An Investigation of the Challenges of Loan Recovery in Nigerian Retail Banks: A Case Study of First Bank, Rivers State
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Background of the Study:
Loan recovery is a critical component of the lending cycle in retail banking, ensuring that banks maintain liquidity and financial stability. In Rivers State, First Bank faces substantial challenges in recovering loans from a diverse clientele that includes both individual borrowers and small businesses. Effective loan recovery processes are vital for mitigating non-performing assets and sustaining profitability. However, a variety of factors complicate loan recovery in the Nigerian context. Economic volatility, fluctuating market conditions, and socio-cultural barriers can all contribute to delays or defaults in loan repayments. First Bank has implemented several measures aimed at improving recovery rates, such as restructuring defaulted loans, deploying field agents for follow-up, and leveraging legal channels for enforcement (Okafor, 2023). Despite these initiatives, the bank continues to experience a significant rate of delinquency, which undermines its overall lending capacity and affects its bottom line. The recovery process is further complicated by the challenges of accurately assessing borrower creditworthiness and monitoring repayment behavior in a rapidly changing economic landscape. This study investigates the operational, managerial, and systemic challenges that hinder effective loan recovery at First Bank in Rivers State. By examining recent loan performance data and recovery case studies from 2023 to 2025, the research aims to identify key bottlenecks in the recovery process and propose innovative solutions to enhance loan recovery mechanisms. Understanding these challenges is crucial not only for improving the bank’s financial performance but also for establishing sustainable lending practices that can withstand economic shocks and promote long-term financial stability (Adeniyi, 2024).
Statement of the Problem:
Loan recovery remains a persistent issue for First Bank in Rivers State, adversely affecting its asset quality and profitability. Despite proactive measures, the bank continues to struggle with high rates of non-performing loans, resulting in significant financial losses. One of the major challenges is the inadequate enforcement of repayment terms, often exacerbated by socio-economic factors such as unemployment, low income, and economic instability. Additionally, there are procedural inefficiencies in the bank’s recovery process, including delays in issuing notices, challenges in tracking defaulters, and limited legal recourse. These issues are further compounded by a lack of robust credit monitoring systems that can provide early warnings of potential defaults. Furthermore, the absence of effective borrower education programs regarding the consequences of default has contributed to a culture of non-compliance. This gap between the bank’s recovery policies and the actual repayment behavior of borrowers creates significant operational difficulties, undermining the bank’s ability to maintain a healthy loan portfolio. The problem is also intensified by external factors such as regional economic downturns and market uncertainties, which reduce borrowers’ capacity to repay loans. This study seeks to analyze these multifaceted challenges in detail, with the goal of identifying critical factors that impede effective loan recovery and proposing practical strategies to address them (Ibrahim, 2024).
Objectives of the Study:
• To assess the operational and systemic challenges affecting loan recovery at First Bank.
• To evaluate the impact of borrower behavior and economic conditions on loan defaults.
• To recommend strategies for improving loan recovery processes and reducing non-performing loans.
Research Questions:
• What are the primary challenges hindering effective loan recovery at First Bank in Rivers State?
• How do economic and socio-cultural factors influence borrower repayment behavior?
• What improvements can be made to streamline the loan recovery process?
Research Hypotheses:
• H₁: Procedural inefficiencies in the loan recovery process significantly contribute to high non-performing loans.
• H₂: Socio-economic challenges negatively affect borrowers’ ability to repay loans.
• H₃: Implementing advanced monitoring systems and borrower education programs will improve loan recovery rates.
Scope and Limitations of the Study:
This study focuses on loan recovery processes at First Bank in Rivers State, using internal loan performance data and borrower surveys. Limitations include potential biases in self-reported data and the influence of external economic conditions that may affect recovery outcomes.
Definitions of Terms:
• Loan Recovery: The process of collecting overdue loan repayments from borrowers.
• Non-Performing Loans: Loans in which the borrower has not made scheduled payments for a defined period.
• Credit Monitoring: The systematic tracking of borrowers’ repayment behavior and credit performance.
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