TABLE OF CONTENT

Title Page i

CHAPTER ONE:  INTRODUCTION

1.1 Background to the Study 1

1.2 Statement of the Problem 2

1.3 Objectives of the Study 3

1.4 Research Questions 3

1.5 Research hypothesis 4

1.6 Significance of the Study 4

1.7 Scope of the Study 5

1.8 Limitation of the Study 5

1.9 Definition of Terms 5

CHAPTER TWO: REVIEW OF RELATED LITERTURE

2.1 Conceptual Framework 7

2.1.1 The Concept of Credit 7

2.1.2 Credit Evaluation 8

2.1.2.1 Character 8

2.1.2.2 Capacity 9

2.1.2.3 Capital 9

2.1.2.4 Condition 9

2.1.2.5 Collateral 9

2.1.3 The Concept of Risk 10

2.1.4 Credit Risk 11

2.1.5 Credit Risk Management 12

2.1.6 Credit Risk Management Strategies 14

2.1.6.1 Selection 14

2.1.6.2 Limitation 14

2.1.6.3 Diversification 15

2.1.6.4 Credit Enhancement 15

2.1.6.5 Compliance to Basel Accord 15

2.1.7 Credit Risk Measurement 15

2.1.7.1 Default Ratio (DR) 16

2.1.7.2 Cost Per Loan Advance Ratio (CLA) 16

2.1.8 Profitability 16

2.1.9 Internal Determinants of Banks’ Profitability 17

2.1.9.1 Loan Quality 18

2.1.9.2 Income 19

2.1.9.3 Deposits 19

2.1.9.4 Capital Ratio 20

2.1.9.5 Liquidity Ratio 21

2.1.10 External Determinants of Profitability of Bank 22

2.1.10.1 GDP 22

2.1.10.2 Interest Rate 23

2.1.10.3 Exchange Rate 24

2.2 Theoretical Review 24

2.2.1 Govermentality Theory 24

2.2.2 Cultural Theory 26

2.2.3 Risk Society 27

2.3 Empirical Review 28

CHAPTER THREE:  RESEARCH METHODOLOGY

3.1 Research Design 34

3.2 Area of the Study 34

3.3 Nature and Sources of Data 34

3.4 Method of Data Analysis 35

3.5 Model Specification 35

3.6 Technique for Analysis 36

3.7 Description of Research Variables 36

3.7.1 Dependent Variable 36

3.7.2 Independent Variables 37 

CHAPTER FOUR: PRESENTATION OF DATA, ANALYSIS AND DISCUSSION

4.1 Presentation of Data 38

4.2 Data Analysis and Discussion of Findings 39

4.2.1 Descriptive Statistics 39

4.2.2 Regression Analysis 40

4.2.3 Test of Hypothesis 41

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1 Summary of Findings 43

5.2 Conclusion 43

5.3 Recommendations 43

REFERENCES 45

APPENDIX 48