Original Research Article | OPEN ACCESS

Credit Risk Evaluation and Performance of Microfinance Banks in Ogun State

For correspondence:-    

Received: May 31, 2020        Accepted: July 4,2020        Published: September 30, 2020

Citation: Credit Risk Evaluation and Performance of Microfinance Banks in Ogun State. Account Tax Rev 2005; 4(3):29-40 doi:

© 2005 The authors.
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Abstract

Microfinance banks in most world economies are dominant as financial institutions providing loans to business owners compared to any other financial institution. However, credit provision requires due attention as credit risk management is one of the critical aspects and challenges faced by microfinance banks. This study examines the role of credit risk management on loan performance in microfinance banks in Ota, Ogun State, Nigeria. The study adopted survey research design and data were collected through a well-structured questionnaire. Purposive sampling technique was adopted, and a sample size of two hundred respondents was drawn from the selected banks in Ota. Data were analysed through the aid of statistical package for social sciences (SPSS), and linear regression was used as a statistical tool for analysis (R=.455; R²=.207 and R Adj.=.202). From the results above, the study revealed that there is a significant relationship between credit risk evaluation and loan performance. The study concludes that proper credit evaluation in microfinance banks is necessary. Therefore, the study recommends that the board and management of microfinance banks in Nigeria should ensure that the implementation of the appraisal process is strictly adhered to without compromise when evaluating risks inherent in loans to their clients.

Keywords: Microfinance, business, credit, financial, provisions, banks