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.

                             TABLE OF CONTENTS

Title page ------------------------------------------------------------------------- i Approval page-------------------------------------------------------------------- ii Certification --------------------------------------------------------------------- iii Dedication ----------------------------------------------------------------------- iv Acknowledgements ------------------------------------------------------------- v Table of Contents --------------------------------------------------------------- vi List of Tables -------------------------------------------------------------------- viii Abstract --------------------------------------------------------------------------- ix

CHAPTER I: INTRODUCTION

Background of the Study-------------------------------------------------------- 1 Statement of the Problem ------------------------------------------------------ 7 Purpose of the Study------------------------------------------------------------ 8 Significance of the Study ------------------------------------------------------ 9 Research Questions ------------------------------------------------------------- 10 Hypotheses------------------------------------------------------------------------ 10 Delimitation of the Study ------------------------------------------------------

11 CHAPTER II: LITERATURE REVIEW -------------------------------- Conceptual and Theoretical Framework ------------------------------------- 13 Internal Control Structure in Microfinance Banks ------------------------- 26 The Importance of Internal Audit in Microfinance Banks ---------------- 35 Compliance of Microfinance Banks with Prudential Regulations -------- 37 Related Empirical Studies ------------------------------------------------------ 42 Summary of Related Literature ----------------------------------------------- 46

CHAPTER III: METHODOLOGY

Design of the Study------------------------------------------------------------- 48 Area of the Study --------------------------------------------------------------- 48 Population of the Study --------------------------------------------------------- 49

Sample of the Study ------------------------------------------------------------ 49 Instrument for Data Collection ------------------------------------------------ 50 Validation of the Instrument --------------------------------------------------- 51 Reliability of the Instrument --------------------------------------------------- 51 Method of Data Collection ----------------------------------------------------- 51 Method of Data Analysis ------------------------------------------------------- 52 CHAPTER IV: ANALYSIS AND PRESENTATION OF DATA

Findings of the Study----------------------------------------------------------- 67 Discussion of Findings --------------------------------------------------------- 70

CHAPTER V: SUMMARY, CONCLUSION AND RECOMMENDATION Re-statement of the Problem -------------------------------------------------- 77 Summary of the Procedures used for the Study ----------------------------- 78 Summary of Findings ----------------------------------------------------------- 79 Implications of the Study ------------------------------------------------------ 80 Conclusion ----------------------------------------------------------------------- 81 Recommendations --------------------------------------------------------------- 82 Suggestion for Further Studies ------------------------------------------------ 83 REFERENCES ---------------------------------------------------------------- 84 APPENDICES ----------------------------------------------------------------- 91