Assessment of the Five Cs of Credit in the Lending Requirements of the Nigerian Commercial Banks

Ezekiel Oseni
Additional contact information
Ezekiel Oseni: Department of Banking and Finance, Faculty of Administration, University of Lagos, Lagos, Nigeria.

International Journal of Economics and Financial Issues, 2023, vol. 13, issue 4, 58-65

Abstract: Credit evaluation and decision like any investment decision requires utmost due diligence from the decision makers to avoid high default rates. It is expected of the lender to apply caution all the way by eliminating all forms of asymmetry information that could lead to adverse selection and non-performing loans. To avoid adverse selection and high default rates that could jeopardize the lender s going concern and profitability, caution is the silent C emedded in the five Cs of credit. The study administered a structured questionnaire to all the Nigerian banks that survived the 2005 recapitalization era and were still in operations at the time of this study. While the structured questions required the respondents to rank the five Cs of credit based on the importance their credit policy and practice attached to them, the hypothesis tested centred on the impacts of the Cs of credit on risk asset quality. The qualitative data were also analyzed using a module of the SPSS statistical software. The study observed that all the Cs of credit have a direct and significant correlation with the asset quality (non-performing loan ratio). The study recommended that Caution which it considered as a slient C of credit embedded in the five Cs and the only C provided by the lender should be the watchword throughout the credit risk management process. It imay be pertinent to also note that while the traditional five Cs (character, capacity, capital, collateral and conditions) are required from the borrower, the caution is required from the lender as a check on traditional five Cs.

Keywords: Credit Evaluation; Lending; Non-performing Loans; Five Cs of Credit (search for similar items in EconPapers)
JEL-codes: A20 B31 E51 G21 N20 (search for similar items in EconPapers)
Date: 2023
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.econjournals.com/index.php/ijefi/article/download/14482/7357 (application/pdf)
https://www.econjournals.com/index.php/ijefi/article/view/14482 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eco:journ1:2023-04-8

Access Statistics for this article

International Journal of Economics and Financial Issues is currently edited by Ilhan Ozturk

More articles in International Journal of Economics and Financial Issues from Econjournals
Bibliographic data for series maintained by Ilhan Ozturk ().