The Role Of Accounting In The Development And Survival Of Macro Finance Banks In Nigeria

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The Role Of Accounting In The Development And Survival Of Macro Finance Banks In Nigeria

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PROJECT TOPIC AND MATERIAL ON THE ROLE OF ACCOUNTING IN THE DEVELOPMENT AND SURVIVAL OF MACRO FINANCE BANKS IN NIGERIA

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  • Name: The Role Of Accounting In The Development And Survival Of Macro Finance Banks In Nigeria
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CHAPTER ONE

INTRODUCTION

1.1BACKGROUND OF STUDY

For both developing and developed countries microfinance banks plays an important role in the process of industrialization and economic growth, Apart from service to engage in economic activities and be more self-reliant, microfinance bank create employment opportunities, enhance the productivity of the active poor in the country, provide veritable avenues for the administration of the micro credit programmers of government and high network individual on a non recourse case basic (Oguntaye, 1999).

The definition of microfinance bank varies systematically. There is no one acceptable international definition. However, a microfinance bank can be defined as well capitalized, technically sound system, oriented towards lending based on the Cash flow and character of clients (Ana, 2008).

Microfinance Banking

In December 2005 Bangladesh’s Muhammad Yunus and the bank he founded Grameen bank, which created a new category of banking by granting millions of Small loans to poor people with no collateral- helping to establish the microcredit movement across the developing word – won the Noble Peace Prize. On its web site the Norwegian Committee said it awarded the prize to Yunus, 65, and the bank “for their efforts to create economic and social benefit from below’’ World Bank, 2007).

As a young economics professor at Chittagong University in Bangladesh in 1976, Muhammad Yunus lent $27 out of his own pocket to a group of poor craftsmen in the nearby town of Jobra. To boost the impact of the small sum, Yunus volunteered to serve as guarantor on a larger loan from a traditional bank, kindling the idea for a village-based enterprise called the Grameen project. It never occurred to the professor that his gesture would inspire a whole category of lending and propel him to the top a powerful financial institution. Today, Yunus runs Bangladesh’s Grameen Bank, a leading advocate for the world’s poor that has lent more than $5.1 billion people. The bank is built on Yunus’ conviction that poor people can be both reliable borrower and avid entrepreneurs. It even includes a project called Struggling members program that serves 55,000 beggars. Under Yunus, Grameen has spread the idea of micro credit throughout Bangladesh, Southern Asia, and the rest of the developing world (world Bank. 2007).

The History of Microfinance in Nigeria

The microfinance Banks replace the ailing Community Banks created by Ibrahim Bandamosi Banbagida but was soon caught in the throes of an inefficient Nigerian economic system. This laudable concept has hijacked by money bags; it has been caught by bureaucracy of the Nigerian polities and economics. No thank to ill formulated policies and the high cost of doing business in Nigeria. The microfinance concept is presently being misapplied. The central bank of Nigeria directs that every microfinance bank should have a minimum reserve of not less than N20 million, while at the same time directing that the Nigeria Deposit Insurance Company insures each depositor for a maximum N100,000,00 regardless of the amount of money invested. These requirement takes the microfinance industry out of the reach of the people it was intended to serve, the very poor while at the same time discouraged prospective investors, because their funds are not sufficiently secured. It is interesting to know that the CBN does not regulate interest rates charged by microfinance banks; so with N20m tied up in the CBN vaults as legal reserve ration, high cost of incorporation of business ventures; taxes, approvals, rents, salaries etc the operators hardly have enough left to commence operations ( www. cenbank .org ).

Having failed to capture its target market, microfinance banks in the country are now trying to complete with full fledged commercial bank are grossly inadequate in the most important aspect of its operations. This is raising funds from depositors and getting prospective clients to shed their phobia for bank loans; for fear of exorbitant interest rates charged and hidden bank charges (Ana, 2008).

Impact on the Economy

The baseline economic survey of Small and Medium Industries (SMIs) in Nigeria conducted in 2004, indicated that the 6,498 industries covered currently employ a little over one million workers. Considering the fact that about 18.5 million (28% of the available work force) Nigerians are unemployed, the employment objective/role of the SMIs is far from being reached. One of the hallmarks of the National Economic Empowerment and Development Strategy (NEEDS) is the empowerment of the poor and the private sector, through the provision of needed financial service, to enable them engage or expand their present scope of economic activities and generate employment. Delivering needed services as contained in the Strategy would be remarkably enhanced through additional channels which the microfinance bank framework provides. It assists The SMIs in raising their productive capacity and level of employment generation (CBN, 2008).

The role of microfinance bank in the development of the Nigeria, economy particularly in rural areas centre is laudable enough to draw attention to that sector. Microfinance banks create employment opportunities, minimizes rural urban migration, as a means of conserving the hard earned foreign currency and maintaining firm and profitable competition. This is leading to the major source of new (CBN, 1991).

Accounting is relevant in any business be it small, medium or large. Microfinance banks play a vital role in the nation’s economy, particularly in the rural areas. This research in intended to minimize the inefficiency encountered by microfinance operator in the use of good accounting record and highlighting the role of good accounting ethics thereby reducing the problems and enhancing the development and survival of these finance units in rural centres.

1.2STATEMENT OF RESEARCH PROBLEM

Most microfinance banks apparently lack skills for adequate financial analysis and poor accounting record. This research is intended to highlight the accounting inadequacies of microfinance units, which include poor accounting and financial control system. This has given rise to inadequate financing, ineffective budgetary control and poor cash flow. Others are planning, material control, and weakness in bank related activities. Ways of correcting the abnormalities in the system and methods of keeping proper accounting records will be suggested.

When asset and liabilities are not properly are not properly managed the profit situation will not stand out and liabilities may be overstated or understand (Oguntaye, 1999).

1.3RESEARCH QUESTIONS

For the purpose of his study, the following research questions were formulated to direct this work. And the research question to treat orderly.

Is effective decision making a function of good accounting system?

Does the growth of microfinance bank on the inability to determine the profit accruing to the business?

Does accounting record by microfinance bank in rural centres dependent in lack of good accounting personnel?

How resourceful is microfinance in rural- dwellers development

1.4OBJECTIVE OF THE RESEARCH

To find out whether effective decision making is a function of good accounting system.

To ascertain whether the growth of microfinance bank is dependent on the inability to determine the profit to the business.

To ascertain whether accounting record by microfinance banks in rural centres is dependent on lack of good accounting personnel.

To ascertain the resourcefulness of microfinance in rural-dweller development

1.5RESEARCH HYPOTHESIS

To examine impact of accounting in microfinance banks, the following hypothesis has been formulated.

Ho:Effective business decision making is a function of good accounting system.

Hi: Effective business decision making is not a function of good accounting system

Ho:The growth of microfinance banks is not dependent on the inability to determine the profit of the business.

Hi: The growth of microfinance bank is not dependent on the inability to determine the profit to the business.

Ho: Keeping accounting records by microfinance banks is rural centres is dependent on lack of good accounting personnel.

Hi: Keeping accounting records by microfinance banks in rural centres is not dependent on lack of good accounting personnel.

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