Introduction

Banks faces challenges when it comes to debt recovery from customers. Most bank customers are inaccessible after loan has been granted to them, and this makes it difficult for banks to recover loan lend to their customers (Ghandi, 2014). Debt recovery simply means following loans that has not been paid by a borrower with the intention of getting the delinquent obligations paid back. Banks faced challenges due to default in payment by borrowers, and lack of credit management of debt portfolio which leads to a slack in the quality of bank statement.

According to Cambridge School of Finance (2016), debt recovery is the process of getting people or businesses to pay back money they owe to other people or businesses at a time that was set by two parties. Meghana & Supriya (2020) opines that the commercial banks are key players in the banking industry though financial inclusion in developed nation.

The popularity of commercial banks, according to Afolabi (1991), is not due to the realization that they represent legally or commercially middlemen in the structure, but instead due to their vast branch network, sizable client base, and simplicity of transacting with them. The commercial banks' role as intermediaries reaches its zenith when they extend credit facilities like loans and investments, making money available to individuals and businesses. Because of this one role, commercial banks contribute to the rise in social economic activity. (Frattaroli & Herpfer, 2023)

According to Frattaroli & Herofer (2023), banks must choose between specialty and diversity when deciding on their lending portfolio. A basic argument for portfolio diversification contends that banks should disperse lending risk among several businesses. And monitoring strategies is the best option a bank can formulate to make sure that the loan granted to a borrower is used for the exact purpose (Migwi, 2013; Cerqueiro, Ongena, & Roszbach, 2016; Bhat & Desai, 2020), focus on the strategies adopted by commercial banks to monitor loan given to a customer.

Each bank has its own method for recovering debt from customers in order to improve performance, guarantee that loans given to customers are repaid, and guarantee that the bank will continue to function normally. According to Greuning and Igbal (2007), banks can prevent loan losses before they occur.

According to Muiru, Oluoch and Ajang (2018), the likelihood that loans will be paid back in full, including interest and principal, is another factor that influences the loan portfolio's value. The majority of commercial banks' primary business is lending. Typically, the loan portfolio is the largest asset and primary revenue source. As a result, it is one of the greatest threats to a bank's stability. Loan portfolio issues have historically been the primary cause of bank losses and failures, whether as a result of lax credit standards, inadequate portfolio risk management, or economic weakness.

Recovery process by a bank is to speed up payment from their customers. Granting of credit to customers is one of the ways banks generate funds for payment of salaries, taxes, dividend, and also retain earnings, but it becomes difficult because most customers default in payment, and this affect the bank statement, and growth of the bank. This makes banks to come up with procedures to recover loan granted to a customer.

Objective of the study

The objective of this study is to understand the several means banking sector in Nigeria recover loans, and how they monitor such loans, but specifically,

• To determine the influence of debt outstanding on bank performance.
• To establish the effect of recovered funds on bank performance.
• To assess the relationship between loan customer retention and bank performance
• To investigate how loan customer relationship impacts bank  performance

• Does the level of debt outstanding affect the profitability of banks?
• How does the recovery of funds from non-performing assets contribute to the health of banks?
• How does loan customer retention relate to the overall profitability and revenue generation of banks?
• What is the role of strong customer relationships in enhancing the performance of banks?

Research hypotheses

The following hypothesis is proposed for test in the study

• There's no significant relationship between outstanding debt, and banks profitability.
• There's no significant relationship between recovered funds, and profitability.
• loan customer retention has no influence on the bank profitability
• loan customer relationship does not impacts bank performance

Theoretical framework

Several theories have been propounded that supports credit recovery. Notably among them include Credit Theory of Money and Customer-Supplier Relationship Theory.

The British economist Mitchell Innes also contributed to the development and popularization of the credit theory of money in his 1913 paper "What is Money?" According to the credit theory of money, which is a form of credit produced by financial organizations via the extension of financial assistance and other types of credit, money does not constitute a tangible good. Rather, it is a form of credit. According to this idea, money is produced as a result of these institutions' borrowing and lending operations and is not backed by any tangible goods like gold or silver. The theory goes on to claim that the demand for money determines its value, while the supply of money is governed by the total amount of credit produced by these organizations. According to Innes (1914), to that a sale and purchase is the exchange of a commodity for credit. From this main theory springs the sub-theory that the value of credit or money does not depend on the value of any metal or metals, but on the right which the creditor acquires to "payment," that is to say, to satisfaction for the credit, and on the obligation of the debtor to "pay" his debt and conversely on the right of the debtor to release himself from his debt by the tender of an equivalent debt owed by the creditor, and the obligation of the creditor to accept this tender in satisfaction of his credit.

In Hamisu (2017), Robert and Gary's Customer-Supplier Relationship Theory is discussed. Customer-supplier relationship theory suggests that debt recovery techniques have costs and benefits for both lenders and borrowers. As part of a debtor-creditor relationship, there are four types of costs: pre-sale, post-sale, distribution, and production costs.

Among the primary benefits, Brealey and Meyers (2005) cite customer economics, power, the nature of the decision-making unit, and the institutional connection between creditor and debtor. Because of this, the debtor and the creditor will always enjoy wide profit margins, depending on the interest rate on the loan. In order to manage separate client-supplier associations, the protectors of this speculation use a portfolio method. In this theory, debt recovery strategies play a significant role in financial institutions' performance since the repayment of debt is a matter of association between a creditor and a debtor in order to maintain mutual interests in terms of gains for both parties(Kaczmarczyk, 2019).

Empirical reviews

In their respective studies, Salas and Saurina (2002), Ali and Daly (2010), and Nkusu (2011) discovered that non-performing loans and GDP per capita had an inverse relationship. On the other hand, Beck, Demirhuc-Kunt, and Levine (2013) discovered that non-performing loans and GDP had an appositive relationship.

Araka (2018) investigated the impact of non-performing loans (NPLs) on the financial performance of commercial banks in Nigeria. In order to evaluate data from the Central Bank of Nigeria's (CBN) statistical bulletin and publications from the Nigeria Deposit Insurance Corporation (NDIC), the research used a variety of regression approaches. The data showed that a high ratio of non-performing loans to total loans and a high cash reserve ratio had a statistically significant negative influence on return on assets (ROA). This shows that a high percentage of non-performing loans may have a negative impact on the financial health of Nigeria's commercial banks.

Again, multiple regression modeling was used in an investigation on loans with poor performance by Gabriel, Victor, and Innocent (2019) to look at data gathered from the Central Bank of Nigeria (CBN) statistical bulletin and Nigeria Deposit Insurance Corporation (NDIC) publications over a range of years. The ratio of non-performing loans to total loans (NPL/TLR) and the cash reserve ratio (CRR) both have statistically significant negative effects on return on assets (ROA). These findings suggest that a high proportion of non-performing loans may have a negative impact on the financial health of Nigerian commercial banks. Therefore, it is advised that regulatory bodies in Nigeria maintain an atmosphere that encourages and supports effective risk management techniques among the nation's commercial banks.

Bos and Kolari (2005) state that banks with a relatively low equity-asset ratio are likely to experience excessive losses. According to Salas and Saurina (2002) and Berger and DeYoung (2007), there is a negative correlation between the capital ratio and nonperforming loans.

Using financial ratios gathered from the financial books of the selected banks and analyzed using regression, correlation, and descriptive statistical techniques, Kargi (2011) examined the effect of credit risk on the profitability of Nigerian banks. According to his findings, credit risk management has a significant impact on bank profitability in Nigeria. The study came to the conclusion that bank profitability was inversely correlated with the amount of loans and advances, deposits, and non-performing loans, putting banks at risk of distress and illiquidity.

According to a similar study by Epure and Lafuente (2012), regulatory changes improve bank performance, while the ratio of capital adequacy to net interest margin has a positive effect while risk revealed NPLs and differences in banks have a negative impact on the return on asset. Kithinji (2010) who analyzed the effect of credit risk the board on business banks benefit in Kenya showed that, NPLs and measure of credit doesn't impact the degree of business bank productivity, thusly the suggested that factors other than NPLs and credit in all actuality do influence benefits.

From 2005 to 2008, credit risk efficiency in Taiwanese commercial banks was examined by Chen and Pan (2012). Using data envelopment analysis (DEA), they looked at credit risk through the lens of financial ratios. Credit risk cost efficiency (CR-CE), credit risk allocative efficiency (CR-AE), and credit risk technical efficiency (CR-TE) were the proxies for credit risk. Over the time periods analyzed, their findings revealed that banks could be efficient in all efficiency categories. In general, the DEA analysis revealed that CR-CE, CR-AE, and CR-TE had relatively low average efficiency levels in 2008. The results of Felix and Claudine's (2008) study on the relationship between credit risk management and bank performance revealed that ROA and ROE were inversely related to the NPLs ratio to total loans, resulting in a decline in performance.

According to Ahmad and Ariff (2007)'s investigation, regulation is very important for banks that specialize in multiple products and services; whereas a bank's management quality is crucial for a loan-dominated institution in an emerging market. They assert that a significant contributor to the facilitation of potential credit risk is an increase in the provision for loan losses. They came to the conclusion that developed markets have lower credit risk than emerging markets.

The investigation of Al-Khouri (2011) on the impact of the attributes of bank's particular gamble and the working climate on banks execution in the Bay Collaboration Committee (GCC) utilized the proper impact relapse methods and presumed that, capital gamble, liquidity chance and credit risk are the dominants components that influences the exhibition of banks while estimated utilizing ROA, and just liquidity risk significantly affects the presentation of the banks with regards to ROE.

According to Ahmed, Takeda, and Shawn (1998), an increase in the provision for loan losses reflects an increased deterioration in credit risk and loan quality, thereby affecting banks' performance. The procedures for overseeing credit risk are the systems applied by banks to get away or diminish the adverse consequence of credit risk. It is essential for banks to have a solid framework for managing credit risk if they are to achieve their goals and remain in business.

From the aforegoing, reviews revealed a predominant research focus on either non-performing loans or Credit Risk Management Practices and Internal Control Systems, as well as their associations with financial performance. Existing literature primarily relied on secondary data obtained from the Central Bank and National Deposit Insurance Corporation to assess the influence of credit recovery. The outcomes of these studies varied depending on the utilization of multiple regression analysis to examine the relationships between dependent and independent variables (Salas & Saurina, 2002; Ali & Daly, 2010; Nkusu, 2011; Omitogun, Olanrewaju, & Alalade, 2016; Araka, 2018; Gabriel, Victor&Innocent, 2019; Abimbola, 2020). Studies that deviated from these, are in developed economies and not a developing economy.

In contrast, the present study departs from relying solely on secondary data and instead delves into the exploration of field data. This approach involves gathering insights from interviews and questionnaires, allowing respondents to provide experiential perspectives on various credit recovery-related matters. By adopting this methodology, a more comprehensive understanding of the subject matter can be obtained, thereby enriching the analysis and contributing to the existing body of knowledge in the field of finance

Research Design

A research design refers to an overall plan of combining different components of the research study in an organized manner. This study uses a descriptive design to better explain the connection between loan repayment, credit, and debt recovery. A survey research design was employed in selecting a few individuals from a group in other to gather relevant information concerning the subject matter. The research is based on qualitative, and quantitative techniques in collecting relevant data through a questionnaire.

Population of the Study

A population is made up of all conceivable elements or observations relating to a particular phenomenon of interest of the research subject or element. The population of this study comprised of credit department staff of branches of Ecobank Nigeria Plc in Cross River State, who are in charge of structuring, availing and recovery of credits at the branch level.

Ecobank Plc

Ecobank Nigeria is a significant subsidiary of Ecobank Transnational Incorporated (ETI), One of the Africa’s leading independent banking group which was established as a public limited liability company on October 7, 1986. Using digital platforms like the Ecobank Mobile App, USSD, Ecobank Online, Ecobank OmniPlus, Ecobank Omnilite, EcobankPay, and Ecobank RapidTransfer, as well as an extensive distribution network of over 250 branches and over 50,000 agency banking locations, Ecobank is a major player in the distribution of financial services in Nigeria.

Ecobank Nigeria is now a top-tier Nigerian bank in terms of assets, customer base, deposits, and branches thanks to the Ecobank group’s successful acquisition of Oceanic Bank International. Ecobank had previously acquired the defunct All States Trust Bank Plc, Hallmark Bank Plc, and African International Bank Plc (AIB) customers and deposit liabilities.

The population of the study covers marketing officers in branches of Cross River State who have credit portfolios to drive recovery.

Table 1: Population of the Study

Sample Size

The Taro Yamane formula was used to determine the sample size due to the large

number of the population.

N = Population of study

K = Constant(1)

e = degree of error expected

n=sample size

Validity and Reliability of Instrument.

To ensure the validity of the research instrument, the researcher submitted the research questionnaires to the supervisor for scrutiny and approval. In order to determine the reliability of the research instrument, the researcher gave out 5 copies of the questionnaire to respondents outside the study area; this was to test ability of the respondents to understand the questions asked in the questionnaire. This was used to standardize the questionnaire. Through this process, the questionnaire was proven to be reliable

Method of Data Analysis

Data for the study were analyzed using frequency distribution table, and percentages will be used to analyze the data from the questionnaire, with and correlation with the use of SPSS were used to tests  the hypotheses.

 P = No. of responses (×) × 100

     Total numbers of responses(y)

Also considered a chi-squared test is a test in which this is asymptoticallytrue, meaning that the sampling distribution (if the null hypothesis is true) can be made to approximate a chi-squared distribution as closely as desired by making the sample size large enough.

Formula:

For the Chi Square distribution of



is the Gamma function:         

                                                     

X²= Σ (observed frequencies-expected frequencies)²

Expected frequency

e x²= Σ (E-O) ²

Where as:

X² = chi-square

Σ = summation or sigma

Fo = observed distribution

Fe = Expected distribution

Expected value:

Σ rc = Row total x column total

We used expected counts for three variables - Customer Relationship, Quality of Service, and Loan Customer Retention - to conduct Chi-square tests. Chi-square tests are a type of statistical test used to determine if there is a significant association between two categorical variables. The expected counts refer to the number of observations that would be expected in each category if there was no association between the variables.

By comparing the expected counts to the actual counts, the researchers were able to determine if there was a significant association between the variables. Only the expected counts for the three variables were subjected to the Chi-square test, indicating that these variables were the main focus of the research questions.

The statistical analysis is presented as Chi-square test statistics and exact significance (p-values), which are used to determine the probability of obtaining the observed results by chance. All tests were conducted at a significance level of P = .05, which means that the researchers considered a p-value less than .05 to be statistically significant. Accordingly, one-sample t-tests was adopted for comparisons between groups and it was used because they are considered more powerful than other types of t-tests in certain situations.

Table 2: Variables

Data Presentation And Analysis

Section A

Figure 1: Age Distribution of Respondents Click here to view Figure

Table 3: Age distribution of Respondents

Source: Field Survey, 2023

Table 3: shows that 41.7% of the total respondents are within the age range 41-50, 27.9% are within the age 31-40, 13.9% are within the age 18-30 and 16.7% are within the age range of 50 and above made a percentage of 100. 

Figure 2: Age Distribution of Respondents Click here to view Figure

Table 4: Experience distribution of Respondents.

Table 4:Shows that 5% of the respondent have an experience of 1-4 years, 15.5% are 5-8 years’ experience, 21.1% are 9-12 years’ experience, 20.4% are 13-16 years and 38.1% for 17 years and above.

Figure 3: Educational Qualifications  of Respondents Click here to view Figure

. 
Table 5: Educational qualification of Respondents

Source: Field Survey, 2023

Table 5:Shows that 8.8% of respondent are HND/OND/NCE holders, 66.4% are BSC degree holders, 17.7% are MSC/MA holders and 7.1% are PHD holders

Figure 4: Educational Qualifications of Respondents Click here to view Figure

Table 6: Post of Respondents