The Impact of Infectious Epidemic on the Smooth Operation of Microfinance Banks in Nigeria a Case Study of Coronavirus Disease
CHAPTER ONE
Objective Of The Study
The main objective of this study is to examine the impact of Coronavirus (Covid-19) on the microfinance banks in Nigeria. Specifically this study seeks to:
- Determine the impact of covid-19 on the rate of turnover of the Microfinance bank
- Determine the impact of corona virus outbreak on work force in the MFB
- Determine the impact of corona virus outbreak on the business with respect to overall firm performance
- Determine the effect of corona virus outbreak on the profitability of the Microfinance bank
CHAPTER TWO
LITERATURE REVIEW
Introduction
This chapter deals with the review of relevant literature. The researcher discusses past research done on the topic and other related ones in order for the researcher to analyze, summarize, cite, and relate previous studies explicitly. This enabled the researcher to establish theoretical framework for the problem and to establish the significance of the study.
Bank lending and SMEs development in Nigeria
SMEs are crucial catalysts for economic development (Aruwa, 2004). Banks provide a nation with a function of pooling scattered resources from surplus to deficit units so as to promote investment innovation, productivity and consequently growth and development. The banking industry in Nigeria dominates the financial system (Aruwa, 2005). Berger et al. (2001) maintains that a well functioning financial system contributes to investment and economic growth. Every enterprise at its onset, before standing firm on its feet, needs borrowing.
The first place that they need to go and borrow at those times is the banks. According to elementary corporate finance theory, an investment project should be undertaken whenever its net present value is positive. This assumes that the capital outlay is not exhaustive. Firms do any volume of investment, and so where the firms do not have adequate capital to embark on any level of investment, there is need for capital borrowing (Mambula, 2002). This shows that even if an enterprise is strong and firmly rooted, it still does not stop borrowing, because it can embark on a very large scale investment more than it currently does, if it can get the required capital. In an economy where the interest rate is high, small and medium scale enterprises find it difficult to borrow and repay when in fact they constitute the real sector of the economy. When funding becomes a major problem for such enterprises, nothing else works. This is because other problems which emerge later in an enterprise’s lives that are being tackled as natural problems which come after its funding. This in turn hinders the growth and development of the economy. Njoku (2007) postulates that to forestall the imminent capital flight from the real sector to the banking sector, banks should begin to take second look at the industrial sector in terms of lending operations. He continues that banks should plough back a large proportion of the money available to them to the real sector of the economy as long-term loans at rates not exceeding 5%. This he said will encourage industrialists not only to remain in their present businesses but also to achieve their business expansion targets. Small and medium scale enterprises dominate the private sector of the Nigerian economy, but almost all of them are starved of funds (Mambula, 2002). The persistent lack of finance, for establishment and operation of SMEs occasioned by the inability or unwillingness of the deposit money banks to grant long term credit to operators of the real sector of the economy, led to the establishment of development finance institutions and the introduction of numerous funding programmes for the development of SMEs in Nigeria.
Main sources of financing SMEs in Nigeria
The importance of finance to business organization cannot be over-emphasized. Business finance is however, not easy to come by especially in respect of SMEs. Yet they require funds from every source available to meet their asset needs, working capital needs, and for expansion. According to Ekpenyong and Nyong (1992), there is wide consensus in Nigeria that government policies are skewed in favour of the formal sector to the detriment of the informal sector. This skewness is to the great disadvantage of SMEs in Nigeria since they are more disposed to the funds of the informal sector. The financial system in Nigeria is not in short supply of liquidity, but money deposit banks have been very reluctant to grant loans to SMEs, which they regard as a high-risk sector. Most of the banks would rather pay the penalty imposed for not meeting the minimum exposure to preferred sectors of the economy than actually run the risk of being exposed to them. According to Ojo (1984), the sources of investment finance for SMEs include owner’s savings and assistance government institutions, local authorities, co-operative societies, relatives and friends, moneylenders and MFIs.
CHAPTER THREE
RESEARCH METHODOLOGY
Introduction
In this chapter, we would describe how the study was carried out.
Research design
It is a term used to describe a number of decisions which need to be taken regarding the collection of data before they are collected. (Nwana, 1981). It provides guidelines which direct the researcher towards solving the research problem and may vary depending on the nature of the problem being studied. According to Okaja ( 2003, p. 2),” research design means the structuring of investigation aimed at identifying variables and their relationship, it is used for the purpose of obtaining data to enable the investigator test hypothesis or answer research question by providing procedural outline for conducting research”. It is therefore, an outline or scheme that serves as a useful guide to the researcher in his efforts to generate data for his study. The research therefore, adopted the survey method in data collection. It is used to obtain the peoples opinion through questionnaire..
Sources of Data
The data for this study were generated from two main sources; Primary sources and secondary sources. The primary sources include questionnaire, interviews and observation. The secondary sources include journals, bulletins, textbooks and the internet.
Population of the study
A study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitute of individuals or elements that are homogeneous in description (Prince Udoyen: 2019). In this study the study population constitute of all the Micro finance bank in Abuja. A total of 60 MFBs were sampled for the study.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
Introduction
This chapter deals with research questions and treatment. Out the 52 questionnaires distributed 40 was returned for the analysis
Research Question One: Coronavirus outbreak reduces the rate of turnover of the MFB
CHAPTER FIVE
CONCLUSIONS AND RECOMMENDATIONS
If similar a epidemic is seen in the country, will nigeria. MFBs face a similar fate as their counterparts in other countries? MFBs are as important to the economy in the United States as in China and most other countries. In addition to the supply chain problems, U.S. MFBs will, as in China, likely see an immediate “demand shock” when people decide to stay home when a broad outbreak starts. Even without mandated mass quarantines, a highly contagious disease outbreak will naturally reduce travel, crowd gathering, and certain services and consumptions before a vaccine or a treatment is widely available. People may want to avoid crowded office buildings, shopping malls, gyms, bars, and movie theaters and turn to remote working, home entertainment, and online stores. Businesses may want to protect their employees and cancel conferences and meetings and encourage remote working. Tourism, hospitalities, transportations, restaurants, rentals, optional personal services, and daycare facilities are likely to suffer. Health care settings may be overwhelmed by people with flu symptoms, but optional procedures and routine checks or other health spending may even see a downturn during the outbreak.
Inequality issues have already been mentioned in recent reports, but it is worth noting that people who cannot afford sick days or lack of health care coverage may be less likely to self- quarantine or seek proper medical care, which could exacerbate transmissions. If the epidemic is prolonged and market demands plunge, we may see MFBs lay off workers to balance the lack of revenues. This will further reduce demand.
Recommendations:
COVID-19 is, first and foremost, a humanitarian crisis. Many people and families have suffered and will suffer from the unexpected losses around the world. It will have a profound impact on the world’s social and political environments and on its economy. The coronavirus epidemic in Nigeria can therefore affect both the demand and the supply sides of the world economy. I will provide a few recommendations for the government and MFBs based on the study.
Considerations for Policymakers and MFBs
- Social distancing-based public health interventions, such as mass quarantines, extensive travel bans, and transportation system disruption, can shock the economy and shrink the market demand in the service sectors that are critical for many MFBs that rely on visits by regular customers. When considering using these interventions, the cost on MFBs should be considered.
- MFBs are financially more fragile and cash-strapped when market demand is down. Emergency funding programs that target MFBs could be one important component of a response. Lower interest rates, deferred or waived taxes and fees, or easier lending policies could also help MFBs stay afloat during the period of low market demand. Congress has begun to take actions through supplemental appropriations to address some of the financial challenges of MFBs. The Federal Reserve Bank’s recent lending rate cut will also support MFBs.
- MFBs could benefit from diversifying business platforms. Online-based platforms and virtual service provisions can help MFBs sustain business during quarantines or travel bans. It would be helpful if policymakers could bring tax breaks and technical guidance to help MFBs restructure their business operations.
- China is currently putting the disease prevention burden on MFBs. This may further stress MFBs. The public health system could have a hotline or website to provide MFBs with information on the epidemic, disease prevention methods, PPE resources, and testing sites (or provide mobile testing).
- The government could consider setting aside additional funding for unemployment insurance payments in the event that MFBs affected by the COVID-19 are forced to lay off employees.
- Additional emergency funding could be considered to help MFBs avoid bankruptcy or help the creditors of bankrupt MFBs.
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