1.1 BACKGROUND OF THE STUDY
Microfinance has gradually developed to be a worldwide movement, no
longer being a subject matter of microfinance practitioners alone.
Governments, donors, development agencies, banks, foundations,
corporations, business communities, civil societies, researchers,
universities, consultants, philanthropists and others are taking an
increasing interest in it (Sale Huddin and Hukinil, 2004).
The increasing level of acceptance of microfinance among the
various groups of stakeholders worldwide presents the following
questions: is microfinance becoming popular because it is a good
business to make money or is it a powerful tool to fight poverty or is
it because of both (Annibale and Bob: 2006). Since the concept was born
is Bangladesh almost three decades ago, microfinance has proved its
values in many countries, as a weapon against poverty and hunger. It
really can change people’s live for the better, especially the lives of
those who need it most (Ashmawians El-fouadh: 2006) it has been
evidenced worldwide that microfinance helps the poor to overcome poverty
and not through charity. It is a financial system that serves the poor
with financial services in a most effective and productive way.
The experience of many microfinance institutions so far strongly
suggests that it is possible for the institutions to reach the goal of
serving people in extreme poverty without having to sacrifice their
profitability. This is mostly because microfinance is designed with the
poor in mind, while at the same time being founded on market principles
of competitiveness, pricing and sustainability. There is nothing wrong
in earning money while serving the poor, as long as earning money does
not become the prime or the only goal of microfinance providers.
Microfinance institutions throughout the developing world are proving
small loans to the poor for self-employment and providing to be
sustainable enterprises in the fight against poverty (Daley – Harris:
The global picture regarding microfinance outreach is quite
impressive from a mere 7.6million poorest families in 1997, the
micro-credit of more than 92million clients by December 31, 2004, this
number includes 66.6million families who were among the poorest when
they started with a program (Adams and Ivatury: 2004): of these
66.6million poorest clients, 55.7million or 83.6% were served by the 52
largest individual institutions, all with 100,000 or more clients.
Among these largest microfinance institutions, 79% is in Asia, 17% are
in Africa and only 4% are in Latin America.
Robust economic growth cannot be achieved without putting in place
well focused programmes to reduce poverty through empowering the people
by increasing their access to factors of production, especially credit.
The latent capacity of the poor for entrepreneurship would be
significantly enhanced through the provision of microfinance services to
enable them engage in economic activities and be more self-reliant,
increase employment opportunities, enhance household income and create
On July 1, 2001, Nigeria joined the ranks of developing nations
adopting laws and policies to regulate the microfinance sector. Under
the new microfinance policy of the Central Bank of Nigeria, community
bank and microfinance institutions must increase their capital base from
5million naira (approximately 42,000 USD) to 20million naira
(approximately 169,000 USD). The purpose of this policy is to create
microfinance banks that are financially sound, stable, self-sustaining
and integral to their communities with potential to attract more
Microfinance is about proving financial services to the poor who
are traditionally not served by the conventional financial services, the
federal government through the Central Bank of Nigeria established
community banks in every locality.
A reversal of that led to the establishment of microfinance banks
to replace them, which is now better constituted and equipped to
function. The SEEDVEST microfinance bank is an example of one of these
micro-financial services institutions committed to poverty reduction
within its jurisdiction.
1.2 STATEMENT OF THE PROBLEM
In envisioning the future of microfinance, it is important to know
the rationale for microfinance movement. Poverty focused microfinance
came into existence as a private initiative growing almost unnoticed
through process of learning by doing.
The global concern for the level of poverty in Africa is well known
to all. Africa is have lest hit by the crippling problems of chronic
hunger and malnutrition. The great concentration of poverty is
sub-Saharan African which is also a matter of concern for all. Despite
such disappointing facts, microfinance in Africa is growing. A broad
range of diverse institutions offers financial services to low income
clients in Africa. These include non-government organizations, non-bank
financial institutions, co-operatives, credit unions rural banks,
Rotating Savings and Credit Associations (ROSCA), postal financial
institutions, and increasing number of commercial banks.
When the present administration came into office on the 29th May
1999, it paid attention to poverty reduction. During the regime
preceding this administration, the World Bank tried to focus on poverty
reduction in Nigeria and so commissioned a study on poverty assessment
in Nigeria. The study not only profiled poverty but also established
quantitatively the trend of poverty encroachment to development from
1980 to 1986. the study showed that poverty level in Nigeria has been
extremely high, with about two thirds of the population living below
poverty line (Akanji, 2008). Consequently, mainframe economic though
established that to conquer poverty requires action at the local,
National and global levels to expand poor people’s opportunities empower
them and increase their security.
This study aims to establish the need to empower the poor, which
has been estimated to be on the increase through the operation of
microfinance banks as a strategy for poverty reduction. This study
intends to address the following questions:
i What are the roles of microfinance banks on poverty reduction in Port Harcourt town?
ii How does SEEDVEST microfinance bank extend financial services and credits to beneficiaries?
iii What are the impediments to micro-financial services faced by SEEDVEST microfinance bank?
1.3 OBJECTIVES OF THE STUDY
The broad objective of this study is to estimate the role of
microfinance banks on poverty alleviation with a special focus on
SEEDVEST microfinance bank. The specific objectives shall include:
i To determine the impacts of microfinance banks on poverty alleviation in Port Harcourt town.
ii To trace how SEEDVEST microfinance bank extend micro-financial services to customers or recipients.
iii To evaluate the likely obstacles to micro-financial services
faced by SEEDVEST microfinance bank in the discharge of their duties.
The research hypotheses of the study are:
1. SEEDVEST microfinance bank play significant role in poverty reduction in Port Harcourt town.
2. SEEDVEST microfinance bank extends financial services and credits to potential beneficiaries.
3. There is no impediment to the discharge of micro-financial services by SEEDVEST microfinance bank.
1.5 IMPORTANCE AND RELEVANCE OF THE STUDY
Poverty is a hydra-headed social and economic problem facing
Nigeria for nearly half a century with diverse and far reaching
implications for current and future generations. Likewise, efforts at
stemming the tide have also been crucial among policy makers and the
Microfinance is about providing financial services to the poor who
are traditionally not served by the conventional financial institutions.
Three features distinguish microfinance from other formal financial
products. These are:
i. The smallness of loans advanced and or savings collected.
ii. The absence of asset-based collateral and
iii. Simplicity of operations.
To this end this study is relevant and important to the extent that
it explores the nature of micro-financial services available in
microfinance banks. The study shall equally illuminate the derivable
benefits from micro-financial services are well as acts as guide to
scholars and commentators whose basic interest is in microfinance banks
1.6 LIMITATION AND SCOPE OF THE STUDY
This study is limited to the roles of microfinance banks on poverty
alleviation in Nigeria: a case study of SEEDVEST microfinance bank.
The analysis touched on both the focus point as well as national
In another vein, there were limitations encountered in the process
of undertaking this study which include insufficient materials from the
focus of the study as well as time limits that affected a better
analysis of the issues being studied.