CRITICAL ANALYSIS OF THE PERFORMANCE OF MICROFINANCE BANK; A CASE STUDY OF UMUCHINEMERE PROCREDIT MICROFINANCE BANK

ABSTRACT
The goal of this research work is to carry out a critical analysis of the performance of microfinance bank in terms of meeting its objective on financial sustainability and economic empowerment. Umuchinemere Procredit Microfinance Bank one of the vibrant private owned micro-finance bank in operation in the eastern part of our country Nigeria, was therefore selected as case study of this research. The rationale behind the research work was the paucity situation of credit facilities available to the poor class of the society and effort of the government to remedy the issue by formulating policies that promotes participation of private stakeholders in economic empowerment through financial intermediation targeted to the poor economic unit. The problem the research is about to solve therefore, is to analyze the performance of the microfinance bank which is a 100% private initiative, in the area of financial sustainability and economic empowerment. Suggestion from previous authors in the area of study was review for recommendation and solution on how to run an efficient and profitable funding unit by applying some of the principles as follows; corporate governance, financial sustainability, welfare impact, outreach to the poor e.t.c. considering the nature of study, the research design used was a case study of Umuchinere Procredit Microfinance Bank (UPMFB). Data was collected from a secondary source of published financial statement for a period that covered the trend of 10 years. The data was presented in tabular and graphical form. The tool for analysis was CAMEL rating and financial ratio. After critical analysis, the findings made was that the bank has strength in capital and liquidity base but with very poor earnings, poor asset quality, low or no capital growth and vulnerability of the bank asset to unsecured loan. The researcher came up with the recommendations that the government should provide special deposit insurance scheme to cushion the high risk vulnerability associated with the peculiar nature of microfinance bank. The microfinance bank should embark on risk management policy review, periodic staff training to enhance professionalism and efficiency, reaching out to untapped viable sources of the economy with the excess resources (deposits) available to it.

CHAPTER ONE
1.1  BACKGROUND OF STUDY
The practice of microfinance in Nigeria is culturally rooted and dated back several centuries. The traditional micro finance institutions provide access to credit for rural and urban low-income earners. They are mainly informal self help groups (SHGs) or Rotating Savings and Credit Association (ROSCAs) types. Other providers of microfinance services include savings collector and cooperative societies. The informal financial institutions generally have limited outreach due primarily to paucity of loanable funds.

In order to enhance the flow of financial services to Nigeria rural areas, government has, in the past, initiated a series of publicly financed micro/rural credit programs and policies targeted at the poor. Notably among such programmes were rural banking programme, sectoral allocation of credits, concessional interest rate, and agricultural credit guarantee scheme (ACGS). Other institutional arrangements were the establishments of Nigeria Agricultural and Cooperative Bank Limited (NACB), National Directorate of Employment (NDE), Nigerian Agricultural Insurance Cooperation (NAIC), the Peoples Bank of Nigeria (PBN), The Community Banks (CBs), and Family Economic Advancement Programme (FEAP).

Nigeria is one of the least develop countries relative to developed economies. The per capita income of the country is less than $200 currently. This is very little money to cover daily meal, let alone health, education and other emergency expenses which make the poor vulnerable to unforeseen illness, expenses and others. There is a high level of unemployment even with skilled labour force, and the unemployment is increasing from time to time as the population of the country is increasing.

It is also experience in the country that poor household are the main participants in some kind of informal sector, ranging from small petty trading to medium scale enterprise (Jean-Luc 2006). And due to the fact that this sector uses intensive labour force as well as since it is livelihood of most of the poor, developing this sector has been argued to be a weapon to resolve the problem of unemployment and poverty of household.

Several studies noted different causes of poverty in a country; some argued that the cause of poverty in developing economies among other things is that the poor does not have access to credit for the purpose of working capital as well as investment for its small business. In Nigeria for instance, the unserved market by existing financial institution is large. The average banking density in Nigeria is one financial institution outlet to 32700 inhabitants (CBN, 2005). In the rural areas it is 1:57000 (CBN, 2005) that is less than 2% of rural households have access to financial services. This reveals the existence of huge gap in the provision of financial services to the large proportion of the active poor and low income group. Furthermore eight (8) leading microfinance institutions (MFIs) in Nigeria were reported to have mobilized a total of N2.666 million savings in 2004 and advanced N2.624 billion credit with an average loan size of N8206.90 (CBN, 2005). This translated to about 320000 membership-based customers that enjoyed one form of credit or the other from eight NGO-MFIs.

Also the aggregate microcredit facilities in Nigeria account for about 0.2 percent of GDP and less than one percent of the total credit to the economy (CBN, 2005). The effect of not appropriately addressing this situation would further exacerbate poverty and slow down growth and development......

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Item Type: Project Material  |  Attribute: 92 pages  |  Chapters: 1-5
Format: MS Word  |  Price: N3,000  |  Delivery: Within 30Mins.
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