Assessment of Compliance with Internal Control Mechanism by Microfinance Banks in the North Central States of Nigeria

ABSTRACT

The study is aimed at the assessment of compliance with internal control mechanism by Microfinance Banks in the North Central States of Nigeria. Data were collected through the use of structured questionnaire which contained 45 items. Descriptive statistics, mean, standard deviation and t-test were used for data analysis. Simple random sampling was used to select three states (Benue, Nasarawa and Plateau) and Abuja out of the six states in the North Central States of Nigeria. The population of the study consisted of 152 respondents (management staff) of Microfinance banks. The instrument was subjected to face validation by three experts. It was also trial tested on 40 respondents to establish the internal consistency of the instrument. The reliability co-efficient of the instrument was computed to be 0.97, 0.98, 0.95, and 0.80 respectively for cluster of the instrument and the over-all co-efficient was 0.98. The result of the data analyzed showed that Microfinance Banks highly complied with physical control measure in the North Central States of Nigeria. It also showed that the importance of internal audit in the detections and preventions of errors and frauds in Microfinance banks cannot be over looked. It was recommended that management of Microfinance banks should always ensure that risk management procedures of the bank are followed in loan approval and disbursement to reduce the incidence of bad debts. That the rural and semi-urban poor should always be the target of management of Microfinance banks in loan disbursement since Microfinance banks were established to meet their financial needs. Central Bank of Nigeria should ensure that guidelines and monitoring policies of the Central Bank of Nigeria are complied with by all the Microfinance banks operating in Nigeria.