Minimum capital threshold and credit management strategies amongst microfinance banks in Nigeria

Abstract

This study investigated the distribution of credit management strategies across the categories of MFBs in Nigeria. To achieve this objective, a survey was conducted on 115 credit managers randomly selected across the four categories of MFBs. Responses obtained were analyzed using statistical tools such as the bar chart and Kruskal Wallis rank test. The results showed that the distribution of loan collection policy is significant across the categories of MFBs. The post-hoc test further revealed that this credit strategy varies significantly between MFBs in the tier-1/tier-2 and state/national categories. The study concluded that the minimum capital threshold is a key determinant in the choice of credit strategies amongst MFBs in Nigeria. Therefore, it is recommended that the government should ensure funds availability to the microfinance banking sub-sector, to help the banks improve their capital base and adopt better credit management strategies.

Keywords: Capital threshold; Credit management strategies; microfinance banks.