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| Digital Banking, Managerial Opportunism and the Performance of Microfinance Banks in Nigeria |
Bayo L.O. Kazeem and S. O. Olayiwola
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Abstract:
The performance of Microfinance Banks' (MFBs') in Nigeria is an important economic and political issue that has been a subject of many studies. The relationship between the shareholders and the managers of MFBs is expected to translate to profitability if all norms in the act of funding, monitoring, management and work environment are fulfilled. However, quite a number of these banks had been forcefully closed down. Hence, government's efforts at using MFBs' as a tool of improving the standard of living of the rural dwellers, alleviate poverty and provide micro credits to rural and urban dwellers did not yield desired results. The presence of opportunistic distortion of financial information occasioned by manager's desire to achieve the set earnings targets may adversely affects the accounting choices and disclosures in financial reporting. As firm's underlying economic performance is measured by using accounting metrics, the violation of the contracting and controlling role of accounting metrics will impair the reliability and informational role of these metrics. Therefore, the metrics must be done with high degree of confidence reposed in the agents in order to play reliable, contracting and controlling roles expected by the principal. However, the agents usually backslide on this role due to managerial opportunistic behavior leading to inability of the system to generate expected earnings with sincerity of the agent and the professionals. Digital banking is the digitization of all the traditional banking activities and programs that were previously only available to customers when physically inside of a bank branch. Since digitalization reduces human error and builds customer loyalty, digital banking may mitigate the effect of managerial opportunism on the performance of microfinance banks. This study examined within the context of digital banking, the effect of managerial opportunism on the performance of microfinance banks' in Nigeria. The results of both fixed and random effects estimations revealed that none of the variables included to explain the effects of managerial opportunism on microfinance banks performance in Nigeria is significant with digital banking as one of the control variables. This implies that, with digital banking, managerial opportunism does not have any significant effect on the performance of microfinance banks in Nigeria.
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