Assessment of the Challenges Faced by Microfinance Banks in Recovering Loans from Customers in Ibadan North Local Government Area, Ibadan, Oyo State, Nigeria

Timilehin Grace Sodiyan; Opeyemi Folorunso Sigbeku

doi:doi:10.11648/j.ijfbr.20220805.11

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Assessment of the Challenges Faced by Microfinance Banks in Recovering Loans from Customers in Ibadan North Local Government Area, Ibadan, Oyo State, Nigeria

Timilehin Grace Sodiyan, Opeyemi Folorunso Sigbeku

Published in International Journal of Finance and Banking Research (Volume 8, Issue 5)

Received: 18 October 2022 Accepted: 9 November 2022 Published: 23 November 2022

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Abstract

The Nigerian economy is currently in a state of decline as a considerable amount of its population is living below the global poverty line. The influence of the poor economy has brought high inflation that ran most businesses into debt, depleted capital and defaulted from repaying loans to financial institutions backing them. This further created a problem of loan recovery for both microfinance banks and commercial banks. Therefore, this study was conducted to assess the challenges facing these microfinance banks in recovering loans from customers and appraise their financial performance and sustainability. This was a banking institution-based descriptive cross-sectional study that utilized the qualitative method of data collection to elicit information on status of loan recovery, challenges influencing loan recovery, effects on their financial performance and sustainability. The interviews were conducted with the aid of Key-informant interview guide and recorded using digital audio recorder. The audio recordings were transcribed verbatim, analysed using ATLAS. ti version 8 and presented using thematic analysis and description. This study shows that loan recovery status is fair among those MFBs assessed. Also, the micro-finance banks face challenges that are policy-related, customer-related, poor documentation processing and poor staff attitude in recovering their loans. Decline in Economy, COVID-19 Pandemic and inflation were the factors responsible for the challenges. The poor loan recovery reportedly led to increase in high-risk portfolio, reduction in stakeholder’s profit and investment and inability to meet target profit and bank foreclosure. It was concluded that loan recovery status is not as expected as a fair repayment rate was reported. The challenges highlighted were from both banks and the customers, therefore, microfinance banking industry should endeavour to provide flexible loan packages to customers in order to reduce their burden and put all the necessary measures in place to check the lapses on the part of staff.

Published in	International Journal of Finance and Banking Research (Volume 8, Issue 5)
DOI	10.11648/j.ijfbr.20220805.11
Page(s)	131-135
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2022. Published by Science Publishing Group

Keywords

Loan Recovery, Loan Defaults, Loan Repayment, Microfinance Banks, MSMEs, Financial Institutions, Economy, Nigeria

References

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[5]	Odetayo TA (2016) Empirical Analysis of Challenges of Microfinance Banks in Financing Small Scale Enterprises in Nigeria. Account and Financial Management Journal 1.5. AFMJ, 2016, 1: 301-307. DOI: 10.18535/afmj/v1i5.06.
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[9]	Eluhaiwe PN (2005) Poverty Reduction through Micro-Financing: Abuja, CBN Bullion 30 (3) July/September.
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[12]	Akpoveta OA, Joy O and Joy O (2020) COVID-19 Pandemic: Nigeria’s economic and business disruptions. International Scholars Journal of Arts and Social Science Research 2 (4): 14-31.
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[16]	Nkamnebe AD and Idemobi EI (2011) Recovering of micro credit in Nigeria: Implications for enterprise development and poverty alleviation. Management Research Review.
[17]	Nawai N and Shariff M (2013) Loan repayment problems in microfinance programs that use an individual lending approach: A qualitative analysis. Journal of Transformative Entrepreneurship 1 (2): 93-99.
[18]	Asongo AI, Idama AA and Ngutor A (2014) Credit Risk Portfolio Management in Microfinance Banks: Conceptual and Practical Insights. Universal Journal of Applied Science 2 (6): 111-119.
[19]	CBN (2005) Regulatory and Supervisory Framework for Microfinance Banks [MFBS] in Nigeria. Available at: https://www.cbn.gov.ng/out/publications/guidelines/dfd/2006/regulatory%20guidelines.pdf (Accessed 12 October 2019).

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APA Style

Timilehin Grace Sodiyan, Opeyemi Folorunso Sigbeku. (2022). Assessment of the Challenges Faced by Microfinance Banks in Recovering Loans from Customers in Ibadan North Local Government Area, Ibadan, Oyo State, Nigeria. International Journal of Finance and Banking Research, 8(5), 131-135. https://doi.org/10.11648/j.ijfbr.20220805.11

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ACS Style

Timilehin Grace Sodiyan; Opeyemi Folorunso Sigbeku. Assessment of the Challenges Faced by Microfinance Banks in Recovering Loans from Customers in Ibadan North Local Government Area, Ibadan, Oyo State, Nigeria. Int. J. Finance Bank. Res. 2022, 8(5), 131-135. doi: 10.11648/j.ijfbr.20220805.11

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AMA Style

Timilehin Grace Sodiyan, Opeyemi Folorunso Sigbeku. Assessment of the Challenges Faced by Microfinance Banks in Recovering Loans from Customers in Ibadan North Local Government Area, Ibadan, Oyo State, Nigeria. Int J Finance Bank Res. 2022;8(5):131-135. doi: 10.11648/j.ijfbr.20220805.11

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@article{10.11648/j.ijfbr.20220805.11,
  author = {Timilehin Grace Sodiyan and Opeyemi Folorunso Sigbeku},
  title = {Assessment of the Challenges Faced by Microfinance Banks in Recovering Loans from Customers in Ibadan North Local Government Area, Ibadan, Oyo State, Nigeria},
  journal = {International Journal of Finance and Banking Research},
  volume = {8},
  number = {5},
  pages = {131-135},
  doi = {10.11648/j.ijfbr.20220805.11},
  url = {https://doi.org/10.11648/j.ijfbr.20220805.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20220805.11},
  abstract = {The Nigerian economy is currently in a state of decline as a considerable amount of its population is living below the global poverty line. The influence of the poor economy has brought high inflation that ran most businesses into debt, depleted capital and defaulted from repaying loans to financial institutions backing them. This further created a problem of loan recovery for both microfinance banks and commercial banks. Therefore, this study was conducted to assess the challenges facing these microfinance banks in recovering loans from customers and appraise their financial performance and sustainability. This was a banking institution-based descriptive cross-sectional study that utilized the qualitative method of data collection to elicit information on status of loan recovery, challenges influencing loan recovery, effects on their financial performance and sustainability. The interviews were conducted with the aid of Key-informant interview guide and recorded using digital audio recorder. The audio recordings were transcribed verbatim, analysed using ATLAS. ti version 8 and presented using thematic analysis and description. This study shows that loan recovery status is fair among those MFBs assessed. Also, the micro-finance banks face challenges that are policy-related, customer-related, poor documentation processing and poor staff attitude in recovering their loans. Decline in Economy, COVID-19 Pandemic and inflation were the factors responsible for the challenges. The poor loan recovery reportedly led to increase in high-risk portfolio, reduction in stakeholder’s profit and investment and inability to meet target profit and bank foreclosure. It was concluded that loan recovery status is not as expected as a fair repayment rate was reported. The challenges highlighted were from both banks and the customers, therefore, microfinance banking industry should endeavour to provide flexible loan packages to customers in order to reduce their burden and put all the necessary measures in place to check the lapses on the part of staff.},
 year = {2022}
}

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TY - JOUR
T1 - Assessment of the Challenges Faced by Microfinance Banks in Recovering Loans from Customers in Ibadan North Local Government Area, Ibadan, Oyo State, Nigeria
AU - Timilehin Grace Sodiyan
AU - Opeyemi Folorunso Sigbeku
Y1 - 2022/11/23
PY - 2022
N1 - https://doi.org/10.11648/j.ijfbr.20220805.11
DO - 10.11648/j.ijfbr.20220805.11
T2 - International Journal of Finance and Banking Research
JF - International Journal of Finance and Banking Research
JO - International Journal of Finance and Banking Research
SP - 131
EP - 135
PB - Science Publishing Group
SN - 2472-2278
UR - https://doi.org/10.11648/j.ijfbr.20220805.11
AB - The Nigerian economy is currently in a state of decline as a considerable amount of its population is living below the global poverty line. The influence of the poor economy has brought high inflation that ran most businesses into debt, depleted capital and defaulted from repaying loans to financial institutions backing them. This further created a problem of loan recovery for both microfinance banks and commercial banks. Therefore, this study was conducted to assess the challenges facing these microfinance banks in recovering loans from customers and appraise their financial performance and sustainability. This was a banking institution-based descriptive cross-sectional study that utilized the qualitative method of data collection to elicit information on status of loan recovery, challenges influencing loan recovery, effects on their financial performance and sustainability. The interviews were conducted with the aid of Key-informant interview guide and recorded using digital audio recorder. The audio recordings were transcribed verbatim, analysed using ATLAS. ti version 8 and presented using thematic analysis and description. This study shows that loan recovery status is fair among those MFBs assessed. Also, the micro-finance banks face challenges that are policy-related, customer-related, poor documentation processing and poor staff attitude in recovering their loans. Decline in Economy, COVID-19 Pandemic and inflation were the factors responsible for the challenges. The poor loan recovery reportedly led to increase in high-risk portfolio, reduction in stakeholder’s profit and investment and inability to meet target profit and bank foreclosure. It was concluded that loan recovery status is not as expected as a fair repayment rate was reported. The challenges highlighted were from both banks and the customers, therefore, microfinance banking industry should endeavour to provide flexible loan packages to customers in order to reduce their burden and put all the necessary measures in place to check the lapses on the part of staff.
VL - 8
IS - 5
ER -

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Author Information

Timilehin Grace Sodiyan

Faculty of School of Business, University of Ibadan, Ibadan, Nigeria
Opeyemi Folorunso Sigbeku

Department of Oral Pathology and Centre for Entrepreneurship and Innovation, University of Ibadan, Ibadan, Nigeria

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APA Style

Timilehin Grace Sodiyan, Opeyemi Folorunso Sigbeku. (2022). Assessment of the Challenges Faced by Microfinance Banks in Recovering Loans from Customers in Ibadan North Local Government Area, Ibadan, Oyo State, Nigeria. International Journal of Finance and Banking Research, 8(5), 131-135. https://doi.org/10.11648/j.ijfbr.20220805.11

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ACS Style

Timilehin Grace Sodiyan; Opeyemi Folorunso Sigbeku. Assessment of the Challenges Faced by Microfinance Banks in Recovering Loans from Customers in Ibadan North Local Government Area, Ibadan, Oyo State, Nigeria. Int. J. Finance Bank. Res. 2022, 8(5), 131-135. doi: 10.11648/j.ijfbr.20220805.11

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AMA Style

Timilehin Grace Sodiyan, Opeyemi Folorunso Sigbeku. Assessment of the Challenges Faced by Microfinance Banks in Recovering Loans from Customers in Ibadan North Local Government Area, Ibadan, Oyo State, Nigeria. Int J Finance Bank Res. 2022;8(5):131-135. doi: 10.11648/j.ijfbr.20220805.11

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@article{10.11648/j.ijfbr.20220805.11,
  author = {Timilehin Grace Sodiyan and Opeyemi Folorunso Sigbeku},
  title = {Assessment of the Challenges Faced by Microfinance Banks in Recovering Loans from Customers in Ibadan North Local Government Area, Ibadan, Oyo State, Nigeria},
  journal = {International Journal of Finance and Banking Research},
  volume = {8},
  number = {5},
  pages = {131-135},
  doi = {10.11648/j.ijfbr.20220805.11},
  url = {https://doi.org/10.11648/j.ijfbr.20220805.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20220805.11},
  abstract = {The Nigerian economy is currently in a state of decline as a considerable amount of its population is living below the global poverty line. The influence of the poor economy has brought high inflation that ran most businesses into debt, depleted capital and defaulted from repaying loans to financial institutions backing them. This further created a problem of loan recovery for both microfinance banks and commercial banks. Therefore, this study was conducted to assess the challenges facing these microfinance banks in recovering loans from customers and appraise their financial performance and sustainability. This was a banking institution-based descriptive cross-sectional study that utilized the qualitative method of data collection to elicit information on status of loan recovery, challenges influencing loan recovery, effects on their financial performance and sustainability. The interviews were conducted with the aid of Key-informant interview guide and recorded using digital audio recorder. The audio recordings were transcribed verbatim, analysed using ATLAS. ti version 8 and presented using thematic analysis and description. This study shows that loan recovery status is fair among those MFBs assessed. Also, the micro-finance banks face challenges that are policy-related, customer-related, poor documentation processing and poor staff attitude in recovering their loans. Decline in Economy, COVID-19 Pandemic and inflation were the factors responsible for the challenges. The poor loan recovery reportedly led to increase in high-risk portfolio, reduction in stakeholder’s profit and investment and inability to meet target profit and bank foreclosure. It was concluded that loan recovery status is not as expected as a fair repayment rate was reported. The challenges highlighted were from both banks and the customers, therefore, microfinance banking industry should endeavour to provide flexible loan packages to customers in order to reduce their burden and put all the necessary measures in place to check the lapses on the part of staff.},
 year = {2022}
}

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