Financial Record Keeping and Challenges in Micro Finance Banks
Chapter One
OBJECTIVES OF THE STUDY
Objectives of the study are:
- To determine the interest cover rate by borrowers or cost of capital covered by household business.
- To light what extent the poor masses seek credit facilities from these financial institutions.
- To examine if the inability of the government to operate its financial institutions to full capacity is responsible for the poor economy
- To unveil if the international monetary fund correlates with the local micro-finance bank.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Introduction
According to the Consultative Group to Assist the Poor (CGAP), microfinance is defined as “a facility that offers poor people access to basic financial services such as loans, savings, money transfer services and micro insurance” ( www.cgap.org). Indeed, microfinance serves the un-bankable, bringing credit, savings and other essential financial services within the reach of millions of people who are too poor to be served by regular banks, in most cases because they are unable to offer sufficient collateral. In general, banks are for individuals with money, not for persons without money (www.microfinanceinfo.com). Microfinance involves the provision of financial services to the poor and low-income clients who are customarily not served by the traditional banks (Ledgerwood, 1999; Otero, 1999; Schreiner, 2001). These financial services include micro-credit, savings, micro-insurance, micro-leasing and money transfer and payment services (www.themix.org; Bi et al, 2011). The features that distinguish microfinance from other forms of formal and semi-formal financial products are; smallness of loans advanced and savings collected, near absence of assets–based collateral and simplicity of operations (Microfinance Policy, Regulatory and Supervisory Framework for Nigeria, 2005; Ledgerwood, 1999; Robinson, 2003; Bauman, 2001). From the above-mentioned, it can be concluded that microfinance is a poverty alleviation scheme which operates by providing financial and non-financial services to economically active and low income households and their businesses. To realise this poverty mitigation objective, microfinance supports the poor and low-income households increase their income, build sustainable enterprises, reduce susceptibility to shocks and generate employment (Leikem, 2012; Aigbokhan et al, 2011; Irobi, 2008; Morduch; 2002). Anecdotal evidence suggests that the first credit union in Africa was probably established in Northern Ghana in 1955 by the Canadian Catholic missionaries that were there at the time. This suggests that the practice of microfinance is not new in Ghana. Ghanaians have always tried to provide themselves with needed finances through informal microfinance approaches like self-help groups (SHGs), rotating savings and credit associations, (ROSCAs), accumulating credit and savings associations (ASCAs) and direct borrowings from relations, friends and neighbours (Asiama and Osei, 2007; Nair and Fissha, 2010; Adjei, 2010; www.mofep.gov.gh). These approaches may have sufficed in the traditional society but the growth in the sophistication of the economy as well as advancement in technology and the increasing incidence of poverty among citizens has revealed the shortcomings of this approach. The Government of Ghana (GoG), Bank of Ghana (BoG) and other researchers allude to this when they pointed out that the informal financial institutions that attempt to provide microfinance services generally have limited outreach due primarily to paucity of loanable funds (www.mofep.gov.gh; www.bog.gov.gh; Nwanyanwu, 2011; Asiama and Osei, 2007). It was in a bid to resolve this recognized deficiency of the informal microfinance sector that the GoG in 2006 introduced a microfinance policy as a prelude to the licensing and regulation of microfinance institutions in Ghana. According to this policy document, its aim is to provide a microfinance framework that would enhance the provision of diversified microfinance services on a long-term sustainable basis for the poor and low income households, build a platform for the setting up of MFIs and improve BoG’s regulatory/supervisory performance in ensuring monetary stability and liquidity management. MFIs were therefore established because of the failure of the existing financial institutions to adequately address the financing needs of the poor and low income households (MoFEP, 2006; Asiedu-Mante, 2005). Again, several cases in which customers of MFIs have lost their monies and investments (www.business.myjoyonline.com) reached the government and the regulator, but seemingly powerless BoG then, only advised customer caution in dealing with mushrooming MFIs. Furthermore, the incidence of people with ‘tainted’ characters setting up MFIs with the objective of duping poor clients will be reduced, since the Central Bank as part of certifying the establishment and continuity of MFIs will conduct background investigations of directors of all the regulated MFIs thus improving public confidence and mutual trust in MFIs. The GoG and BoG further justified its licensing of MFIs with the lack of institutional capacity and weak capital base of existing RCBs, which was promulgated particularly to serve the low income households and rural dwellers, need for increased savings opportunity, existence of huge un-served market and coupled with need to guarantee the security and protection of deposits or savings of poor customers (Bank of Ghana, 2007; Bank of Ghana, 2011; MoFEP, 2006). Taking the issue of lack of capacity by existing financial institutions further, the BoG pointed out that only 30% of Ghanaians had access to financial services (www.business.myjoyonline.com) and that most of those without access to financial services dwell in the rural areas. In the same vein, traditional banks choose not to finance such micro and small enterprise, most often owned by the poor, although according to Abor and Quartey (2010) over 92% of the enterprises in Ghana are micro, small and medium and account for 70% of Gross Domestic Product (GDP) of Ghana. This is attributed to the high risks inherent in them and their inability to provide asset-based security. MFIs were established to make up for the shortfall in the financing of the entrepreneurial poor and their small businesses, thus awakening the entrepreneurial spirit at the micro-level, which is critical to the sustainability of growth in emerging economies such as Ghana’s.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to financial record keeping and challenges in micro finance banks
Sources of data collection
Data were collected from two main sources namely:
(i)Primary source and
(ii)Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment, the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
Population of the study
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information on financial record keeping and challenges in micro finance banks. 200 staff of selected microfinance banks in Edo state was selected randomly by the researcher as the population of the study.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was on financial record keeping and challenges in micro financial banks. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of on financial record keeping and challenges in micro financial bank.
Summary
This study was on financial record keeping and challenges in micro financial bank. Four objectives were raised which included: To determine the interest cover rate by borrowers or cost of capital cover by household business, to light what extent the poor masses seek credit facilities from these financial institutions, to examining if the inability of the government to operate it financial institutions to full capacity is responsible for the poor economy and to unveil if the international monetary fund has correlation with the local micro-finance bank. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of selected micro finance banks. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made accountants, human resource managers, customer care officers and marketers were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
Microfinance banks can be a powerful tool in initiating a cyclical process of growth and development microfinance activity can improve the access of rural poor to financial services. The microfinance interventions help in inculcating necessary habits for economic independence and self-reliance. Nwachukwu (2008) quotes Chukwuma Soludo, governor of Central Bank of Nigeria (CBN). The poor have been observed to be good clients because institutions providing loans to the poor have been having repayment rates exceeding 97 percent.
Recommendation
The central bank of Nigeria should intensify her regulations and policies drive in the microfinance bank sub sector of the banking industry with the view of enhancing it acceptability; Particularly, the introduction of ten digits’ account number for microfinance bank. Microfinance banks should extent its outreach to local governments and villages for that is where the majority of the economically active poor are. Management of microfinance banks should strategies better ways of recovery their loans, they should follow strict KYC (Know your customer) and KYB (Know your customer business) before the disbursement of any loan.
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