CERTIFICATION

This is to certify that this dissertation titled Relationship Between Fraud and the Performance of Micro Financial Institution in Buea Municipality is an original work submitted to the department of Economic and Accounting, Faculty of Social and Management Sciences, University of Buea in partial Fulfilment of the Requirements for the Award of the Bachelors of Science Degree (BSc.) in Accounting. It is a record of her research work and has not been presented before in any panel.

1.6 Significance of the Study

The finding of this study will be of great importance to the policy makers in the Buea municipality in their efforts to prevent and at worst detect fraud timely. The regulator should be alert in ensuring that all MFIs in the Buea municipality put in place appropriate controls and policies to monitor the operations of these controls and their effectiveness.

This study will be of great importance to the government of the Buea municipality so as to enable them known whether the economy is progressing or not.

This study will also be of great importance to the customers in the Buea municipality. It will help them to know if the institution is financial capable or not to handle their funds. It also indicates if the institution is operating fairly or not so as to know whether they can entrust their savings to them.

This finding will help employees of MFIs in the Buea municipality to adhere strictly to their professional ethics and codes of conduct and staff in the MFIs will use this finding to reevaluate themselves and adopt appropriate measures and procedures of controlling or preventing fraud.

This study will add to the wide academic knowledge. The researchers and the academician will find this study useful for further discussion and research.

1.7 Organization of study

This study is based on five (5) chapter of which chapter one is talking about the background to the study, problem statement, objective of the study, hypothesis of research, significance of the study. Chapter two is talking about literature review which include; conceptual issues, theoretical literature, empirical literature. Chapter three is methodology include; source of data, method of data collection and data analysis and problems of data collection. Chapter four is presentation of data analysis include; analysis and interpretation of result. Chapter five is conclusion and recommendation.

LITERATURE REVIEW

2.1 Conceptual Issues

2.1.1 Fraud

Internationally, no precise legal definition of fraud exists. Hornby (1995) defined fraud as criminal deception. On the other hand, Ovuakprie (1994) sees MFIs fraud as any activity that lead to dishonest or unfair dealing. In its lexical meaning fraud is an act or course of deception of trickery deliberately practiced in order to gain some advantage dishonestly kartudu quoting Tanko in Damage and Hanid (2005) defined fraud as the use of deception with the intention of gaining an undue advantage, avoiding an obligation or causing loss to another party. Olufidipe (1994) defined fraud as “Deceit or trickery deliberately practiced in other to gain some advantage dishonestly.’’

A false representation of a matter of fact, whether by words or by conduct, by false or misleading allegation or by concealment of that which deceives and is intended to deceive another so that he shall act upon it to his legal injury. By extension fraud will include embezzlement, theft or any attempt to steal or unlawful obtain, misuse or harm the assets of MFIs. Fraud can be broadly defined as an intentional act of deception involving financial transactions for purpose of personal gain. Fraud is a crime and is also a civil law violation. Many fraud cases involve complicated financial transactions conducted by ‘white collar criminals’ such as business professionals with specialized knowledge and criminal intent. Since fraud means deceit or trick deliberately practiced in order to gain some advantage dishonestly, it becomes obvious that there must be a dishonest intention and the action per say must always be intended to benefit the perpetrator at the detriment of another. Also Fraud is a serious problem in the society and it affects every organization and it takes several forms. The following are some of the types of fraud.

 Unauthorized Withdrawals

According to Odhiambo (2013), unauthorized withdrawals are when an individual obtains fund from another person’s account without proper authorization. It may take the form of an individual forging another person’s signature and thereby obtaining money over the counter or forgeries of other funds from one account to another or withdrawal of funds from one account to another through the use of ATM Automatic Teller Machine according to Ebe (2006). The forgery may be targeted on saving accounts, deposit accounts, currents accounts and transfer instruments such as draft, mail transfers etc. It may also take the form of an individual knowingly, or unknowingly, divulging their personal information such as personal identification numbers (PIN) and password to fraudulent or third parties.

 Unauthorized use of Credit or Debit Cards

Unauthorized Use of Credit or Debit Card is a transaction involving the charging of expenses/purchase of goods and services without the consent of the cardholder. Such transactions may occur as a consequence of credit or debit cards that are lost, stolen, not received, issued on a fraudulent application, counterfeit or other fraudulent conditions as defined by the credit or debit card issuer. It is also when a fraudster obtains a debit card of another person together with the PIN and uses it to buy goods from the internet or at the Point of Sale terminals.

 Illegal Foreign Exchange Trading Schemes

Illegal Foreign Exchange Trading Scheme refers to: Buying or selling of foreign currency by an individual/company who is not an authorized dealer, or by an individual/company that has not obtained the permission of the Controller of Foreign Exchange under the Exchange Control Act 1953 (ECA). Buying or selling of foreign currency by a resident who is not an authorized dealer, with a person outside Malaysia, or by a resident who has not obtained the permission of the Controller of Foreign Exchange under the ECA. 

 Fraudulent Money Transfer

According to Akinyomi(2012) in his study on the examination of fraud in the Cameroonian MFIs and its prevention, fraudulent money transfer is when a fraudster generates a fraudulent request or alters a legitimate Fund Transfer Request for the purpose of committing fraud. The fraudster will then collude with fraudulent MFI staffs to withdraw the ill-gotten money.

 Theft and Embezzlement

According to Akinyomi (2012), theft and embezzlement represent another form of fraud which involves the illegal collection of financial items such as cash, traveler’s cheque etc. There by acquiring money the wrong way or procedure.

 Illegal Deposit Taking     

Illegal Deposit Taking is an act of receiving, taking or accepting of deposits (moneys, precious metals, precious stones, any other article etc.) from members of the public that promises a repayment with interest or returns in money or money’s worth without a valid license under the Banking and Financial Institutions Act 1989 (BAFIA).Lending to ghost Borrowers: Granting of loan and overdraft whether such loan are being repaid by the “ghost” borrowers or not experience have revealed that some unscrupulous bank managers grant fictitious loans by themselves using fake names (non-existing),signature and non-customers as fronts.

The Causes and Catalysts of Frauds

According to Benson and Edwards (2006), Nwaze (2009) and Adebisi (2009), there are many causes of fraud, depending on the enabling environment. We will focus our attention on the common ones under the following classifications: Social, technological and legal. Others are personal and management. These are briefly discussed below.

 Technological Causes of Fraud

Continuous advancement in technology constitutes a major factor in enhancing fraud. The easier things become the more it is for fraudsters too.  The cost of perpetrating fraud using available technology is very low. Technology facilitates near perfection of documents‟ replication.  It has turned the world to a global village. It has removed physical boundaries; hence fraud can be perpetrated along far distances. Proceeds from fraudulent activities can be obtained with ease, e.g. via Electronic Money Transfers, ATM fraud, Spam Emails. Most of the technological fraudsters are youths with highly developed minds and are often influenced by successful peers. Technological frauds are not easy to detect or prevent. There are so many user points worldwide where such frauds can be perpetrated. Technological development is a continuous process. While a particular fraudulent act is being detected and prevented, other methods are being developed.