EFFECTS OF CORPORATE GOVERNANCE AND CREDIT POLICIES ON DELINQUENCY MANAGEMENT OF MICROFINANCE BANKS IN NIGERIA
Abdulai Rasheed Alade - Department of Banking and Finance, Faculty of Financial and Management Services, Polytechnic of Ibadan, Nigeria
Ogunsanwo Odunayo Femi - Department of Finance, Faculty of Management Science, Federal University of Oye-Ekiti, Nigeria
Adeleke Kareem Olalekan - Department of Banking and Finance, School of Business, Federal Polytechnic of Ado-Ekiti, Nigeria
Olowo Samson Oluwole - Department of Finance, Faculty of Management Science, Ekiti State University, Nigeria
ABSTRACT
This study examined the effect of corporate governance and credit policy on delinquency management of microfinance banks in Southwest Nigeria. Specifically, the study evaluated the extent to which board size, board composition, credit standard policy and credit term affect delinquency management of microfinance banks. Static panel regression estimate which involved pooled regression, fixed effect estimate, random effect estimate, Hausman test were employed as the analytical techniques. Data on corporate governance (proxied by board size and board composition); credit policy (proxied by credit standard and credit terms and conditions) and delinquency management (proxied by loan portfolio at risk and default rate) were obtained from Annual Financial Statement of respective microfinance banks over a period of seven (7) years from 2012 to 2018). The result revealed that board size has negative and significant effect on loan portfolio at risk and default rate by (t =-0.723004, -15.96851; p < 0.05); board composition has a negative and an insignificant effect on loan portfolio at risk and default rate by (t =-2.455182, -0.500404; p> 0.05); credit standard has positive and significant effect on loan portfolio at risk and default rate by (t =1.694070, 3.752766; p< 0.05); credit terms has positive with a significant effect on loan portfolio at risk and default rate by (t =1.694070, 3.482707; p< 0.05). The result, therefore, implies that credit policy is very instrumental to delinquency management of microfinance banks in Nigeria based on their significant influences unlike corporate governance which has a negative impact on delinquency management. Thus, bank managers should increase their board size with more management skills and professionalism, making it very difficult for the CEO to manipulate the board. The study concluded that corporate governance has negative effect on delinquency management while credit policy has positive and significant effect on delinquency management of microfinance banks in Nigeria. The study recommended that microfinance banks should engage in the development and implementation of strategic training for board members and senior bank managers. This should be carried out with special emphasis on corporate governance, corporate governance disclosure and banking ethics.
