Private lenders and borrowers’ internal control weaknesses

Hasan, Mahmudul

doi:10.1002/jcaf.22517

Cited by 2 publications

(3 citation statements)

References 40 publications

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“…Weak internal controls in banks and microfinance institutions can have significant implications for loan recovery processes. Studies have shown that when internal control weaknesses are present, lenders tend to react by adjusting loan terms, such as decreasing the use of financial covenants and increasing loan spreads (Hasan, 2021). Additionally, poor internal controls can lead to higher levels of non-performing loans, affecting the financial stability of institutions (Ozili, 2019).…”

Section: Presence Of Weak Internal Control On Loan Recoverymentioning

confidence: 99%

Navigating Loan Recovery Process from SMEs: Identifying Critical Challenges for Microfinance Institutions in Tanzania

Sikira,

2024

int.jour.sci.res.mana

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The purpose of the study is to examine the loan recovery challenges facing Microfinance Institutions (MFIs) and Small and Medium Enterprises (SMEs) in Tanzania. The study took place at Nuru Financial and Business Services (NFBS), the Self-Microfinance Fund (SMF), and Ameic Microcredit Limited (AMC). These are among the microfinance institutions found in Dar es Salaam. The researchers employed a descriptive research design and used NFBS, SMF, and AML as study cases. The study involved 50 respondents, including credit officers, obtained through simple random sampling. In the data collection, the study used semi-structured questionnaires to gather primary data. Also, the study used secondary data from documents available at NFBS, SMF, and AML. Data were analysed using simple descriptive statistics with frequency, percentages, and mean. The study found that loan recovery was a challenging task and faced several obstacles, such as insufficiency of capital to cover recovery costs, the presence of weak internal controls on loan recovery, higher interest rates, and facing an extraordinary event during the loan recovery process. Others are getting into bitter relations with customers during loan recovery due to the incompetence of staff to address loan recovery processes. Finally, the study recommends the government provide financial support or subsidies to microfinance institutions to cover recovery costs, such as grants, low-interest loans, or financial assistance programmes. Establish and enforce regulatory standards for internal controls within microfinance institutions. Implementing policies to regulate interest rates charged by microfinance institutions to ensure fairness and transparency. Establish a legal framework to handle extraordinary events during the loan recovery process. Microfinance institutions should explore partnerships with international development organisations, impact investors, or donor agencies to secure additional funding for loan recovery efforts. Loan officers should be trained in cost-effective recovery strategies, and SMEs should engage in responsible borrowing practices to minimise the risk of default.

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Section: Presence Of Weak Internal Control On Loan Recoverymentioning

confidence: 99%

Navigating Loan Recovery Process from SMEs: Identifying Critical Challenges for Microfinance Institutions in Tanzania

Sikira,

2024

int.jour.sci.res.mana

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“…Prior studies have concentrated on traditional banks financing and what matrix these banks rely on to grant loans to SMEs to finance their working capital and long‐term assets (Berger & Udell, 2006, 2002). Hansan (2021) examined whether the presence of private lenders is associated with effectiveness of borrowers’ internal controls. Hansan (2021) defines private lenders to include banks.…”

Section: Introductionmentioning

confidence: 99%

“…Hansan (2021) examined whether the presence of private lenders is associated with effectiveness of borrowers’ internal controls. Hansan (2021) defines private lenders to include banks. Our paper contributes to accounting and finance literature by focusing on non‐banker lenders and SMEs that are subsidiaries of large firms.…”

Section: Introductionmentioning

confidence: 99%

Non‐bank financing of small and medium size firms in developing economies: Effect of management control systems including large firm affiliation

Nketia

Asare

Ampofo

2023

J Corp Accounting Finance

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This study investigates the relationship between Management Control Systems (MCS) of Small to Medium Size Enterprise (SME) and how that can sway financing of working capital (short‐term) and long‐term assets by non‐bank sponsors/investors. Based on the World Bank enterprise survey, we examined elements within the data that we classified as key components of management control mechanisms that can affect the effective running of SMEs to attract non‐bank financing. We developed six hypotheses to test the vigor of the association of financial report systems and/or subsidiaries status of SMEs and the financing of working capital and/or long‐term assets by non‐banks. The results of our tests illustrate that generally firms with sound financial systems and/or that are subsidiaries of a parent company entice non‐banks sponsors to finance the working capital and long‐ term assets of SMEs. This study contributes to the financing literature by examining MCS employed by non‐banks to extend financing to SMEs.

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Private lenders and borrowers’ internal control weaknesses

Cited by 2 publications

References 40 publications

Navigating Loan Recovery Process from SMEs: Identifying Critical Challenges for Microfinance Institutions in Tanzania

Navigating Loan Recovery Process from SMEs: Identifying Critical Challenges for Microfinance Institutions in Tanzania

Non‐bank financing of small and medium size firms in developing economies: Effect of management control systems including large firm affiliation

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