Banking Regulation and Financial Performance of Selected National Microfinance Banks in Nigeria (Published)
This study investigates the impact of banking regulation on the financial performance of selected National Microfinance Banks in Nigeria. Specifically, the study examines the effect of Minimum Capital Requirements and Prudential Ratios prescribed by the Central Bank of Nigeria on the financial performance of National Microfinance Banks, measured by Return on Equity. An ex-post facto research design was adopted, relying on secondary data obtained from the annual reports of the seven licensed National Microfinance Banks in Nigeria and Central Bank regulatory publications over a ten-year period (2015–2024). The data were analysed using Multivariate Analysis of Variance (MANOVA) to capture the simultaneous effects of regulatory variables on financial performance indicators. The empirical findings reveal that Minimum Capital Requirements and Prudential Ratios exert a statistically significant influence on the financial performance of National Microfinance Banks in Nigeria. Specifically, higher capital requirements and compliance with prudential standards are associated with improved financial performance, suggesting that regulatory measures contribute positively to institutional stability and profitability. The interaction effect between these regulatory variables further indicates that their combined influence plays a critical role in shaping performance outcomes. Based on these findings, the study recommends that regulators should sustain effective enforcement of capital and prudential regulations while ensuring sufficient flexibility to accommodate the unique operational realities of microfinance banks. Additionally, National Microfinance Banks should strengthen internal capital management and risk-control mechanisms to optimise returns and ensure long-term financial sustainability.
Keywords: Financial Performance, minimum capital requirements, prudential ratios and returns on equity (ROE)
Central Bank Regulations and the Financial Sustainability of National Microfinance Banks in Nigeria (Published)
This study examines the impact of Central Bank Regulations on the Financial Sustainability of National Microfinance Banks in Nigeria. The study employed the expost-facto research design. Data was collected from the central bank bulletins and the financial reports of the sample seven national Microfinance banks. The data collected was analysed using Multivariate Analysis of Variance (MANOVA). The findings derived from the empirical analysis revealed significant relationships between the Minimum Capital Requirement, and the financial sustainability indicators, including returns on assets (ROA) and returns on equity (ROE) and confirmed that the Minimum Capital Requirement imposed by the central bank has a significant impact on the financial sustainability of microfinance institutions. Based on the findings of the study, the following policy recommendations can be made; Policymakers and regulators should continue to enforce and monitor the Minimum Capital Requirement for microfinance banks. Adequate capitalization is essential for the financial sustainability and profitability of microfinance institutions. However, the capital requirement should be flexible enough to accommodate the specific needs and characteristics of microfinance banks, considering their focus on serving the underserved segments of the population. And Microfinance banks should prioritize maintaining an adequate level of capital to ensure their ability to generate returns on assets. This can be achieved through effective capital management strategies, including attracting additional capital from investors, optimizing internal capital generation, and ensuring efficient use of capital in productive activities.
Keywords: Financial Sustainability, minimum capital requirements, returns on assets (ROA) and returns on equity (ROE)