The level of Non-Performing Loan (NPL) in the banking industry continue to dog bank’s in Nigeria, “the non–performing loan (NPL) is a loan on which the borrower is not making interest payments or repaying any principal. At what point the loan is classified as non–performing by the bank, and becomes bad debt.?
The finding further reveaked that “a NPL is the sum of borrowed money upon which the debtor has not made his scheduled payments for at least 90 days. A nonperforming loan is either in default or close to being in default.
“Ratio of defaulting loans (payments of interest and principal past due by 90 days or more) to total gross loans (total value of loan portfolio). The loan amount recorded as nonperforming includes the gross value of the loan as recorded on the balance sheet, not just the amount that is overdue. (International Monetary Fund, Global Financial Stability Report)
“It is calculated by using the value of nonperforming loans (NPLs) as the numerator and the total value of the loan portfolio (including NPLs, and before the deduction of specific loan loss provisions) as the denominator.
The ratio of nonperforming loans to total gross loans is often used as a proxy for asset quality and is intended to identify problems with asset quality in the loan portfolio.”
The management of Jaiz bank plc on Wednesday disclosed that its exposure to NPLs in the short to medium term was within tolerable limits.
According to the report, Managing Director of Jaiz bank, Hassan Usman told journalists in Abuja on Wednesday that the bank was not heavily or significantly exposed to the oil sector, but the bank’s exposure is to real estate.
Usman added that Jaiz has limited exposure because Forex: is important because “we do not have the exposure that other banks have because we do not borrow or invest in dollars.”
Speaking on the foreign exchange situation in the country now, Usman noted that Jaiz bank “makes money from selling Forex and our counterparts/customers depend on forex for various reasons. If they don’t get dollars on time our exposure to them is intertwined.”
The managing director also justified listing of the bank’s shares in the Nigerian Stock Exchange (NSE) on twins reasons of enhancing transparency and openness in the bank’s activities.
The Jaiz MD was optimistic that the bank’s outlook for 2017 will be much better than 2016, stressing that “if current policies on forex and infrastructure provision is maintained, 2017 will be a good year.”
Jaiz bank, he said, has challenges like any growing institution. One of such challenges he said has to do with perception. According to him, “this product is not a religious product it is a mode of financing that tries to provide goods and services to people who cannot afford to buy such goods and services directly.”
Usman lamented that the most important challenge facing the bank “is awareness by all stakeholders but this is being overcome. Islamic banking is not about the creed. There are issues about specifics. Even those clamouring did not fully know or understand what Islamic banking was all about. They thought it was charity, when they found out, that they had to pay for services there was a rude shock, we normally try to explain this. It is an Organization set up to make profit, create value and be sustainable.”
Other challenges he pointed out are the enabling environment like infrastructure for non-interest banking like liquidity instruments. The Ministry of finance he said “had promised us last year that by the first quarter of this year, there will be sukuk. Another challenge is the limited number of qualified trained manpower to manage Islamic banking.”
Inspite of these challenges, Usman noted that “the product (Jaiz bank) has proved itself to be sustainable. We now have national franchise branches in South West and South-South and we are opening more branches in other parts of the country.”
Analyst and astute investor, Celestine Ukpong said though NPL is not respect operators at any level, nevertherless, Jaiz Bank should not drumed over NPL performance yet, as is it too early for the young bank like jaiz bank to talk about NPL, he added.
Ukpong urged management of the bank to focuss on bring more money making strategies and growing the bank. The financial results of 2017 will determeined the next message and decision making of potential investors on the side line, he added.