IIARD International Institute of Academic Research and Development

IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH (IJBFR )

E-ISSN 2695-1886
P-ISSN 2672-4979
VOL. 10 NO. 8 2024
DOI: 10.56201/ijbfr.v10.no8.2024.pg1.20

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Credit Risk Management and Financial Performance of Microfinance Banks in Nigeria

ATAINE, Marcel Mietee & Prof. OSUJI, Casmir Chinemerem

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Abstract

This study examined the impact of credit risk management on the financial performance of microfinance bank in Nigeria from the period of 1993 to 2022 (30years). The study used Loan-to- Deposit Ratio (LDR), Non-Performing Loan Ratio (NPLR), Loan Loss Provision Ratio (LLPR), Debt-to-Equity Ratio (DTER) and Capital Adequacy Ratio (CAR) as a proxied for credit risk management while financial performance proxied with Returns on Asset (ROA) of Microfinance Bank in Nigeria. The study made used of aggregate secondary data from CBN Statistical Bulletin, CBN Annual Report, CBN Financial Strategy Report and CBN Bank Supervisory Annual Report for the duration of the study. The descriptive statistics and the correlation analysis was used to determine the nature of relationship between the independent (Loan-to-Deposit Ratio (LDR), Non- Performing Loan Ratio (NPLR), Loan Loss Provision Ratio (LLPR), Debt-to-Equity Ratio (DTER) and Capital Adequacy Ratio (CAR)) and dependent (Return on Asset (ROA)) variables, followed by several diagnostics tests. After which, the study conducted a unit roots test for the time series data in order to ascertain if they are stationary or not and Johannsen Cointegration to the determined the long term effect of all the independent variables on the dependent variable. In view of the hypothesis formulated for this research, the method of data analysis chosen were the ordinary least squares multiple regression analysis which was used through the Regression model, using the computer software, E-VIEWs 9.0. The finding revealed that LDR with an associated p- value (sig. value) is 0.0020. This suggests that LDR have a positive significant effect on ROA; NPLR with an associated p-value (sig. value) of 0.8763. This suggests that NPLR have a negative insignificant effect on ROA; LLPR with an associated p-value (sig. value) is 0.2313. This suggests that LLPR have a negative insignificant effect on ROA; DTER with an associate

keywords:

Credit, Risk, Management, Financial and Performance

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