ProjectClue.com WhatsApp or Call Us

projectclue whatsapp icon07030248044

Project Topic:

FACTORS DETERMINING LOAN REPAYMENT IN MICRO-FINANCE BANKS IN NIGERIA

Project Information:

 Format: MS WORD ::   Chapters: 1 - 5 ::   Pages: 72 ::   Attributes: Questionnaire, Data Analysis,Abstract  ::   1,774 people found this useful

Project Department:

BANKING FINANCE UNDERGRADUATE PROJECT TOPICS, RESEARCH WORKS AND MATERIALS

Project Body:

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY        

The practice of microfinance in Nigeria is culturally rooted and pre-dates modern banking era. The traditional microfinance institutions provide access to credit for the rural and urban, low-income earners. They are mainly of the informal Self-Help Groups (SHGs) or Rotating Savings and Credit Associations (ROSCAs) types. Informal financial groups exist in all parts of the country and they are in form of traditional groups that work together for the mutual benefits of their members. The micro and small business entrepreneurs in Nigeria rely heavily on the informal financial market for funding. This condition provides a platform for informal institutions to attempt to fill the gap usually based on informal social networks. In many countries, people have relied on the mutually supportive and benefit-sharing nature of the social networking of these sectors for the fulfillment of economic, social and cultural needs and the improvement of quality of life (Portes, 1998).

In order to enhance the flow of financial services to micro, small and medium enterprises in the country, the Federal

Government of Nigeria (FGN) launched the new Microfinance Policy, Regulatory and Supervisory Framework

(MPRSF) in December, 2005. The MPRSF aimed among other things to bring the existing informal institutions under supervisory purview of the Central Bank of Nigeria (CBN). By doing this, monetary stability in the country is enhanced and financial infrastructure of the country is expanded to meet the financial requirements of the Micro,

Small and Medium Enterprises (MSMEs) in the country (CBN, 2005). The policy is also meant to address the problem of lack of access to credit by small business operators.

According to CBN (2005), “microfinance is about providing financial services to the poor who are traditionally not served by the conventional financial institutions’. There are three features that distinguish microfinance from other formal financial products. These are: (i) the absence of asset-based collateral; (ii) the smallness of loans advanced and or savings collected, and (iii) ease of operations.

Microfinance, according to Otero (1999) is “the provision of financial services to low income poor and very poor self-employed people”. These financial services include: small loans, savings, current, financing small business for the active poor both in rural and urban areas of the country. Microfinance is a term used to refer to different methods for giving poor people access to financial services. Microfinance is about providing of timely, affordable, diversified, and dependable financial services to the active poor which otherwise would have little or no access to financial services. It is a financial intervention that focuses on the low income group of a given society.

Credit risk evaluation and lending decisions made in the past by lending institutions put a lot of emphasis on security than other similar important considerations (Santomero, 1997). There are instances in the past when it was easier to get a loan from a financial institution as long as the borrower had security to be charged rather than the ability to service the loan. Cash flow projections, viability of the project, character of the borrower, previous loans completion and ability to repay were not considered as important. This way a number of lending institutions ended up with many loan defaults due to incomplete, poor and unprofessional credit risk assessment and valuation particularly using all the 5C’s of credit appraisal model that is: capacity, credibility, capital, collateral and character. Effective loan portfolio management begins with oversight of the risk in individual loans Sundarajan (2007). Prudent risk selection is vital to maintaining favorable loan quality. Therefore, the historical emphasis on controlling the quality of individual loan approvals and managing the performance of loans continues to be essential.

It seems appropriate for any discussion of risk management procedures to begin with why these firms manage risk. According to standard economic theory, managers of value maximizing firms ought to maximize expected profit without regard to the variability around its expected value. However, there is now a growing literature on the reasons for active risk management including the work of Parrenas (2005), Sundarajan (2007), and Fallon (1996) to name but a few of the more notable contributions.

1.2     STATEMENT OF THE PROBLEM

Controlling non-performance of loans is very critical for both the performance of an individual bank and the economy’s financial environment. Adeyemi, K. S., (2008) identified some of the challenges which microfinance institutions face that impinge on their ability to perform to include; undercapitalization, inefficient management and regulatory and supervisory loopholes. To these, Mohammed, A. D. and Hassan, Z. (2009) added usurious interest rates and poor outreach. Further buttressing the challenges facing microfinance banks, Nwanyanwu, O. J.,(2011), identified diversion of funds, inadequate finance, and frequent changes in government policies, heavy transaction costs, huge loan losses, low capacity and low technical skill in the industry as impediments to the growth of this subsector. These constraints contributed to the failure of previous microfinance banks.

Waruinge (2009) did a survey of factors contributing to non-performance of loans among commercial banks in Nigeria and established that economic factors and poor credit management greatly contributed to high portfolio of nonperforming loans among commercial banks in Nigeria. These studies concentrated on microfinance enterprises which have a different operational and marketing strategies from those employed by microfinance banks.

1.3     OBJECTIVES OF THE STUDY  

The general objective of this study is to examine the factors determining loan repayment in microfinance banks in Nigeria, a case study of Idemili North of Anambra State. The specific objectives include the following:

1.     To examine the influence of socioeconomic factors on loan repayment among customers of microfinance banks in Nigeria.

2.     To determine the effect of lenders’ factors on loan repayment among customers of microfinance banks in Nigeria

3.     To find out the extent to which borrowers factors affect loan repayment among customers of microfinance banks in Nigeria.

4.     To establish the effect of loan factors on loan repayment among customers of microfinance banks in Nigeria.

5.     To investigate the suggestion on how to improve loan repayment among customers of microfinance banks in Nigeria.

1.4     RESEARCH QUESTIONS

The relevant research questions related to this study include the following:

1.     What is the influence of socioeconomic factors on loan repayment among customers of microfinance banks in Nigeria?

2.     What is the effect of lenders’ factors on loan repayment among customers of microfinance banks in Nigeria

3.     To which extent do borrowers’ factors affect loan repayment among customers of microfinance banks in Nigeria?

Get the complete project »


Instant Share On Social Media:


Can't find what you are looking for?
Call (+234) 07030248044.

OTHER SIMILAR BANKING FINANCE PROJECTS AND MATERIALS

A CRITICAL ANALYSIS OF CAUSES AND PROBLEM OF FINANCIAL DISTRESS IN NIGERIA BANKING SECTOR (A CASE STUDY OF AFEX BANK PLC.)

 Format: MS WORD ::   Chapters: 1 - 5 ::   Pages: 68 ::   Attributes: Questionnaire, Data Analysis,Abstract

CHAPTER ONE INTRODUCTION The importance of capital as a necessity though not sufficient condition for economic growth is recognized in development economy where it is believed that the position of ...Continue reading »

A CRITICAL ANALYSIS OF THE USE OF FINANCIAL REPORT IN ASSESSING BANK PERFORMANCE. (A CASE STUDY UNION BANK OF NIGERIA PLC)

 Format: MS WORD ::   Chapters: 1-5 ::   Pages: 72 ::   Attributes: Questionnaire, Data Analysis,Abstract  ::   5108 engagements

CHAPTER ONE INTRUDUCTION BACKGROUND OF STUDY A farmer, who plants corps, expects result, similarly to student who sits for examination expects results. The same 5 also true of an investor. For the ...Continue reading »

A CRITICAL ANALYSIS ON THE USE OF FINANCIAL STATEMENTS IN ASSESSING THE PERFORMANCE OF AN ORGANIZATION (A CASE STUDY OF FIRST BANK NIGERIA)

 Format: MS WORD ::   Chapters: 1-5 ::   Pages: 72 ::   Attributes: Questionnaire, Data Analysis  ::   18288 engagements

ABSTRACT This project work is carried out to examine the contribution of micro finance banks to the development of Small and medium scale enterprises in Nigeria. The Brass micro finance bank is used a...Continue reading »

A CRITICAL APPRAISAL OF CURRENT ASSETS MANAGEMENT IN PUBLIC LIMITED LIABILITY COMPANIES

 Format: MS WORD ::   Chapters: 1 - 5  ::   Pages: 80 ::   Attributes: Questionnaire, Data Analysis,Abstract  ::   3640 engagements

ABSTRACT This project examined the management of current assets in public Limited Liability Company. It is obvious that no company can perform well without good current asset management. This cares f...Continue reading »

A CRITICAL APPRAISAL OF CURRENT ASSETS MANAGEMENT IN PUBLIC LIMITED LIABILITY COMPANIES

 Format: MS WORD ::   Chapters: 1 - 5 ::   Pages: 55 ::   Attributes: Questionnaire, Data Analysis, Abstract

CHAPTER ONE 1.0 INTRUDUCTION: Current assets as one of the management tolls of business organization are very important in the proper function of business and achievement of organizational goal. Cur...Continue reading »

A CRITICAL ASSESSMENT OF THE SURVIVAL STRATEGIES OF DEPOSIT MONEY BANKS IN A DEPRESSED ECONOMY

 Format: MS WORD ::   Chapters: 1 - 5 ::   Pages: 68 ::   Attributes: Questionnaire, Data Analysis,Abstract  ::   1808 engagements

CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY Nigerian economy is faced with national and global economic challenges and as such, the financial institutions, especially the banking sector ha...Continue reading »

What are looking for today?

WHAT OUR CUSTOMERS ARE SAYING:
  • 1. Abubakar Sani from Nigerian Investment Promotion Commission said "I had a wonderful experience using ProjectClue, they delivered not only on time, but the content had good quality. I recommend ProjectClue for any project research work.".
    Rating: Excellent
  • 2. Ogunniran Olawale from Ekiti state university said "Projectclue is really safe and reliable Quick access to project works Nice customer service Fast delivery of request Recommend this toy fellow students ".
    Rating: Excellent
  • 3. Fahat Nasir from isa kaita college of education dutsinma said "Fish farming a solution unemployment ".
    Rating: Very Good
  • 4. Ajimbi Oluwarotimi from Theology school osun said "Good ".
    Rating: Very Good
  • 5. Clement Abdullahi Ogiji from National Open University of Nigeria said "I am a living witness and have recommended project clue to a lot of students, so far none have been disappointed, very reliable and, trustworthy and dependable".
    Rating: Excellent
  • 6. Jhuee from Sultan national high school said "Good quality. I recommend project clue for any project research work.".
    Rating: Excellent