CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Commercial Banks are legal entity with perpetual succession formed as a corporate body under law, by an association of person, Basil (2001: 1) according to companies and Allied matters Act 1990 section 29, companies are classified into three types

1. A private company limited by shares shall end with the word “limited”. (Ltd).

2. Public company limited by shares ends with the words “public limited” (plc)

3. Company limited by guarantees shall end with the words “ limited by Guarantee)” in brackets (ltd Gtc) It is based on these that we shall call to mind on the issues concerning financial organizations. A financial institution is a business organization and establishment, which deals with money and financial assets such as shares, bills of exchange, treasury bills etc. Augustine (2003:38).

Financial institution are regarded as banks, which is comprised of central banks, commercial banks (known as joint stock banks) and others. Financial institutions do not focus on banks as long but those institutions which pool or mobilize savings and excess liquidity from individuals, firms, corporate bodies etc. It is obvious for one to know that a country or an economy cannot stand without a proper banking system. Banks originated from man’s question for store-keeping or safe keeping of wealth.

1.2  BACKGROUND OF THE CASE STUDY (VISTA BANK SL)

Vista Group Holding SA is a financial services holding company with the objective to build a world-class pan-African financial institution group and contribute to economic and financial inclusion in Africa.
Vista Group Holding SA has entered in strategic partnerships with various global financial institutions to drive its growth strategy by focusing on MSME (SME banking, leasing, and microfinance, banking on women), trade and supply chain finance, bank assurance increasing profitability while controlling operating costs and mitigating risks. Vista Group Holding SA is focused on maximising the opportunities in its respective markets to become the financial institution of choice through innovative banking and insurance products.
October 2020
Vista Bank Group Expands Its Trade Finance Services in West Africa by Acquiring BNP Paribas’ Subsidiaries in Guinea and Burkina Faso Vista is now the largest bank in Guinea and operates in four countries including Sierra Leone, a strategic point of entry into the WAEMU market.
February, 2021
Vista bank entered Sierra Leone as a result of Vista Group that is pleased to announce that the Central Bank of the Gambia has formally approved the rebranding of First International Bank (Gambia) Limited to Vista Bank (Gambia) Limited and such changes also affected the First international Bank Sierra Leone Limited which was as a result of mismanagement.
March, 2021
Vista Bank Guinea was granted a €10m line of credit by the ECOWAS Bank for Investment and Development (EBID) to increase its capacity, support and medium-term funding for small and medium-sized enterprises (SMEs) and small and medium-sized industries (SMIs) in the Republic of Guinea and Sierra Leone.
Mission: To build a world-class pan-African Financial Institution that promote financial inclusion and fosters economic development of the continent.
Vision: Make banking and insurance an integrated services to satisfy our Customers financial needs and create values for all stakeholders using superior market knowledge, operational excellence and a culture of integrity.
Values: The core values of Vista bank includes services, Integrity, Innovation, Excellence, Respect, Performance, Governance and Accountability.

1.3   STATEMENT OF THE PROBLEM

The statement of the problem serves as the corner stone upon which the gross research plan is based, Baridam (1993: 22). It is quite convincing that a “sound banking system is a healthy economy”. As we have previously discussed, there was an up ward trend in the failure of banks in the recent decades. A tendency, which though is not peculiar to Sierra Leonens can impede the economy and affect the public adversely. This takes into consideration, the problems that are responsible for the banks which are as follows:

1. Fraud

2. Unqualified management staffing

3. Excessive overdraft facilities to customers

4. Lack of motivation to workers (incentives).

5. Excess liquidity i.e total operational failures

While the failures ahs effect on the economy at large, these are listed as follows;

i. Divestment: After a banks failure, instability comes which throws investors off balance and for this reason, the investors will retreat or withhold their investments

ii. Demand deposit: Commercial banks collect this from customers with this agreement to pay interest to the individuals and there by making or creating their own interest or profit by lending to borrowers fails to redeem the loans as when even though the banks had collected some collaterals from them (borrowers).

1.4 OBJECTIVE OF THE STUDY

The main purpose or objective of this research is

1. to conduct investigation on the causes of bank failures

2. To know the effect of bank failures on companies i.e (investors) in the economy

3. To explore and reveal the various failures of banks

4. To proffer solution and recommendations on the possible ways to solve the problems of bank failures in all sectors of the Sierra Leone economy

1.5 RESEARCH QUESTIONS

It is clear that a bank cannot fail without any sigh that means, that these are some other things that must have contributed in the failure of such organizations which we expect from the respondents to highlights us on them in this project: they are

i. What factors are responsible for bank failure in Sierra Leone?

ii. Does banks failure have any effect on the Sierra Leone economy?

iii. What corrective measure could be taken to the effect of bank failures on Sierra Leonen economy?

iv. What are the likely effects of bank failure to the other sectors of the economy?

v. What are the reactions of the individuals and stake holder/investors towards bank failure in Sierra Leone?

vi. How has bank distress affected the banking habit of the people in Sierra Leone?

1.6 STATEMENT OF RESEARCH HYPOTHESES

A hypothesis is a proposition that is stated in testable form and prediction of particular relationship between two or more variables.

Hypothesis

Ho: There is no relationship between bank fraud and economic development

Hi There is a strong relationship between bank fraud and economic development

H0: there is no strong relationship between poor bank financial management and distress in the banking sector.

Hi: Poor bank management leads to frauds and distress in the banking sector