Banks have been credited generally with enviable role of being a very important source of funds or capital for the development of the economy. This recognition largely emanates from the roles assumed by most banking institutions in mobilizing various deposits and channeling some towards feasible and viable ventures. This size, type and level of such profitable outlet along with other complimentary factors contribute to economy well being of the country in which the bank is situated. As a result of this, banking institutions have been an agent of economic growth and perhaps economic development.
This deposit which are loanable funds can only be made available to banks, if customer make substantial deposit which banks in turn employ to make loan and advance available to borrower so as to generate interest which may accrue from the advances. This enables the bank to run its day-to-day administrative cost, remain in business and pay satisfactory divided to its shareholders.
It is unfortunate that the borrowers take undue advantage of these loan and advances granted to them by not utilizing them for the purpose for which were given hence bringing about default in the repayment of such loans and subsequent bad debts.
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