BACKGROUND OF STUDY
attempt will be made in this introductory chapter to give a general outline of
bad debts in micro finance banks.
and Harley (1987) in Anolve (2001) defines finance as a body of facts, principals and theories dealing
with raising and using funds, it is said to be operating in the area of finance
banks and other financial institutions that provides financial services.
debts can be defined as those debts which are not recoverable. Fit is a credit
review which are not recoverable. It is a credit review borrower from a pure
lender who may be a formal or informal financial institution against on
borrowers promises to make future payments. When a company grants credit to its
customers, there are usually a few customers who do not pay. The account of
such customers are called bad debts and are at expense of selling on credit.
You might ask why do merchants swell on credit if bad debts result? The answer
is that they sell on credit in order to increase sale and profit. They are
willing to take a reasonable loss from bad debts in order to increase sale and
profits. Therefore, bad debts, loses are incurred in order to increase the full
or partial recovering is considered doubtful and uncertain.
Nigerian context, there has been increased bad and doubtful trends of debts in
the banks, however, banks and their shareholders, government officials and most
Nigerians have shown a lot of concern to bad debts. In this country by making
pronouncement and insisting on the need to arrest the situation by proclaiming
that who ever grants an irrecoverable loan will be made to repay.
regulatory and supervisory guard lines for Micro Finance Banks in Nigeria (2005)
defines Micro Finance Banks(MFB) as any company licenses to carry on the
business of providing micro finance services that are needed by the
economically active poor, Micro, Small and Medium Enterprises to conduct on
expand their business provision of Micro credit is one of the vital function of
Micro Finance Banks.
a Micro credit is granted to the operator of the micro enterprises such as
peasant farmers, artisans, fishermen, rural women, etc. The definition also
apply to credit delivered to the poor. Like in other business to bankers aim is
to maximize profit for the interest of the shareholders and unlike in other.
The bankers aim to maintain liquidity for interest of the deposit. These two
aims cannot follow the same direction when a bank tries to be specifically
liquid by investing on at most short term securities which means undertaking
loss or lost or risk. At this point, the changes of bad debts occurrence will
fall to its lowest minimum.
the other hand, when bankers try to maintain profitability by investing on its
least long term securities which undertakes
more risks, investments certainly will be fortail liquidity because almost all
the investments will take not less than one year to be repaid. At this point,
the case of bad debt occurrence will rise to higher maximum. When a bank
strikes a balance between profitability and liquidity, there is every tendency
of this bad debt occurrence. The management of bad debts resulting from
commercial banks and advance reflecting on degree of risk associated with
lending has necessitated the adoption of this project.
2005, The Federal Government, through policy guard lines established Micro Finance Banks (MFB) in replacement of
community Banks, But most huge amount of money they lose through bad debts. The
implication is that there is no more confidence
on some bank customers who have calculated scientific ways of defrauding
in banking sector also makes banking unable to meet repayment obligations
severe cases, there are introduction of technology insolvency. These situations
were brought about by the following among others.
Indiscriminate and unprofessional lending
Poor Management which finances long-term
loans assets with short term inabilities.
problem therefore is to attempt to examine the debt management techniques of
the named banks and suggest ways for a healthy and efficient debts portfolio
PURPOSE OF STUDY
purpose of this study is to ascertain the procedure for management of bad debts
in Micro Finance Banks (MFB), especially the purpose of the study is to:
Ascertain the effective credit and bad debts
management on Micro Finance Banks
To identify the danger signals on bad debts
and doubtful debts in Micro Finance Banks
To examine causes of bad debts on Micro
To ascertain the implication of huge bad
debts on Micro Finance Banks
study will go a long sway in considering bad debts, how it can be managed and
come out with good recommendation, which will help in reducing due incidence of
bad debts and its effects on. In general, (Micro Finance Banks of Anambra
State) The study will provide the following vital reference points.
Bank officials: It will provide them with
information on tending policy and how to manage their credit effectively and
how they can control their credits effectively and how they can control
incidence of bad debts in their institutions.
Student Banking And Finance: The study will
definitely provide students with enough material knowledge on debt management.
Banking Public: This study provides the
banking public with information on banking public and credit advances.
scope of this study or research will enter on the investigation with the
problem into the debt management with particular reference to micro finance
banks in Anambra state. This work is limited to Micro Finance Banks in order to
ensure us get authentic information or data as regards the operation of debt
What are the major goals of credit and bad
debts in Nigeria Micro Finance Banks?
What are the danger signals on bad and
What are the causes of bad debts in Nigerian
Micro Finance Banks?
What are the implications of bad debts in
Micro Finance Banks?