ABSTRACT
The term credit may be explained as the provision of financial accommodation to a person, in return for a promise to repay it at some future date. Credit may be extended as a cash loan, or through the medium of deferred payment for the supply of goods or services. Credit plays a fundamental role in the economic development of a free market economy. The role of credit and credit institutions in augmenting production and productivity in an economy is well recognised. In the event of default, a lender must have the assurance that the principal sum lent together with interest earned can be recovered without delay. Its ability to do so is an important factor to be considered in assessing the credit risk. A bank “lends” money and does not give it away. The borrower is required to repay the loan with interest to the bank at a future date.
