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
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
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