EFFECT OF DEBT MANAGEMENT AND PROFITABILITY ON MICROFINANCE BANKS IN NIGERIA

This study examined the effect of debt management on profitability and performance of Microfinance Banks in Nigeria. From 2019 to 2024. The research adopted a descriptive survey design and relied on both primary and secondary data. A total of forty (40) questionnaires were administered to staff of selected Microfinance Banks, of which thirty-eight (38) were duly completed and returned, representing a 95% response rate. Data collected were analyzed using descriptive statistics, Chi-square tests, and regression analysis with the aid of SPSS 26. Findings revealed that effective debt management practices, including timely recovery, clear policies, and loan monitoring mechanisms, significantly enhance profitability and sustainability of Microfinance Banks. Results from the Chi-square analysis indicated that both debt management (χ² = 18.742, p = 0.001) and profitability (χ² = 12.365, p = 0.006) have significant effects on bank performance. Furthermore, regression analysis demonstrated that debt management and profitability jointly account for 45.1% of the variation in Microfinance Banks’ performance (R² = 0.451, p = 0.000). The study concludes that debt management is not merely a technical necessity but a strategic tool for ensuring profitability, growth, and long-term stability. It recommends that Microfinance Banks adopt well-defined lending and recovery policies, strengthen debt monitoring systems, maintain balanced loan loss provisions, and invest in modern credit risk management techniques. The study further suggests that future research should examine the role of fintech innovations, macroeconomic factors, and broader financial institutions in shaping debt management practices and profitability in Nigeria.