Effect of Bank Undercapitalization and Loan Delinquency on Financial Inclusion in Nigeria

Abstract

Financial Inclusion involves ensuring that the poor have access to financial services that are relevant to their needs especially in the rural communities. This study investigated the extent to which undercapitalization of rural banks and frequent loan delinquency influence the ability of deposit money banks to drive the inclusive growth agenda of the Central Bank of Nigeria. Out of the 250 questionnaires distributed, 179 were returned and analyzed. Being a categorical data, the study employed optimal scaling regression to measure the relationship between the dependent and independent variables. ANOVA and other statistical tests were also conducted. The study found that loan delinquency, undercapitalization and payment of utility bills were significant in measuring the inclusive growth initiative of the Central Bank of Nigeria. It therefore recommends among others that the central bank should make policies that will increase the credit worthiness of the rural dwellers as well as encourage banks to boost the capital base of the rural banks in order to be equipped with the financial muscle to drive financial inclusion in Nigeria.

Impacts of E-mutation: A Study on Service Recipients’ Perception

“…Finally, this study concludes that there exists a positive association between access to finance and productivity of enterprises. Babajide et al (2015) investigated the determinants of financial inclusion and its impact on economic growth in Nigeria and the evidence shows that financial inclusion is considered as the significant determinant of output in the economy. Bhatia and Singh (2015) postulated that inclusive growth is considered as the long-term phenomenon that can help to promote the living standard of the deprived sections of the society in the perspective of India.…”

Determinant Factors of Financial Inclusion

“…It also improves the efficiency and accessibility of financial services in a safe, convenient, secure and cost-effective way (Ikram & Lohdi, 2015), especially in the banking sector (Rusydiana et al, 2019). Financial inclusion is recognized as a continuous process to improve the quality, quantity and efficiency of financial intermediary services (Babajide, Adegboye, & Omankhanlen, 2015).…”

Economic analysis of growth finance and liquid liabilities in Nigeria

“…In the past few decades, Nigeria has witnessed significant development of financial instruments, financial intermediaries, and financial markets, which can be attributed largely to deregulation, globalization, and advancement in technology (Ejemeyovwi & Osabuohien, 2020). Thus, there has been an eruption of the availability of numerous borrowing and financing options leading to various investment choices (Babajide, Adegboye, & Omankhanlen, 2015). For instance, households are beginning to broaden their portfolio beyond bank deposits to mutual funds, securities, and derivatives.…”

“…For instance, households are beginning to broaden their portfolio beyond bank deposits to mutual funds, securities, and derivatives. In the same vein, firms are increasingly sourcing funds from stock and bond markets (Babajide, Adegboye, & Omankhanlen, 2015). Despite the varying pace of developments and importance of financial intermediation in the country, the following notable situation exists: while commercial banks have been playing an essential role in channeling funds to borrowers from savers, making it the singular finance provider, its role concerning intermediation, however, appears to be threatened by non-banks intermediation intense competition (Egoro & Obah, 2017).…”