An Investigation into Delays in Lending Request Handling

This report delves into the critical issue of delays in lending request handling processes, focusing on the banking and finance sector. It examines the theoretical framework, exploring the impact of operational inefficiencies on customer satisfaction, profitability, and the overall success of small and medium enterprises (SMEs). The analysis covers various aspects, including the stages of loan approval, the role of technology, the importance of employee performance, and the significance of customer feedback. The report highlights the need for banks to streamline their processes, adopt new technologies, and improve employee training to reduce delays and enhance customer experience. It emphasizes the interrelation of process, cost, and technology issues and suggests strategies for banks to overcome these challenges and remain competitive in the market. The study also investigates the impact of policy and procedures on delays and stresses the importance of effective loan policies and employee productivity.

DELAYS IN LENDING REQUEST
HANDLING PROCESS
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Table of Contents
Chapter 3: Theoretical framework for diagnosis.............................................................................3
3.1 Introduction......................................................................................................................3
3.2 Theoretical background to the problem............................................................................3
3.3 Framework of the study....................................................................................................8
3.4 Description of the techniques.........................................................................................10
3.5 Summary.........................................................................................................................11
Reference.......................................................................................................................................13
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Chapter 3: Theoretical framework for diagnosis
3.1 Introduction
After the introduction section one of another chapter of dissertation is known as literature
review which is considered as most critical part of the thesis. Under this, chapter different
scholar views and opinions will be presented in relation to the selected subject matter, All the
information presented in this section is collected from secondary sources which act as basis of
further study is being carried out. Therefore, with the help of this researcher can easily fill the
gap which is left by previous researcher in their study. This chapter will discuss the theoretical
background which pertains to the main issues which is faced by firms. Therefore, this section
will provide an insight to the reader of the selected topic and nature of the problems. It also leads
to set a base for the project leaders for defining the theoretical framework of the selected project.
In addition to this, different techniques which can be used as a part of the research for solving the
problem will be explained. At last of this chapter summary will be provided in brief.
3.2 Theoretical background to the problem
3.2.1 Delays in handling loan application process models banking and finance
According to the view of Gutiérrez-Nieto, Serrano-Cinca and Camón-Cala, (2016), in a
competitive marketplace required that companies to provide quality products and services with
the higher value in respect to capture market share. In order to accomplish this firm should
actively measure or improve their operations efficiency in their entire value chain. Efficiency is
known as core about producing more and better products and services with the use of same less
resources. One of the main task of banks is to use members accumulated saving in respect to
grant loans to same members. The loan is provided from the members collected savings or
outside funds which are sources by the banks. According to the view of Sousa, Gama and
Brandão, (2016) there are two types of loan which are common in banking and finance sectors
that are short term and long term. Short terms loan are those which can be replaceable within the
year and they are generally for school fees etc. however, these loan do not used for enhancing the
overall earning capacity.
Nikolova, Rodionov and Mottaeva, (2016) stated that in respect to overcome unavoidable
loss of scale and cost issues, banks should plan innovative operating models. Further imaginative
method is need to deliberate such as cut costs and control on a broken value chain.
Issues related to loan approval
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In present time there are many small medium business who are excepting new application
ad new request for business related activities for processed faster that other companies in order to
secure their business interest related to profits and revenues. There are many banks who are
facing negative as compared to other banks who have adopted new technology for making
improvement in their operational services. there is huge delay and barriers in handling process of
their new day to day business requirements requires which results in losing of their existing
customers. Inter related profit, income fee, drop of new customers and lose of cross selling
income. DeYoung, Gron and Winton, (2015) stated that weak operational model lead to the
downfall of small medium banking. For SME banking to accomplish success it is important that
they avoid issues due to which customers satisfaction is getting affected.
Peters and Panayi, (2016) argued that main obstacles for small medium banking are high
handling cost, weak SME operational process and poor credit facilities etc. this all issues are
interrelated directly and indirectly with the m losses, increasing cost and also put negative image
of the bank in market. Therefore, these all can be categorised in the process, cost and technology
related issues. If there is weaker SME operational process then it can become main reason for
many of the issues which are faced by bank divisions. According to the opinion of Mocetti,
Pagnini and Sette, (2017) weaker operational process of the bank can affect the standard
turnaround time while serving a customer.
There are few key elements which lead to directly impact the organisational efficiency
level such as use of technology, design of process, corporate culture availability of timely and
accurate process data. etc. Autor said that to have timely and accurate process data is considered
as one of the pillars of an efficient organisation. If it is not easy to express what are in terms of
numbers it is not easy to know much about it then it will become tough to control it. Thus,
process data helps in permitting for active monitoring and measuring appropriated decision
Improving operational efficiency help in having a strong culture of responsibility or help in
increasing it. In order to find out operational opportunities organisation need to critically assess
their performance at the same time disregarding the threat of negative implications. Cost
efficiency is known as the key for emerging some new operating models.
Dang, Gorton and Ordonez, (2017) stated that SM banks required to be flexible enough
in respect to function successful in this new environment. Hence, banks should componentize
operating models which are reinforced by flexible and configurable architecture.
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Obtaining credit approval from lenders
According to the view of Van der Vliet, Reindorp and Fransoo, (2015) to obtain loan
approval is not easy process as there are wide range of stages which are involved in it. Some of
the important stages and types of approval are known as indicative, pre-approval or in principal,
conditional approval etc. furthermore there are few types of mistakes due to which company
have to delay in loan approval process. Due to lots of loan application small medium banks
forget to review basic personal and contact information etc. Madrian, Hershfield and Rick,
(2017) stated that along with this it is important for customers to provide personal details
whether it is mentioned in the process or not. Each and every document need to be provide on
time as delay in documents can affect entire loan approval process.
As per the opinion of Citron and Pasquale, (014) building up another operational model won't, in
itself, position a bank to prevail in the new market. The working model is just piece of the test.
Regardless of how vigorous or modern the working model might be, if the usage procedure does
not have a powerful administration system, driven by solid, focal outline specialist, the
operational model will never completely accomplish what it was intended for. The genuine test is
in how successfully the working model is actualized
Similar to this Rostamkalaei and Freel, (2016) state that executing another operational model
may mean presenting another innovation foundation, moving towards new procedures, or
changing the operational structure of the business – real modification that should be strapped
through the bank adequately, without trading off the goals of new model.
According to the view of Metawa, Hassan and Elhoseny, (2017) there is no single method
that can help in successfully transforming of banks operational model. The approach of
transformation is depended on the goal and it can easily improve customer experience. Further it
helps in improving customer experience rationalise process and also reduce cost in the back-
office operations. In banks different types of approaches are adopted and company suggesting a
best practice for transforming the bank operational model.
At last, numerous banks are troubled without-of-date IT frameworks. As rivalry warms
up to win back clients and increment interior proficiency, frameworks will require overhauling
no matter how you look at it. Numerous banks are evaluating centre framework moves up to
convey greater adaptability and configurability to their item improvement and estimating
capacities. Innovation is additionally entangled by the quick rate of progress and the presentation
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of new channels and advances, for example, portable keeping money and online networking. The
sheer pace of progress recommends that IT designs will require critical re-building to help an
entire re-working of the conventional managing an account working model.
Agarwal, and Ben-David, (2018) argued that 360-degree feedback help in including an
evaluation of the employee’s character and leadership skills. A rating scale is known as most
common used performance review method. It is based on a set of employers developed criteria.
It leads to includes traits, behaviours, competencies and completed projects on the basis of which
employees are judged. Further in this process employees are assigned for each criterion a
numerical value basically ten or may be five-point scale. In the small medium banks there is
increase in the customers complaints, delay in approval process etc. hence it is essentials for
banks to evaluate performance of employees and provide them training facilities accordingly. It
will help banks in making improvement in their way of working and they can also modify their
operational model for providing better performance.
Madrian, Hershfield and Rick, (2017) stated that complaints of customers lead to put bad
impacts on small medium banks. If banks lead to put delay in new proposals then it lead to
reduce new customers numbers. Further Delay in Daily Request approvals lead to impact
Customer Disappointment and losing Customer to competitors. Customer interest accumulation
may be refunded by bank. In order to reduce negative impact on the firm company should take
feedback from their customers and try to modify products and services accordingly. Van der
Vliet, Reindorp and Fransoo, (2015) argued that with the help of feedback company can bring
changes in its operational system so that customers daily request can be approved on time.
Customers feedback lead to play significance role within the firm in order to understand different
changes which company required. Further it helps in identifying new technologies which can be
adopted by them for making improvement in their regular system. Dang, Gorton and Ordonez,
(2017) argued that company can easily improve its functions and create positive image in market
through enhancing skills and knowledge of employees. It can be done through providing training
and development facilities to employees so that customers request can be handled in an effective
manner. Customers back process transformation help in re-designing end to end process which is
based on client experience. Using structured, consistently methodology to drive. Hence it can be
said that customers feedbacks play important role for company in respect to make improvement
in the way of working. Loan approval process is not easy task because lots of verification need to
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be done on time and customers are required to provide large number of information for obtaining
loan. Hence, adoption of new technologies by banks who are operating their business at small
scale provide lots of supports and benefits.
According to the view of Metawa, Hassan and Elhoseny, (2017) it is analyzed that time
delay in small and medium credit application request process occur due to policy and procedures.
It is identified that in entire credit application process there are various formalities which are
required to be fulfilled as per provided in policies. Due to this reason Doha bank not able to carry
approve loan on time. This lead to increase dissatisfaction level and complaints from customers
side. It is role and responsibility of the board and management to maintain all the adequate level.
Further all information related to the policy and procedures. Risk is inevitable and bank can
reduce risk with the development of and adherence to effective loan policies and procedure.
DeYoung, Gron and Winton, (2015) stated that employees are important part of the bank.
As the whole process of approving the loan move from them to higher authority in respect to
gain approval. It is important for Doha bank to focus on improving employee’s productivity in
order to reduce the chances of delay in lending process. Duchin and Sosyura, (2014)explained
that there are different motivational tools which can be used by firm in respect to increase
employee’s productivity. It is considered as strong cause of time delay in mall and medium credit
applications request process. Along with this, it is essentials for banks to evaluate performance of
employees and provide them training facilities accordingly. It will help banks in making
improvement in their way of working and they can also modify their operational model for
providing better performance.
According to the view of Lee, Sameen and Cowling, (2015) there are many SME banks
who are using old method for approval of loan due to which in loan approval lots of time is
consumed by bank. However, Madrian, Hershfield and Rick, (2017) argued that the time
consumed for approval of a personal loan is depended on the authenticity of the information
which is provided by customers. It is important for small medium banks to adopt new
technologies in order to reduce the processing time of loan approval. There are wide range of
services which are offered to customers in respect. It is important for company to focus in
improving their operational process which will help in reducing the chances of delay in process.
Along with this it is important to provide whole details to customers at the time when they apply
for credit so that without any barrier entire process can be completed. Vliet, Reindorp and
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Fransoo, (2015) stated that turnaround time is the time for the application of a loan by a customer
till the final disbursal of the loan amount. There are most of the customers who want to connect
the dots between online and offline option in order to deliver suitable and reliable services.
Online loan process approval is one of the effective technique which can be used by banks so
that they can easily make changes in their way of working.
3.3 Framework of the study
The study is based on impact of lending process of bank on customer satisfaction. From
the above discussion, it has been analysed that there are various factors which leads to delay in
lending process bank such as, policy and procedure, employee productivity, processing time.
Lending loans is the foremost and critical activity of banking institution. It is mode of generating
income for with the helps of debt contracts, and bonds. Apparently, for the customers, it is the
best source of funding and lowest interest rate. Further, the lending procedure of bank is based
on collection of interest and granting of loan as per client requirement (Mistrulli, 2011). Loan
can be of short term which is derived by institution according to consumer requirement. The
lack of management over credit an operational function has impacted the image of Doha bank
among its stakeholders. It is necessary for the bank to ensure safe and effective lending process
because bank is the foremost source which enable customers opportunities to attain their goals
and objectives.
Conceptual framework
Turnaround time Delays in Small and
medium Credit application/requests
processes ( Banking)
Policy and procedure
Employee productivity,
Processing time.
Policy and procedure
Polices and procedure of small medium size bank are complex for costumers as the banks
are strict with policies of agreement which sometimes becomes for the customers to understand.
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Moreover, the procedure are time consuming because small medium size firm takes time to
process the loan request the ban first secures the guarantees. Lengthy polices and procedure to
mitigating credit risk causes time delay and processing loan request. However, operational
process of banking institution plays a vital role in deriving bank ability to process loan in the
shortest time period. Effectiveness of operational process is regulated with policies and
procedures where the focus of bank is on deriving client ability to payback. Every bank has
specific process of mortgaging loan which comprise, analysis of prospective loan client,
evaluating individuals sincerity and character which derives one's ability to repay. This reduces
the risks of credit management (Wagner, 2010). However, to manage effectiveness in policies
and procedure, small and medium size bank ensures customer record before granting loans.
Moreover, loan granting procedure of bank aim at evaluating client financial condition and
compliance with loan agreement on the basis of terms and condition.
Apparently, polices are procedure of small size banks are designed to make proper check
over lending requests which helps in managing effectiveness in banking services but is time
consuming. On the other hand, compliance with polices and procedure is mandatory requirement
employees of bank as well as customers which delays in managing loan request.
Employee productivity
Workers productivity is referred to individual working efficiency in term of final output
(Qian, Strahan and Yang, 2015). In accordance with analysis it can be said that employee
productivity is directly proportional to operational efficiency of banking institution. In
accordance to this, it can be said that increasing work pressure on employees leads to mis
management and causes delay in management of loan request. Further, it is necessary f the small
medium size bank to reduce paper work which will helps in maintaining categorised record of
client request and interest payments. Digitalisation of work management is the source which can
helps the firm in improving employee productivity with timely management of loan request.
Processing time
It is the key concern of small banking institution because loan request is processed only
after customer check and assessment if loan grant. In this the aim of bank is to evaluate clients
overall information for processing loan. Moreover, the bank takes time in compliance with
process and procedure which leads to delay in processing. Delay in process of loan request
increase the risk of losing corporate reputation of bank which is directly concerned with
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functioning of banking institution therefore, it is essential for the banks to determine specific
time for processing loan request which will assist the institutions in maintaining effectiveness in
lending services (DeYoung, Gron and Winton, 2015). However, it can be said that processing
time management can be done by small bank by increasing operational efficiency which will aid
the organisation in improving process for originating and servicing loans request, reduction in
cycle time and eliminating paper work.
3.4 Description of the techniques
There are three techniques which will be implemented to set improvement in three core
causes of delay in loan request of clients which are as follows:
 Fish borne diagram to problems in policies and procedure: Fishbone diagram is
known as product design and quality defect prevention for finding out potential factors
related to causing an overall effect. It is analysed that Doha banks is operating its
business at small scale. Further issues at present which are faced by them are such as
delay in loan approval process, increase in customer complaints etc. from the fishbone
diagram it is analysed that company is facing issue because of weak operational model
due to which they are not able to carry out their entire process in an systematic manner.
However, with the help of visual representation of fish-borne diagram, the banking
institution will be able to determine problems in polices and procedure which make
lending process lengthy (Mocetti, Pagnini and Sette, 2017). With the help of this tool the
firm will be able to simplify polices and procedure in order to make services convenient
for management as well as for clients.
Furthermore, root causes analysis helps in revealing the key relationship between different
variables and the possible causes to provide additional insights into process behaviour. Thus,
with the use of root causes analysis technique it will become easy to make improvement in
operational process of the business and carry out loan approval process in an effective manner.
 Interview to set improvement in Employee productivity: In accordance with employee
productivity which causes delay in lending request, it is necessary for the bank to
implement the use of interview conformation collection method. In this the organisation
collection employees feedback on business process. Interviewing employees is the
approach which helps the firm in analysing need of improvement in functions and
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services. Like conducting one to one open ended interviews with workers will help the
management in deriving effectiveness of operational efficiency of institution.
It is the source which will helps the firm in analysing problems faced by individual workers
which are the core reason on lacking efficiency in business functions. Further, it helps the in
analysing need of managing changes as per employee perspective (Disyatat, 2011). The focus of
interview will be on determining cycle time taken by employees to process loan request. Further,
one to one engagement with workers will be effective as it will assist in evaluating areas of
errors and service quality which play a vital role in managing timely loan request.
 5W1H technique will be implemented to evaluate problems in processing time: 5
Whys is an interrogative technique which is focused on analysing reasons of problem.
The focus f technique to derive root cause of the problems there Doha bank can
implement the use of technique to determine core reason behind delay in processing of
loan request. With the helps of 5 why the firm will able to gather 5 areas of improvement
which can be beneficial in managing operational efficiency in blending process.
Apart from this, 1 H of the strategy will assist in determining strategy to improve process like,
digitalisation of banking functions, simplifying policies and procedures, or implementing use of
credit risks mitigation strategies etc. (Bellucci, Borisov and Zazzaro, 2010). Analysing how of
the problem is the approach which derives instant solution to problem.
3.5 Summary
This chapter explained the theoretical background for identifying the performance gaps
left in the company and the framework of the study which is related to the project components.
Different techniques used in this chapter as a part of the research is described in order to resolve
the issues faced by company. Throughout this chapter it has analyzed that loan approval process
is not simple task as because there are various steps which need to be fulfilled. One of the main
task of banks is to use members accumulated saving in respect to grant loans to same members.
The loan is provided from the members collected savings or outside funds which are sources by
the banks. main obstacles for small medium banking are high handling cost, weak SME
operational process and poor credit facilities etc
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