This study examined the effect of micro
finance as an effective tool for poverty alleviation in Nigeria. There
has been an intensified and concerted effort by the government to
eradicate poverty in the nation and international level because of the
poor standard of living in the country. It is a very big problem in the
society that needs to be addressed by the government. This work is aimed
to know the reasons while the governments have not able to eradicate
poverty in the society.
The study was conducted in integrated
micro finance bank (IMFB) with 200 respondents. Data were collected from
the respondents by the use of questionnaire method. These respondents
were chosen by simple random method which comprises of both male and
female youths, the data collected were analyzed using percentage while
chi-square technique was used to test hypothesis.
The findings of this study reveal that
the micro finance institutions change interest rate as high as up to
100% of lending and pay as low as 5% of savings. This aggregate the
existing inequality in the distribution of wealth and income in Nigeria.
In conclusion; micro finance as an
effective tool for poverty alleviation has gone a long way to help
eradicate poverty in Nigeria. The study therefore recommends that both
individual and government should employ qualities and skilled staff so
as to enhance the achievement of both organizational and economic goals.
Today widespread poverty is one of the
major problems of mankind and its alleviation one of her major agendas.
In recent years micro finance has emerged as an important instrument to
relieve poverty in the developing countries.
Today there are more than 700 micro
lending institution providing loans to more than 25 million poor
individuals across the world, their vast majority being the women.
However, these institutions face some serious challenges, especially in
less developed countries where the proportion of people in poverty is
high. The existing microfinance in Nigeria serves less than 1 million
people out of 40 million being the potential number that need the
service. Also, the aggregate micro credit facilities in Nigeria account
for about 0.2 percent of the GDP and is less than one percent of total
credit in the economy. Addressing this situation inadequately would
further accentuate the problem and slow down growth and development of
We find that the microfinance
institutions charge interest rate as high as up to 100% for lending and
pay as low as 5% of savings. This aggravates the existing inequalities
in the distribution of wealth and income in Nigeria.
Finally, Nigeria being a country thirty
for rapid development and economic growth encourages the creation and
availability of micro finance institutions so as to encourage these
(people masses) considered unbanked by the commercial banks to
participate in the economic activities. Thus, encouraging economic
growth and development.
1.2 STATEMENT OF RESEARCH PROBLEMS
Poverty is a serious menace, which most
developing or underdeveloped Nations/economy tend to tackle. The
imperative of a concreted and coordinated effort in dealing with the
problem cannot be overemphasized.
Remarkable multilateral effort had been
taken against high poverty level in Nigeria, where the proportion of
impoverished people is reportedly high.
Due to this high rate of poverty in the
economy, our youths engage in criminal activities such as robbery,
smuggling, etc to meet their daily necessities/needs.
Moreso, the inability of ladies of meet
their necessities i.e., adequate health care, material and financial
needs led them to institutions, (Aristo) so as not to be distinguished
or segregated by inferiority complex to mingle with the friends or
Hence, the inability of parents to meet
children needs, enforces them to give their child(ren) out for maids and
the inability to meet or pay hospital bill makes them to go for self
medications which at times is dangerous to health and causes death.
It is against all these scourge, that
the need for Micro finance arouse (MOHAMMED YUNUS) so as to enable those
who were previously considered unbearable by commercial bank
participate actively in the economic activities. Mohammed Aliyu Dahiro
and Hasa, Zubair (2008) the existing microfinance in Nigeria serves less
than 1 million people out of 40 million being the potential number that
need the service.
According to Nout Wellinki (2008) the
term micro finance is generally used for the provision of financial
services, in most cases micro-loans, to the poor and many people have
been to realize its opportunities. Indeed, the concept of Microfinance
has been accepted as an effective means to reach out for the poor.
Conclusively, it is against these
scourge (high poverty level in Nigeria), that Microfinance banks was
established, and the aim of this project is to test how effectively, the
establishment of Microfinance banks can help in the alleviation of
poverty in Nigeria.
1.3 THE AIM AND OBJECTIVES OF THE STUDY
The aim of this research work is to:
- To examine the impact of microfinance bank on poverty alleviation.
- To identify the availability of credit facility on poverty alleviation on small scale enterprises (SME's)
- To evaluate the effect of small-scale enterprises on poverty alleviation.
1.4 RESEARCH QUESTIONS
With the analysis of Microfinance Bank
as an effective tool for poverty eradication in Nigeria, the question
that came for proper consideration and dependable solution are as
followed listed below:
- i. Does the institutional constraint to effective
microfinance services delivery in Nigeria also affect the Integrated
Microfinance Bank (IMFB)?
- ii. Is there any positive impact made by the
Integrated Microfinance bank (IMFB) in the eradication of poverty in
- iii. Are there any possible recommendations in solving
or tackling the institutional constraints to effective microfinance
services delivery in Nigeria?
- iv. Does Microfinance bank undermine domestic capital formation of Nigeria?
- v. Does the Roles and Responsibilities of
stakeholders e.g. government, Central Bank of Nigeria (CBN) contributes
to encourage effective participation of Microfinance institutions to
enhancing economic growth and development?
1.5 RESEARCH HYPOTHESES
This research work aimed at testing the following hypotheses.
1. Ho: That there is no strong relationship between Microfinance bank and poverty alleviation.
H1: That there is strong relationship between poverty alleviation and Microfinance bank.
2. Ho: That there is no strong relationship between credit facility and poverty alleviation (SMEs).
H1: That there is strong relationship between credit facility and poverty alleviation (SMEs).
3. Ho: That there is no positive effect of SMEs in the alleviation of poverty in Nigeria.
H1: That there is positive effect of SMEs In the alleviation of poverty in Nigeria.
1.6 RESEARCH METHODOLOGY
Primary method of study: This
study will use questionnaire in other to test for the relationship
between Microfinance bank and poverty alleviation programmes in Nigeria.
The source of data will be through primary source of data generation
mainly through observation, survey, questionnaires e.t.c.
Sources of Data: Chi-square statistics will be used to analyse the information source through questionnaire.
1.7 THE IMPORTANT OF THE STUDY
The importance of the study on individuals, firms and governments are:
- i. The research work is carried out to put a clear
picture to Microfinance bank as an effective tool for poverty
eradication in Nigeria. Using (IMFB)as the case study.
- ii. It will also show the institutional constraints to effective microfinance services delivery in Nigeria.
- iii. This research study will also show the roles and
responsibilities of stakeholders e.g. government, central bank of
Nigeria (CBN) in Microfinance institutions.
- iv. This study is also aimed at indicating the goals of the Microfinance banks in eradicating poverty in Nigeria.
- v. It is also aimed of showing the policy strategies
of microfinance institutions in Nigeria and the policy targets.
1.8 THE SCOPE AND LIMITATION OF THE STUDY
In carrying out this research work,
information will be obtained from the case study; Integrated
Microfinance Bank (IMFB) on Microfinance bank as an effective tool for
poverty eradication in Nigeria.
Secondly, the questionnaire method of
data collection will be use in the acquisition of information from the
case study. Thirdly, the chi-square method of data analysis will be used
to analyse the questionnaire acquired so as to provide adequate
interpretation to the research work.
Finally, possible recommendations will
be given or enhanced to tackling or combating the constraints or
problems faced by the Microfinance institutions to effective
microfinance services delivery in Nigeria.
Moreso, limitations also have its own impact on this project. The limitations are listed below:
- Time constraints
- Inadequate financial resources
- Inadequate manpower resources
- Inadequate data
1.9 THE DEFINITION OF BASIC TERMS/CONCEPT
Micro finance: Integrated
Micro finance Bank (IMFB) P1c was incorporated as a wholly indigenous
microfinance bank following the grant of an approval-in-principle by the
Central Bank of Nigeria (CBN) on issuing of operating license as the
first micro finance bank in Nigeria on September 2, 2005 and possessing
dividend of 250 million ordinary shares of
N1.00 each. The authorized
share capital of N26 billion to accommodate the teeming high net worth
of individuals yearning was acquired.
Integrated Micro finance Bank (IMFB) was
promoted by a group of investors who saw the gap in the Microfinance
institutions in Nigeria. The official launching of Integrated
Microfinance Bank was enhanced by the then President and
commander-in-chief of the Federal Republic of Nigeria Olusegun Obasanjo.
Promoters of the bank comprised seasoned
and tested Nigerians of integrity and their primary goal is to bank the
unbanked, less-banked (Micro customers) and to take customers to their
businesses through the provision of efficient financial services
integrating the informal sector into the mainstream financial system.
Monetary policy: G.K.
Shaw (Jhingan, M.L. 2004) defines it as any conscious action undertaken
by the monetary authority (Central bank of Nigeria) to change the
quantity availability or cost of money i.e. interest rate.
CBN: This means the Central Bank of Nigeria. It is the highest monetary authority in Nigeria.
Finance: Finance is the
livelihood of any enterprise. It is a key factor of production; with
finance; an enterprise can acquire other factors of production such as
labour, machinery/technology and management as well as raw materials and
embark on any business activity.
GDP: Gross Domestic
Product: It can be defined as the total monetary value of all goods and
services produced within an economy during a given period of times
usually one year.
1.0 ORGANIZATION OF THE STUDY
Chapter one is the introductory parts.
Chapter two will be the literature review. Chapter three is theoretical
framework. Chapter four is research methodology, data analysis and
interpretation of results. While chapter five shall contain the summary,
conclusion and recommendation.