Bank capital, liquidity, and credit risk in Nigerian SME portfolio management

Justification for the Research

The Simple Macroeconomic of Bank capital, liquidity and application of credit risk model in SME portfolio management in Nigeria

The improvement of risk management in SME portfolio is noted by UNCTAD (2002) to be of utmost importance for the profitability of SME banking to be realized.SMEs play an important role in the development of the Nigerian economy as outlined in the work of Ogechukwu (2011). In this paper, we investigate the concept of Simple Macroeconomic of Bank capital, liquidity and application of credit risk model in SME portfolio management in Nigeria.

The aim of this paper is to investigate the Simple Macroeconomic of Bank capital, liquidity and application of credit risk model in SME portfolio management in Nigeria

Objectives

The objectives of this paper are as follows:

To investigate how the concept bank capital macroeconomics apply to concept of SME portfolio management in Nigeria

To investigate how the concept of liquidity macroeconomics apply to concept of SME portfolio management in Nigeria

3. To investigate the nature of application of credit risk model in SME portfolio management in Nigeria

4. To propose a suitable model to be used in the prediction SME performance in the future Nigerian economy

5. To explore the existing macroeconomic models of SME portfolio management.

6. To investigate the various shortcomings that can be encountered in the management of SME portfolio.

Justification for the research

A review of the current Nigerian SME banking scenario as well as the extant literature indicates that most of the literature is focussed on the credit risk management of the large corporate credit market (Claessens,2005). Research on SME risk management as well as capital modelling for the retail credits is largely underdeveloped. A review of literature further points out on the need for coming up with a specific failure prediction system for SMEs, distinct from the one used for other corporate positions (Leeth & Scott 1989; Jacobson et al. 2005; et al. 2005).It is for this reason that we come up with a failure prediction/risk management model for use in SMEs.

The variables that plays a role in the failure prediction

The failure prediction models are based on a standard set of variables/indicators. Extant literature indicates that these variables can be divided into there main categories (Altman,1968; Caouette et al., 1998; Beaver, 1967; Edminster 1972; Chen & Shimerda, 1981;Pompe & Bilderbeek, 2005).

1. Loss of competitive strength as a result of a fall in the demand or a sudden drop in internal efficiency.

2. Increase in the level of debt weight as a result of an external event, like a rise in interest rates; or on the basis of internal reasons, like reduced cash flow or a financial structure imbalance.

3. Deterioration in the quality of the nature credit relationship, especially in relation to the short-term lines of credit.

Method:

1. Conduct a literature review on the use creditworthiness models in the rating of the financial SMEs

2. Write an in-depth research report that combines my own understanding of all the relevant theories and integrates previous research with the results of my own empirical research.

Timetable:

Prepare the research proposal by Complete the data collection process by....

Complete the data analysis process by Give presentation

Complete the final report by Limitations:

Time constraint is the main limitation since the semester is relatively short and the data for the prediction of future performance/creditworthiness is mainly based on annual and quarterly reports.