The statement that “Credit Administration as a tool of Credit Management is unnecessary” is fundamentally flawed, as credit administration plays a critical role in ensuring effective credit management, compliance, and risk mitigation in banking. In the Ghanaian context, governed by the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) and BoG directives like the Risk Management Directive, credit administration is essential for operational efficiency and preventing failures seen in the 2017-2019 banking cleanup. Below, I discuss why credit administration is necessary, countering the statement with structured arguments and practical examples.

1. Definition and Core Functions of Credit Administration (4 marks)
Credit administration involves post-approval processes like documentation, disbursement, monitoring, and recovery of loans. It ensures that credit decisions are implemented correctly, contrasting with credit management’s broader scope of appraisal and approval. In Ghana, BoG mandates segregated duties under the Corporate Governance Directive 2018 to avoid conflicts, making administration a distinct yet integral tool. Without it, approvals remain theoretical, leading to risks like those in collapsed banks (e.g., Capital Bank, where poor administration contributed to NPLs exceeding 30%).

2. Risk Mitigation and Compliance (6 marks)
Credit administration mitigates risks by monitoring covenants, collateral, and borrower performance. For instance:

• Documentation and Perfection: Ensures securities are legally enforceable under Ghana’s Borrowers and Lenders Act, 2020 (Act 1052). Poor administration led to unenforceable collaterals in the cleanup era.
• Ongoing Monitoring: Tracks early warning signs like covenant breaches, aligning with BoG’s Liquidity Risk Management Guidelines. Ecobank Ghana uses digital tools for real-time monitoring, reducing NPLs from 20% in 2020 to under 10% by 2024.
• Regulatory Compliance: BoG requires periodic reviews and reporting; non-compliance can result in fines, as per Act 930. Administration ensures adherence to Basel II/III principles adapted in Ghana, preventing systemic risks.

The statement overlooks these, as unchecked lending without administration invites fraud and defaults.

3. Operational Efficiency and Profitability (5 marks)
Administration streamlines operations by managing disbursements and recoveries, optimizing cash flows. In SME lending, common in Ghana, it facilitates timely repayments, boosting profitability. GCB Bank’s centralized administration units have improved recovery rates post-DDEP, where fiscal strains increased defaults. It also supports data analytics for better credit strategies, integrating with fintech under Act 987 for efficient processes. Without it, banks face inefficiencies, eroding margins in a high-interest environment (BoG policy rate at ~29% in 2024).

4. Counterarguments and Limitations (3 marks)
Proponents of the statement might argue that advanced AI or integrated systems make administration redundant, but in Ghana’s context, with uneven digital adoption, human oversight remains vital to handle nuances like cultural factors in personal lending. Over-administration can burocratize processes, but this is mitigated by BoG’s efficiency guidelines.

5. Conclusion on Necessity (2 marks)
Credit administration is indispensable for robust credit management, ensuring decisions translate to actions while safeguarding against risks. Ghanaian banks like Stanbic, which strengthened administration post-cleanup, exemplify its value for resilience and profitability. Dismissing it as unnecessary ignores regulatory and practical imperatives.

In summary, the statement is incorrect; credit administration enhances credit management holistically.