TABLE OF CONTENTS

DECLARA'rION ......................................................................................................... i

APPRC)V 1I, ............................................................................................................... ii

DEDICArION ........................................................................................................... iii

ACKNOWLEDGEMENT ......................................................................................... iv

TABI,E OF CONTENTS ............................................................................................ v

1C]~C)NYMS ............................................................................................................ vii

ABS'l'R_Ac·r ............................................................................................................. viii

L1s·r ()F ST!'flJIES ................................................................................................ ix

CllAP'I'ER ONE ....................................................................................................... 1

1.0 Introduction .................................................................................................... 1

1.1 Background of the Financial Sector.. ............................................................. 1

1.2 Background of the Study ............................................................................... 2

1.3 Statement of' the Problem ............................................................................... 5

1.4 General Objective of the Study ...................................................................... 6

1.5 Specific Objectives ........................................................................................ 6

1.6 Research Questions ........................................................................................ 6

1.7 ScopeoftheStudy ......................................................................................... 7

1.8 Significance of the Study ............................................................................... 7

ME'l'l 101)01 ,OGY ..................................................................................................... 7

ClIAP'fER ·rwo ...................................................................................................... 9

REVIEW OF RELATED LITERATURE ............................................................. 9

2.0

2.1

2.3

2.4

2.4.1

2.4.2

2.4.3

2.4.4

2.4.S

Introduction .................................................................................................... 9

Scope of a Financial Sector (Sources of Credit) ............................................ 9

Effectiveness of the Law how it has Supported the Debtor and Creditor .... 10

Circumstances that Lead to Borrowing ........................................................ 13

Circumstances Leading to Debt Defaulting and how it Affects the Bank .. 14

Lopsided Credit Distribution ....................................................................... 14

High Degree of Concentration on Loan and Deposit Sides ......................... 14

Interest Rate Spreads and Risks ................................................................... 15

Non- Performing Loans ............................................................................... 15

Exchange Rate Risk ..................................................................................... 15

V

2.4.6 Credit Risk ................................................................................................... 15

2.4.7 Health and Soundness of the Financial Sector.. ........................................... 16

2.5 Possible Interventions to Reduce Consequences of Debt Defaulting .......... 23

2.5.1 Bankruptcy Protection Schemes .................................................................. 23

2.5.4

2.5.6

2.5.7

Economic Policv Research .......................................................................... 24

Large Reserves Maintenance ....................................................................... 24

Strengthening of Commercial Courts .......................................................... 25

High Interest Rate ........................................................................................ 25

Close l
onitoring ......................................................................................... 25

Further Strengthening of Banking Supervise to Safeguard the Gains Made25

S un1n1ary ....................................................................................................... 26

(:IIAPTER THREE ................................................................................................ 27

3.0

3.1

3.1

., "1 .).L

.., .., .) .. )

3.4

3.5

Introduction .................................................................................................. 27

f)ebtor .......................................................................................................... 27

What does the Financial Institution do? ....................................................... 27

Who can benefit from a Loan? ..................................................................... 28

Procedure in brief. ........................................................................................ 28

Advantages of Loan Management ............................................................... 29

Disadvantages of a Loan Management ........................................................ 29

Conclusion .................................................................................................... 30

(:IIAP'rl~ll FOlJR ................................................................................................... 31

RESEARCH FINDINGS INTERPRETATION AND DISCUSSION ............... 31

4.0 Introduction .................................................................................................. 31

4.1 Discussions with Respondents ..................................................................... 31

4.2 Solutions to Reduce Debt Defaulting .......................................................... 39

CIIAP'fl~Il FIVI{ .................................................................................................... 41

CONCLUSIONS AND RECOMMENDATIONS ................................................ 41

5 .0 Conclusion ................................................................................................... 41

5.1 Recommendations ........................................................................................ 41

Rl!FERENCES ......................................................................................................... 43