CREDIT RISK IN DEPOSIT MONEY BANKS AND MICROFINANCE BANKS IN NIGERIA: WHAT WE SHOULD KNOW

The study assessed the credit risk in Deposit money banks and Microfinance banks in Nigeria. The aim of the study is to assess whether or not there is a significance different between credit risk measured by capital adequacy ratio, non-performing loans ratio and loan-deposit ratio of Deposit money banks and Microfinance Banks in Nigeria. The study used secondaty data obtained from NDIC annual accounts and Financial Stability Reports. The data were analysed using descriptive statistics and two paired sample t-test in order to compare the credit risk of Deposit money banks with Microfinance banks. The study finds that the credit risk of Microfinance banks is significantly higher than that of Deposit money banks suggesting that microfinance banks are more vulnerable to credit risk. The study therefore recommends the need for Microfinance banks to rethink their lending model and improve on their corporate governance practices.