CHAPTER ONE

INTRODUCTION

1.1 Background

1.2 Problem statement

1.3 Research Questions

1.4 Research Hypotheses

1.5 Research Objectives

1.6 Significance of the Study

This work is significant to me because it will increase my knowledge of Non-performing loans and will help me in improving on my research skills. The research is also going to enable me to earn an undergraduate degree from the University of Buea precisely a Bachelor degree in Banking and Finance.

The study is important because it’s going to help administration all over and most especially in Banks to know how loans become non performing and ways in which they can reduce the number of loans that become non-performing.

It will also be significant to the field of Banking and Finance because it will be adding knowledge in the field especially under Non performing loans. This will help the younger generation to have more knowledge about Non performing loans and more material in doing their research.

1.7 Scope of the Study

The scope of the study is defined between the range of Microfinance institutions and particularly Buea P & T cooperative credit union Buea. This research is structured to carry out an in depth analysis of the effect of non-performing loans on the performance of Microfinance Institutions. The concepts of non-performing loans were elaborated and performance too looking at economic and financial performance. This research is limited to just a Microfinance in Buea known as Buea P & T cooperative credit union Bueaso as to ease the availability and collection of data. Qualitative research design was used to help us guide the study and have a better understanding. Questionnaires are used and are administered to get the response to the research questions from the respondents gotten through convenient sampling.

1.8 Structure of the Study

The first chapter which is the introductory part of the research deals with the background of study, problem statement, objectives, hypothesis, significant, scope and organization of the study. The second chapter deals on reviews of related literature on conceptual and theoretical as well as empirical literature pertinent to the objective of the study. Chapter three presents the methodology of the study, which includes the scope of study, the method of data collection, and method of data analyses. Chapter 4 entails the presentation and discussion of results. Finally, the summary of the study, conclusion, policy implication and recommendations are presented in chapter five.

CHAPTER TWO

LITERATURE REVIEW

2.1 Conceptual literature

2.1.1 Non-Performing Loans

Angelini, P. (2018) defined non-performing loan (NPL) as a loan in which the borrower is in default due to the fact that they have not made the scheduled payments for a specified period. Although the exact elements of nonperforming status can vary depending on the specific loan’s terms, “no payment” is usually defined as zero payments of either principal or interest. The specified period also varies, depending on the industry and the type of loan. Generally, however, the period is 90 days or 180 days.

Carrascosa, A. (2020).Defined non-performing loan (NPL) is a bank loan that is subject to late repayment or is unlikely to be repaid by the borrower in full. Non-performing loans represent a major challenge for the banking sector, as it reduces the profitability of banks, and is often presented as preventing banks from lending more to businesses and consumers, which in turn slows down economic growth (although this theory is disputed).

Enria, A. (2020) defined a non-performing loan (NPL) is a loan in which the borrower is in default and has not paid the monthly principal and interest repayments for a specified period. Non-performing loans occur when borrowers run out of money to make repayments or get into situations that make it difficult for them to continue making repayments towards the loan.