Risk Watch with Alberta Quarcoopome: The loans saga (1)

  • “Even if everyone is doing it, wrong is never right” -Russel M. Nelson

On 12th September, 2023, the Chartered Institute of Bankers, Ghana launched its 60th Anniversary with a grand event with several dignitaries in attendance, including Dr Ernest Addison, Governor of Bank of Ghana, Dr Kwabena Dufour former Governor of Bank of Ghana, Dr Yaw Adutwum, Minister of Education and several MDs of Banks. The theme for the celebration is “Redefining Professionalism in Banking through Ethics”. This theme is apt and very appropriate in our current banking environment. I have been reflecting over the theme these past few days and wish to touch on one key factor that is the foundation of banking…Loans.

Loans – “The Necessary Evil”

Banks are licensed to accept deposits and grant loans; collecting money from surplus units and sending it to deficit units. If banks don’t grant loans, they cannot make a margin and pay the promised interest on depositors’ funds. However, anybody working in a bank knows that the success of every bank lies heavily on how loans are administered. The function of the Loans or Credits department of every bank is therefore heavily monitored because it can make or unmake the bank.

The Credits or Loans Department is one of the most sensitive, difficult, interesting, and craziest place to work in. It is a place of mixed emotions because you meet or process applications from all types of account holders each with its own account track record. Loan officers have to try and understand the customers’ business operations to appreciate their needs and determine whether they should be granted the loans as some can be followed by pressure. The recent sanitization of the banking sector had a lot to do with high rate of non-performing loans and not just about weak corporate governance.

 The Personalities behind Loan applications

No two customer applications are the same. Some of the personalities behind the loan applications are awesome while others can pose a challenge. In all cases loan officers need to be tactful and truthful to them to prevent them receiving a “No” and closing their accounts. Let us look at some examples of various loan applicants.

Ø  The Visionary: These customers have focused entrepreneurial visions, relevant experiences and dedication, good credit history and realizable delivery channels. They make loan processing a delightful exercise and loan officers feel happy when their applications are approved. Monitoring their operations is easy and the feeling about the success of the enterprise is mutual-the bank as well as the customer.

Ø  The Dreamers: They conceive a business idea and without conducting the relevant research nor starting on a small scale with funds from family and friends, jump onto the band wagon of lobbying the branch manager for a loan. Many of them don’t take no for an answer and take declined applications personally and emotionally. They expect everybody to be excited about their ideas. Others are not even prepared to listen to any business counselling and already set in their ways.

Ø  The “Connected” accounts: This is a group that encompass various account holders who by their relationship with some executive or board members sometimes take advantage to put pressure on managers and credit officers to grant loans to them.

Ø  The Wilful Defaulters: There are a few customers who, with one’s experience and watchful eyes show from day one that they will not be repaying any facility granted them. They sometimes behave as if bank loans are Christmas gifts.

Ø  The “Player: They can be both males and females, with a hidden agenda: to befriend you and take undue advantage of the relationship by benefitting from loans they have no plans of repaying in future. They tempt bankers to mix business with pleasure.

 The Politically Exposed Persons (PEPs)

I believe this is one of the most difficult group of borrowers that some state banks have to contend with. They can make or unmake a bank! You may be wondering why I am saying so.

A PEP generally presents a higher risk for potential involvement in bribery and corruption by virtue of their position and the influence that they may hold.

I used to believe that PEPs were more credit worthy because when the loan is called in or their names come up in the banks’ non-performing portfolio, they would be embarrassed. In my three decades of banking, I have seen some PEPs addressed press conferences and condemned banks’ high lending rates, while in the same vein, directed the Chief Executive of a bank to grant some “crazy” facilities to cronies and family members, who also happened to be PEPs by their association with them.


The Dilemma of Some CEOs

To many people the position of a Chief Executive of a Bank is one of the “hottest, awesome, rewarding and enjoyable position in the financial services industry. It is the icing on the cake and a reward for hard work. I have observed many hardworking and illustrious men and women, who at the Executive levels, were at their peak performance. Then, what happened? When they became CEOs some of them become ‘malleable” to PEPs and renege on some lending principles. Some find themselves under pressure and take indirect orders from all sorts of places including persons who should know better. Of course, the stresses result in ill-health. What happened to the God factor they had relied on throughout their banking career? The worst part is being sent home through radio announcements!

I have seen many illustrious bankers pressurized by external persons. I wish they will be left alone to do the business of banking within the proper context of corporate governance.

The Power and Benefits of saying “No” in a Professional Way

Let’s look at this example: An elderly gentleman in his sixties who was a close friend to a Bank CEO, pressurized a branch manager to process a loan application. The branch manager faced a dilemma: the senior citizen had offered his residence as security for a loan that had all the signs of non- performance. The manager mustered courage to be honest about the transaction and refused to be intimidated by the CEO. Six months after the manager left to work at another bank, the customer visited him at his new office to thank him for his decision not to process the loan. He realized it was not a feasible project.

 The 21st Century Transformational Shift

People are now seeking more meaning from their work and from their lives. People everywhere now have a voice, a stage, and an audience, largely enabled by technology and the worldwide web. Customers, informed by the increasing transparency and availability of information, are demanding that banks behave more responsibly and sensitively. The growing transparency of corporate behaviour in the modern world is creating a new real accountability. Leaders are now trying to care properly for employees as well as the business.

Ethical banking is a concept that has been gaining traction in recent years. It involves banks operating according to ethical values and being able to demonstrate how governance, strategy, and decision-making have been informed by ethical principles They operate around a set of principles and ideals that are used to govern how they interact with their clients, their community, and the world in general. While each bank is left to determine what principles will sit at its core, most have a few characteristics in common, which include community involvement, client screening, and consistency of internal and external ethics.

Next week we shall look at some examples of ethical banking practices and see how banks are working hard to ensure loans are administered with ethics as the key foundation.


There is more to add on, but let me pause here. For more insights on this topic, please book a copy of my new book, “THE MODERN BRANCH MANAGER’S COMPANION” which involves the adoption of a multi-disciplinary approach in the practice of today’s branch management. It also shares invaluable insights on the mindset needed to navigate and make a difference in the changing dynamics of the banking industry. Call 0244333051 for your copy.



Alberta Quarcoopome is a Fellow of the Institute of Bankers, and CEO of ALKAN Business Consult Ltd. She is the Author of Three books: “The 21st Century Bank Teller: A Strategic Partner” and “My Front Desk Experience: A Young Banker’s Story” and “The Modern Branch Manager’s Companion”. She uses her experience and practical case studies, training young bankers in operational risk management, sales, customer service, banking operations and fraud. 


Website www.alkanbiz.com

Email:alberta@alkanbiz.com  or [email protected]

Tel: +233-0244333051/+233-0244611343







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