The Effect of Fraud on Bank Financial Performance in Cameroon: Case Study of NFC Bank

Abstract

Fraud is like an epidemic disease that affects banking sector and has great effects on the country’s economy. Fraud causes decline in liquidity of commercial banks and affects performance. Therefore, the study identified the effects of fraud on financial performance of commercial banks in Cameroon taking a case of NFC bank. Specifically, the study sought to assess the effects of fraudulent money transfer, unauthorized withdrawals and fraudulent loans on bank performance. Descriptive and correlation research designs were utilized in the study. A sample size of 100 respondents from different NFC bank branches was selected which majorly composed of the managers, tellers, credits and risk officers and finance officers. The study utilized primary data collected using questionnaires and secondary data sourced from NFC bank and the bank of central    African states. Data was analyzed using IBM SPSS version 21 and presentation done in figures and tables. From correlation findings, Pearson correlation coefficient of -.690, -.630 and .650 for fraudulent money transfer, unauthorized withdrawals and fraudulent loans respectively was found. This implies that as financial fraud cases increase, commercial banks performance reduces. The R squared value was 62.4% and F statistic was 53.09 in the regression analysis. Additionally, the beta coefficients for fraudulent money transfer, unauthorized withdrawals and fraudulent loans were -0.151, -0.582 and -0.431 respectively with respective significance values of 0.039 for fraudulent money transfer and 0.000 for both unauthorized withdrawals and fraudulent loans. The study concluded that fraud particularly fraudulent money transfer, unauthorized withdrawals and fraudulent loans have significant negative effect on bank performance. The recommendation of this study includes commercial banks putting in place fraud detection mechanisms and strengthen risk department to ensure that potential fraud risks are detected on time to avoid their occurrence. Additionally, the study recommends appropriate scrutiny of loan applicants documents to ensure they are true documents. Lastly the study recommends strict adherence to fraud control mechanisms in place within and outside the bank.