ABSTRACT
The financial sector is one of the most dominant sector in the economic growth and development of any nation. The history of the financial sector in Nigeria dates back to 1892 with the advent of commercial banking business during the colonial
period. It was not until the 1930s however, that indigenous involvement in banking business started and that period witnessed the first incidence of financial distress in Nigeria.
Distress in the financial sector in recent times, remain one of the greatest challenges facing the industry particularly since 1990. It witnessed the collapsed of banks and non-banks financial institutions. In the mortgage finance sub-sector, 97 out of the 286 licensed primary mortgage institutions (PMIs) had their licenses withdrawn in 1997 due to insolvency, while only 54 are said to be stable and sound. This situation is even worst with the community banks and finance houses.
This research has looked at the fundamental factors that led to the distress situation in the financial industry with particular reference to the mortgage finance sub-sector between 1992-1997. This includes:-
i. Poor capitalization
ii. Bad investment portfolio
iii. Political and economic instability
iv. Mobilization of short term funds and excessive interest rate payments
v. Inconsistent government policies
vi. Inadequate monitoring and control by the regulatory authorities
vii. Management/boardroom problems.
These findings are based on the empirical investigations and observation of the situation in Happy Home Savings and Loans Ltd., the analysis and evaluation of other PMIs. An evaluation of the regulatory framework and policies for PMIs operations shows an inherent inconsistency and lack of adequate capacity to monitor and regulate their activities by the supervising authorities
