Dwindling nature of deposits mobilization in microfinance industry necessitated this study. It is to establish the effect of deposit mobilization on the financial performance of micro finance banks in Nigeria: A study of Umuchinemere Pro-credit micro finance bank Nigeria limited 2005 – 2014. The main objective is to examine the effect of customer deposit on the financial performance of the bank and one specific objectives. Two hypotheses were formulated, two research questions, The research design used is ex-post facto. The population of the study was all microfinance banks in Enugu and a sample of one (1)microfinance bank was considered. The data was sourced from the annual report of Umuchinemere pro-credit micro finance bank. Regression analysis and correlation techniques were used to analyse the data. The analysis was carried out using statistical package for social sciences(SPSS).One of the findings of these work is that Customer deposit has effect on the financial performance of Microfinance bank in Nigeria and that Interest rate charges has effect on the financial performance of Microfinance bank in Nigeria. In conclusion Micro Finance Banks are essential in the development of financial system in Nigeria. I recommend that the bank should give due emphasis to its deposit mobilizing tasks since mobilizing deposit is a way to survival and managing deposits is not possible without knowing and controlling the fundamental factors affecting it.




Title page                                                                                                    i

Declaration                                                                                                 ii

Certification                                                                                                iii

Dedication                                                                                                  iv

Acknowledgements                                                                                     v

List of tables                                                                                               vi

Abstract                                                                                                      vii


1.1     Background to the study                                                           1

1.2     Statement of the Problems                                                        4

1.3     Objectives of the study                                                             5

1.4     Research Questions                                                                  6

1.5     Research Hypotheses                                                               6

1.6     Significance of the study                                                          7

1.7     Scope of the Study                                                                   7

1.8     Definition of Terms                                                                8


2.0     Introduction                                                                             10

2.1   Conceptual Framework                                                              10               2.2    Theoretical foundation                                                             29

2.3   Empirical review                                                                        31

2.4    Summary and gap in Literature                                                  36


3.1     Introduction                                                                             38

3.2     Research Design                                                                      38

3.3     Sources of Data                                                                        39

3.4     The Population of the study                                                     39

3.5     Sampler and sample size                                                           39

3.6     Instrumentation                                                                        39

3.7     Reliability and validity of the data and test instrument               40

3.8     Data analysis techniques                                                           40


4.1     Introduction                                                                             42

4.2     Analysis of Data                                                                      42

4.3     Test of Hypothesis                                                                   48

4.4     Major Findings                                                                        49

4.5     Discussion of Findings                                                             49



5.1     Introduction                                                                             52

5.2     Summary                                                                                 52

5.3     Conclusion                                                                              53

5.4     Recommendations                                                                    54

5.5     Suggestion for further study                                                     56

References                                                                                         57

Appendix                                                                                           63




  • Background to the Study

The desire to enlarge banking facilities in the rural areas of Nigeria started with the rural banking scheme in the 1970s, and up to the 1980s. However, by the end of the 1980s, it became clear that the conventional banks were no longer willing to open more rural branches; this was simply because such branches were mostly unprofitable.

Opening them therefore ran contrary to the profit objective of the owners. In facing this challenge, Nigeria, like most other countries of the world have adopted the concept of micro financing as a means of mobilizing deposits in the rural areas. Microfinance banks in Nigeria operate in diverse environments where they render various categories of services and products to the target clients.

Microfinance banking is a type of banking service that is provided to unemployed or low income individuals or groups. Microfinance banking as a means of creating economic and social development has come a long way in Nigeria. Various comprehensive surveys of the diversified activities of microfinance banks have been provided since 2005 when the policy guidelines became operative. Since its inception, Microfinance Institutions (MFIs) has contributed in a special way in supporting small and medium enterprises by

effectively channeling the idle funds obtained through deposit mobilization to the general public in the forms of loans (short, medium or long term loan), so that it is being put into valuable production and other investment projects helping people to reach their goals.

The importance of Microfinance Institutions can never be overemphasized. Deposit mobilization is one of the major objectives of banks. Deposit is the foundation of all banking activities. However, microfinance banks as well as the banking sector in general do depend on customer’s deposit to advance its clients.

Since the proclamation of the term Micro financing in Nigeria in the mid-term 1970’s, several countries have copied this model, mostly in the developing world. However, the government of Nigeria adopted this policy in the year 2005 and inaugurated the microfinance scheme. The main objective for the promulgation of this policy is to provide finance to the economically active poor, excluded from financing from conventional banks, provide employment, engender rural development and reduce poverty. More so, in Nigeria it is important to note that there are over nine hundred (900) Microfinance banks today in Nigeria and they are regulated and supervised by the Central Bank of Nigeria.




2.0 Introduction- This chapter discussed past studies related to this topic and has to do with Conceptual, Theoretical, and Empirical Review which are discussed in details.

2.1 Conceptual Framework

2.1.1 Definition of Deposits

Deposit is the money placed with a bank or other financial institution. Deposits are generally made into either a checking or savings account, although many other types of accounts exist where deposits can also be made or deposit is a claim of customer over the bank on his account. A deposit will often be made into a savings account for the purpose of wealth storage, but such a deposit will usually only earn a relatively low interest rate. On the other hand, a deposit made into a checking account allows the funds to be made available for use through the writing of a cheque.

Other types of deposits to different types of accounts include: Term, Time, Call, Counter, Bank, Security, Current, Demand, Direct and Fixed Deposits (Hellman, Murdock & Stiglitz, 2000). A deposit is generally required upon the opening of almost all fiduciary accounts at banks and other financial and credit institutions. Banks mobilize deposits by making finances and by investing in various financial markets. Basically deposit mobilization is related to the creation    of credits.

The banks would have special campaigns where they would interact with a lot of people and invite them to make deposits with their bank, Nada (2010).

2.1.2 Importance of Deposit Mobilization

First, deposit means a claim of customer over the bank on his account in economic concept, any kind of wealth needs to be distributed fairly. It affected the economic stability of the state. One of wealth type in individual level is money, which can be deposited in a bank. Microfinance Bank is one of the players who have this important role to mobilize the deposits.

To mobilize the deposits, Microfinance Bank can do several activities. First, making finance activities. Those activities are good in wealth distribution, which can be useful for another party who needs the money. In sample nowadays, financing activities in property, car, trading, etc are the type of financing which are distributed by the banks from depositor to the borrower (Cantoni, 2004).


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