Accounting Practices and Financial Performance of Licensed Microfinance Banks in Nigeria: Evidence from Kwara State

Abstract

Despite the growing importance of microfinance banks (MFBs) in promoting financial inclusion, empirical evidence on the combined influence of accounting control systems, financial reporting practices, and accounting information systems on their financial performance remains limited, particularly in the context of Kwara State, Nigeria. This study addresses this gap by examining the effect of these accounting practices on the financial performance of licensed microfinance banks. Specifically, this study examines the effects of accounting control systems, financial reporting practices, and accounting information systems on the financial performance of licensed microfinance banks in Kwara State, Nigeria, with a view to addressing these problems. In particular, it seeks to evaluate how their accounting control systems, financial reporting practices and accounting information systems affect their financial performance. The study adopted cross sectional survey design, where data were obtained from 115 managerial staff of 27 licensed MFBs in Kwara State, obtained through Taro Yamane formula. Data is analysed using Partial Least Square-Structural Equation Modelling (PLS-SEM). The findings showed that accounting control systems, accounting information systems, financial reporting practice have significant effects on financial performance of microfinance banks. The study concluded that found that all three dimensions of accounting practices positively influenced the financial performance of the MFBs in Kwara State. The study recommended that licensed microfinance banks invest in modern accounting information systems to improve the accuracy and timeliness of financial information, strengthen internal control systems through regular monitoring and internal audits, and enhance financial reporting quality by ensuring compliance with applicable accounting standards and regulatory requirements. These measures will improve transparency, stakeholder confidence, and sustainable financial performance.