The Effect of Credit Lines and Risks on Operations of Microfinance Banks

Abstract

This study examines the new era of microfinance banks (MFBs) in Nigeria considering the challenges that is being faced by them in recent times and their prospects of survival in a dynamic environment like Nigeria. The objectives of this paper are to assess the poor implementation of government policy on microfinance banks; to examine other factors like credit lines, credit risks that had weakened the microfinance sub sector and its ability to achieve the policy objective of economic empowerment so as to uncover areas of necessary modification in the policy. The data for this study were obtained from primary source and were analyzed using correlation coefficient, chi-square, frequency and simple percentage. The paper recommended that the regulatory authorities are to make sure that the microfinance policy is properly implemented. Also, the banks should follow strictly their code of conduct and monitor their customers’ businesses and make sure that loans are used for the purpose for which they were given as this will reduce the number of non performing loans.

Keywords: Microfinance, Microfinance banks, Credit lines, Credit risks, Banks’ depositors

International Journal of Development and Management Review (INJODEMAR) Vol. 7 June, 2012