Microfinance Banks In Nigeria Research Articles

Impact of Regulatory Influence on Financial Performance of National Microfinance Banks in Nigeria

While existing literature has acknowledged the pivotal role of regulatory measures in shaping the operational landscape of financial institutions, there remains a notable gap in understanding the direct consequences of such regulations on the financial performance of NMBs in Nigeria. This study explores the impact of regulatory measures, specifically sanctions, penalties, and Minimum Capital Requirement (MCR), imposed by the Central Bank of Nigeria (CBN) on the financial performance of NMBs. This research adopts an ex-post facto research design, using data from the past six years of seven operational NMBs. The Agency Theory and Pecking Order Theory provide theoretical frameworks to interpret these relationships. The study reveals that regulatory measures significantly influence the allocation of micro loans within NMBs, reflecting the alignment of managers’ interests with those of stakeholders. However, regulatory factors alone do not adequately explain variations in ROA, indicating the presence of complex and unexamined factors affecting financial performance. Individual regulatory variables, such as sanctions, penalties, and MCR, also do not have a significant multivariate impact on RMLT or ROA. The study recommends that Nigerian National Microfinance Banks (NMBs) should closely monitor and adapt to Central Bank regulations, particularly regarding sanctions, penalties, and Minimum Capital Requirement, despite the absence of a direct multivariate link to financial performance indicators; it also advises diversifying strategies to enhance Returns on Assets (ROA) and suggests further research for a deeper understanding of NMB sustainability dynamics.

Central Bank Regulations and the Financial Sustainability of National Microfinance Banks in Nigeria

This study examines the impact of Central Bank Regulations on the Financial Sustainability of National Microfinance Banks in Nigeria. The study employed the expost-facto research design. Data was collected from the central bank bulletins and the financial reports of the sample seven national Microfinance banks. The data collected was analysed using Multivariate Analysis of Variance (MANOVA). The findings derived from the empirical analysis revealed significant relationships between the Minimum Capital Requirement, and the financial sustainability indicators, including returns on assets (ROA) and returns on equity (ROE) and confirmed that the Minimum Capital Requirement imposed by the central bank has a significant impact on the financial sustainability of microfinance institutions. Based on the findings of the study, the following policy recommendations can be made; Policymakers and regulators should continue to enforce and monitor the Minimum Capital Requirement for microfinance banks. Adequate capitalization is essential for the financial sustainability and profitability of microfinance institutions. However, the capital requirement should be flexible enough to accommodate the specific needs and characteristics of microfinance banks, considering their focus on serving the underserved segments of the population. And Microfinance banks should prioritize maintaining an adequate level of capital to ensure their ability to generate returns on assets. This can be achieved through effective capital management strategies, including attracting additional capital from investors, optimizing internal capital generation, and ensuring efficient use of capital in productive activities.

Effect of Cyber Security on Business Sustainability of Listed Microfinance Banks in Nigeria

Purpose: In Nigeria, microfinance banks (MFB) face the burden of investing in cyber security to protect their databases, prevent monetary losses, maintain customer trust, and remain afloat in a competitive business environment. However, there are incessant cyber risks and attacks by criminals who gain undue access to the cyber-space of MFB and cause financial and non-financial loss.
 Design/methodology/approach: The objective of this quantitative study was to examine the effect of cyber security on the business sustainability of three listed, and most valued MFBs in Nigeria. The population of the study was 315 senior, medium and junior employees of three MFBs in Nigeria. As the target population was manageable, the research adopted a census. Data were collected using a semi-structured questionnaire, and the formulated hypothesis was analysed using multiple regression.
 Findings: The study found that cyber security has a significant and positive impact on the sustainability of MFB in Nigeria. Data availability account for the largest contribution to the sustainability of MFBs, followed by data confidentiality and data integrity. Employees in a MFB uphold that data availability, confidentiality, and integrity are pivotal elements of cyber security that influence the sustainability of their organisations in Nigeria. Given these results from the viewpoint of employees, MFBs are implored to regularly review and strengthen their risk management strategy and adopt a more integrative approach of human-centric cybersecurity, which brings technology and human elements together to address current and future cyber risks and build and sustain consumer trust in digital financial transactions. The implication of the study and areas for future research are highlighted.
 Paper type: Research paper

Impact of Capital Adequacy Risk on the Financial Performance of Microfinance Banks in Nigeria

Impact of Capital Adequacy Risk on the Financial Performance of Microfinance Banks in Nigeria

Determinants of Financial Depth: A Case Study of Mortgage and Microfinance Banks in Nigeria

Financial depth is an important components of financial development for which determinants have been examined by a number of extant studies, using  different kinds of financial depth indicators. This study aims at analyzing the factors that determine financial depth using the assets of mortgage and  microfinance banks as indicators of financial depth. The study employs data that span from 1992 to 2021, using Autoregressive Distributed Lag (ARDL)  model. It is found in the study that the policy of conversion of community banks to microfinance banks and the introduction of mortgage warehouse  fund have positive effects on microfinance and mortgage banks’ assets. Also, it is found that literacy rate has negative effect only on the microfinance  bank assets. Thus, this study recommends further deepening of the various segments of financial system, policy makers should strengthen the existing  policies and create the new similar policies and reforms with respect to each indicator of financial depth.

INSTITUTIONAL GOVERNANCE AND FINANCIAL PERFORMANCE IN NIGERIA’S NATIONAL MICROFINANCE BANKS

This study examines the effect of institutional governance on the financial performance of National Microfinance Banks (NMFBs) inNigeria for the period 2016 to 2021. Institutional governance was proxy by Board characteristics such as board size, board independence, board gender diversity, and audit committee size while financial performance was measured by the returns on assets (ROA). The study adopts a descriptive research design while panel multiple regression was used to test the hypotheses of the study. The study found that board size and board gender diversity have significant negative effects on financial performance while board independence and audit committee size have significant positive effects on the financial performance of the sampled banks. From the findings, the study concludes that institutional governance variables have a significant effect on the financial performance of the NMFBs in Nigeria. It is recommended that NMFBs should have a board with at least six non-executive directors to guarantee board independence. The study also recommends that an audit committee size of at least four will help to enhance the financial performance of the NMFBs. 

Machine Learning Approach to Credit Scoring for Fintech Start-Ups Using Micro Finance Banks in Nigeria

In the Nigeria FINTECH markets, lack of recorded credit history is a significant impediment to assessing individual borrowers' creditworthiness, deciding fair interest rates, and exposing this company to humongous risk. Thus, this research compares various machine learning algorithms (logistic regression model alongside Decision tree, Naive Bayes, Adaptive Boosting (Adaboost), Random Forests, K-Nearest Neighbour, and Gradient Boosting methods) on real micro-lending data of LAPO microfinance bank domiciled in Nigeria to test their efficacy at classifying borrowers into various credit categories. The results were validated with test metrics such as confusion matrix, accuracy, recall, precision, and area under the curve, which revealed that machine learning algorithms, can be used successfully to classify new customers into various risk classes, while some machine learning algorithm outperforms the others. Also, risk can be mitigated by ascertaining the creditworthiness of an individual applying for a loan. Finally, customers with no credit history should not be classified as high-risk customers. Generally, Random forest, Decision tree Classifier, and KN Neigbhour machine learning algorithms showed better performance with real-life data than others. The study also demonstrated that classifiers such as random forest algorithms can perform this task very well, using readily available data about customers (such as age, occupation, and gender). This presents an inexpensive and reliable means for FINTECH institutions around the developing world, especially Nigeria, to assess creditworthiness without credit history or central credit databases.

Credit Risk Management and Financial Performance of Microfinance Banks In Nigeria (2011 - 2020)

Microfinance banks holds the key to economic growth in developing economics and their financial health is sacrosanct to achieving this role.They provide small scale finances to small business enterprises. This study examined the effect of credit risk management on the financial performance of Microfinance banks in Nigeria. Published financial reports of six purposively selected Microfinance banks, covering the period of 2010 - 2019 were used as data for the regression model. The study employs descriptive statistics, Panel least squares regressions and correlation analysis to estimate the effect of the credit risk variables proxied by Non-performing loan ratio (NPLR), Liquidity ratio (LIQR) and Capital adequacy ratio (CAR) on the financial performance measured by Return on assets (ROA). Arising from the results of the Panel regression, the study therefore concluded that credit risk management proxied by NPLR and CAR have significant effect on the financial performance of the selected Microfinance bank in Nigeria proxied by ROA. Hence, Central bank of Nigeria should regularly monitor Microfinance bank’s compliance to relevant provisions of the law as it concerns debt accumulation.

Effect of Corporate Governance on Performance of ‎Microfinance Banks in Nigeria‎

Good corporate governance is perceived as a key component of sustainability for Microfinance ‎Banks (MFBs) as it is assumed to help them achieve their social and financial objectives. This study ‎examined the effect of corporate governance on the performance of MFBs in Nigeria. Corporate ‎governance was proxied by audit committees, board size and composition while Return on Equity ‎‎(ROE) was used as the measure of financial performance. Twelve MFBs were randomly selected ‎from South West, Nigeria. Secondary data was obtained from the annually published reports of the ‎selected licensed microfinance banks in Nigeria between ten years period of 2011 and 2020. Data ‎were analyzed using regression and correlation techniques.‎ The results demonstrated that board size correlates favourably and significantly with MFBs ‎performance, implying that larger boards improve bank performance. Board composition exhibited ‎a strong positive relationship with MFBs’ performance. Furthermore, audit committees correlate ‎positively and significantly with MFBs’ performance, demonstrating that audit committees are ‎important components of corporate governance. Finally, the study found that corporate governance ‎proxies (audit committees, board size, and composition) have a positive and significant effect on ‎MFB's performance in Nigeria.‎ Consequentially, this study suggests that an operational audit committee be established if MFBs’ ‎credibility, efficiency, competitiveness, and sustainability are to be ensured. MFBs should also ‎maintain a completely unbiased board composition to ensure optimal achievement of goals and ‎long-term profit maximization.‎

Dividend Policy and Performance of Listed Microfinance Banks in Nigeria

This research focuses on Dividend policy and its impact on performance of listed micro finance banks in Nigeria between2006 and 2021.The ordinary least square estimation technique and multiple regression method of data analysis was utilized..It was discovered that all the explanatory variables ie Return on Assets ,Liquidity ratio, Debt ratio and size of banks did not significantly impact Dividend Policy surrogated by Dividend Payout within the period of the study .It was therefore suggested that micro finance banks should increase dividend payments to its shareholders and also expand their branch network .The Central Bank of Nigeria is also advised to step up its supervisory role by plugging all loop holes through which liquidity is being depleted illegally by some of these micro finance banks.

Challenges Hindering Islamic Microfinance Banks’ Sustainable Financial Inclusion: A Case of Al-Hayat Microfinance Bank in Ogun State, Nigeria

Microfinance is regarded as an effective technique of poverty alleviation since it provides access to financial resources that can assist in poverty reduction by increasing financial involvement and empowerment. However, despite the fact that microfinance banks account for the vast bulk of the market in Nigeria, with over 800, their contribution to the country’s economy is less than 1%. Additionally, the primary objective of poverty eradication has not been accomplished. Thus, existing research has positioned Islamic microfinance institutions as a viable tool for poverty alleviation in Nigeria. However, Islamic microfinance banks in Nigeria continue to witness minimal development. This research investigates the challenges hindering the development of Islamic microfinance banks in Nigeria. Semi-structured interviews were used to collect data for this study. In addition, data reduction, coding, integration, and visualisation steps are implemented to analyse data effectively. The finding shows that several regulatory issues, such as licence procedures requiring paid-up capital, are some challenges. Likewise, awareness, misconceptions, and acceptance remain significant hindrances faced by IMFBs in Nigeria. Additionally, IMFBs face some in-house challenges, such as a lack of Islamic fintech, convenient access to the unbanked community, and human capital. Consequently, the study recommends that stakeholders in the Nigerian financial system launch public awareness campaigns about the significance of Islamic microfinance banks in promoting financial inclusion and reducing poverty.

Impact of Deposit Money Banks on Poverty Reduction: A Focus on Microfinance Banks in Nigeria

Impact of Deposit Money Banks on Poverty Reduction: A Focus on Microfinance Banks in Nigeria

Organizational climate and employee engagement of micro-finance banks in South-East, Nigeria

Abstract Purpose: The purpose of this study is to examine the relationship that exists between organizational climate and employee engagement in Microfinance Banks in South-East Nigeria. Research Methodology: The study adopted a Survey Research Design and the target population consisted of 3875 employees of all the Microfinance Banks in South-East Nigeria while the sample size was six hundred and eighty-seven (687) employees of the 31 selected banks. A simple random sampling technique was adopted by the study and a structured questionnaire was used in data collection and was analyzed by using Simple Regression Analysis at a 5% level of significance. Results: The findings indicated that there is a significant relationship existing between Career Development Climate and Employee Commitment in Microfinance Banks in South-East Nigeria (r = .961; R-Square = .923; p-value<.05) and that there is a significant relationship existing between Teamwork Climate and Absorption in Microfinance Banks in South-East Nigeria (r = .989; R-Square = .979; p-value<.05). Limitations: Most of the banks used in the study are state-based banks, thereby, limiting how the work would be generalized if it had used national-based microfinance banks. Contribution: this work contributed to the already existing body of knowledge in the area of organizational climate and employee engagement, but brought in empirical findings to back up the relationship between the variables in microfinance banks in Nigeria.

Enterprise-Wide Risk Management and Risk Governance of Microfinance Banks in Nigeria

Purpose: Proactive risk management is indispensable to the long-term growth and sustainability of a business, however the practice of enterprise-wide risk management (EWRM) among microfinance banks is limited by its knowledge. Hence, the motivation of this study to examine the effect of current practices of EWRM on risk governance in MFBs in Nigeria. Design/Methodology: The study adopted survey research design to define the structure and strategy of the study. Targeting microfinance banks in the north east region of Nigeria, 222 MFBs were selected as at 31 st December, 2020. The required data were collected from respondents using structured questionnaire and financial statement of the banks. The data collected were analyzed using both descriptive and inferential statistics. Findings: The analyses of the study revealed that board of directors’ oversight, human resources competence, internal audit effectiveness, and top management commitment have positive and significant effect on risk management effectiveness of the microfinance banks in Nigeria. Furthermore, regular risk compliance was found to have positively moderates the relationship between human resource competence and risk management effectiveness, and the relationship between top management commitment and risk management effectiveness. However, the results indicates that regular risk management negatively moderates the relationship between internal audit effectiveness and risk management effectiveness and the relationship between board of directors’ oversight and risk management effectiveness. Implications: The current enterprise-wide risk management practices among MFBs in the North East Nigeria has a positive and significant effect on risk governance of the banks, which invariably enhance the performance of the banks. Furthermore, the internal control mechanism instituted by the regularity authority and the Board of Directors has enhance EWRM practices and MFBs performance. Hence, the study recommended the effective implementation of CBN Risk Management Framework for Microfinance Institutions to assist the MFIs identify their risk exposures with a view of monitoring and controlling them.

Determinants of Financial Sustainability for Microfinance Institutions: Lessons for Islamic Microfinance Banks in Nigeria

Islamic microfinance institutions play a major role in the provision of financial services to the poor and underprivileged through non-interest, equity-based products and services. To achieve these critical objectives, however, they need to be financially sustainable, which is threatened by the current economic and financial crisis caused by the Covid-19 pandemic. The objective of this paper is to review the determinants of financial sustainability of microfinance institutions with a view to drawing lessons for Islamic microfinance banks in Nigeria. The paper utilized the literature review methodology to synthesize research findings in the area. The review revealed that the major determinants of financial sustainability of microfinance institutions are the capital structure, asset size, and financial innovation. Others are good risk management and corporate governance frameworks. The paper thus recommended that Islamic microfinance institutions in Nigeria should maintain a robust capital structure that relies more on equity, a lean but diversified Board, and utilize more technology-based services. Most importantly, they should emphasize profit and loss sharing principles in their operations.

Effect of Corporate Governance Board Characteristics on Performance of Microfinance Banks in Nigeria.

Effect of Corporate Governance Board Characteristics on Performance of Microfinance Banks in Nigeria.

COVID-19 and Microfinance Banks in Nigeria

This study investigated the effects of COVID-19 pandemic on the activities and performance of microfinance banks with special focus on South West Region of Nigeria. Data were collected from 100 heads of department selected from 20 randomly picked microfinance banks. Data were analyzed with simple percentage and regression technique. It was discovered that, COVID-19 impedes the activities of microfinance banks through loans repayment, deposit mobilization, customers, patronage, operational efficiency, and nonperforming loans. The study concluded that, COVID-19 imposed constraints on the activities of microfinance banks which negatively affect financial performance. It was suggested that, there is need for quick response of regulatory authorities to microfinance banks. Financial and regulatory supports should to stop the declining activities of microfinance banks because microfinance banks play supporting role to small business and less privilege in the economy. There is need for the digitization of microfinance banks' activities to cushion the negative effects of future pandemic. Periodic review should be undertaken to monitor and uncover threats in the loan portfolios, liquidity position, and financial statements of MFBs for quick policy initiatives and innovations.

Competitive Intelligence and Performance of Microfinance Banks (MFBs) in Nigeria

The sustainability issues faced by microfinance banks (MFBs) in Nigeria necessitated this study to examine the effect of competitive intelligence on performance of MFBs in Nigeria. The study adopted the use of survey research design. The study population was made up of 112 employees of 28 MFBs. Primary source of data collection was deployed (questionnaire) and reliability was done using Crombach Alpha with a reliability statistic of .899. Descriptive statistics (mean) and inferential statistics (regression analysis) at 5% level of significance was adopted for data analysis and test of the hypothesis respectively. The result revealed that strategic intelligence indeed had a statistically significant relationship with the performance of MFBs in Nigeria (r =.863; R-Square = .746; F = 284. p-value < 0.05). It was, therefore, concluded that the environment of business is increasingly becoming more dynamic by the day, hence, the need to keep an eye on it to stay relevant in business.

Appraisal of the problems affecting microfinance banks in emerging economies and the mitigating factors: Nigeria’s experience

This study appraised the problems of microfinance banks in Nigeria and evaluated the mitigating factors. Survey research design through the administration of structured questionnaire was adopted for data collection. The targeted population was 250 microfinance banks operators and micro, small and medium entrepreneurs. The respondents validly returned 223 copies of the questionnaire. Descriptive statistics like table, mean, standard deviation and percentages were used for data analyses. The findings revealed that high operating and financial expenses (99.6%); low revenue base (99.6%); lack of effective corporate governance (99.6%); lack of standard and uniformity in financial transactions (99.6%); insiders’ abuse (99.6%); and ineffective monitoring of the allocated funds to ensure the utilisation as intended (99.6%) are highly critical among the twenty identified problem confronting microfinance banks in Nigeria. The results also showed that majority of the respondents believed that among the twenty identified mitigating factors to the problems of MFBs in Nigeria, timely preparation of financial statements (99.6%); adoption of cost efficiency mechanism (99.6%); investing more on information technology for enhancement of operations (99.6%); standardisation of the quality, experience and qualifications of management of microfinance (99.6%); and effective background check of staff and customers are the most important. The study, therefore, recommends the need for government to evaluate these findings and timely deploy the mitigating factors for the enhancement of the growth of microfinance banks in Nigeria.

Microfinance banks and growth of micro, small and medium enterprises in emerging economies: Evidence from Nigeria

This study examined the nexus between microfinance banks and the growth of micro, small and medium enterprises in Nigeria. Research design method through a self-administered questionnaire to respondents was adopted for the study. The respondents comprise the microfinance banks’ management and staff and micro, small and medium business entrepreneurs, in Lagos State, the commercial hub of Nigeria. The targeted population of this study was 250 with 223 validly responded. The study tested two hypotheses using logit regression analysis. The hypothesis one shows that the null hypothesis is rejected with the acceptance of the alternate that the microfinance banks in Nigeria channelled their resources to the intended target (t-calculated of 8.181 is greater than t-tabulated of 0.000 at 5% level of significance). The findings further showed that a significant positive relationship exists between microfinance banks, proxied by Small Scale Financial Services (SSFS); Financial Sustainability (FST); Absence of Assets-based Collateral (AAC); and Advisory Services (ADS) and the growth of micro, small and medium enterprises in Nigeria. This implies that any upward movement in the services of microfinance banks will enhance the growth of MSMEs. This is further affirmed with the t-calculated of 6.540 > t-tabulated of 0.000 at 5% level of significance. Thus, rejecting the null hypothesis two and accepting that there is significant positive link between microfinance banks and MSMEs in Nigeria. This study then recommended among others, the need for government to put in place, a strong and more effective team comprises of all stakeholders, to ensure that the microfinance banks do not derail from their primary responsibility of sustaining funding for the MSMEs.