan management in microfinance banks?
3. What impact do accountants have on achieving effective and efficient collateral security for loan issuance?
1.5 Significance of the study
This study will be beneficial to management accountants who are in charge of managing the organization’s investment portfolio, as well as appraising and approving each investment. The study will also be beneficial to the federal debt management agency, as it aims to serve as a guide for loan and credit or debt management agencies with credit control and loan approval responsibilities. The study will also be useful to academics who want to research a similar topic because it will act as a guide for their research. Finally, the research will benefit academic students as well as the general public.
1.6 Scope of the study
This study focuses on investigating the role of accountants in credit and loan management in microfinance banks. It also seeks to assess accountants’ influence on credit and loan management in microfinance banks. Lastly, to ascertain the impact of the accountant on achieving effective and efficient collateral security on loan issuance. The Fina Trust Microfinance Bank in Lagos state is the focus of this study.
1.7 Limitation of the study
Finance, inadequate materials, and time constraint were the challenges the researchers encountered during the study
1.8 Definition of terms
Accountants: An accountant is a person who records business transactions on behalf of an organization, reports on company performance to management, and issues financial statements.
Credit management: Credit management is the process of granting credit, setting the terms on which it is granted, recovering this credit when it is due, and ensuring compliance with company credit policy, among other credit-related functions.
Loan: A thing that is borrowed, especially a sum of money that is expected to be paid back with interest.