This study is based on the development of microfinance bank in Nigeria (a case study of Octopus Microfinance Bank).
It is to examine the impact of financial industry to the citizenry.
Collection of data was made through the
use of questionnaire and personal interview of some workers in the bank.
The statistical methods employed in the analysis were the use of
percentages and table.
Findings show that credit has been recognized as an essential tool for promoting small and micro enterprises.
Rural transformation is all about
seeking transformation to bring about improvement in the living
condition of the farmer, the artisan, the tenants and the landless
within the simple and rustic economies of the countryside and urban
slum. Based on these findings, it was therefore recommended that a
national policy framework of microfinance should be prepared by the
development finance department of the Central Bank of Nigeria.
It should be subjected to stakeholders review so as to enhance provision of diversified microfinance services and land term.
TABLE OF CONTENT
Table of content
1.1 Definition of microfinance
1.3 Overview of microfinance banks in Nigeria
1.4 Brief history about the people of Oto-Awori and Ijanikin
1.5 Purpose of the study
1 .6 Method of research and research questions
1.7 Problem of the study
1.8 Definition of basic terms
2.0 Literature review
2.1 Role of microfinance banks in promoting entrepreneurship in rural areas
2.2 Financial requirement
2.2.2 Management requirement
2.3 Certification process
2.4 The history of microfinance
2.4. Examples of recent innovations in financial services for the poor
2.5 Importance of microfinance banks
2.5.1 Government view of microfinance sector
2.6 Problems of microfinance banks
3.1 Chapter Outline
3.2 Review of research questions/hypothesis
3.3 Research design
3.4 Characteristics of the study population
3.5 Sampling procedure and design
3.6 Data collection instrument
3.7 Administration of the data collection instrument
3.8 Limitation of the methodology 52
Data presentation and analysis
4.0 Introduction of chapter
4.1 Socio-demographic analysis
4.2 Research question
Summary, conclusion and recommendations
5.1 Restatement of research questions
5.2 Restatement of hypothesis
5.3 Summary of findings
Microfinance refers to the entire
flexible structures and processes by which financial services are
delivered to micro entrepreneurs as well as the poor and low income
population on a sustainable basis. It recognized poor and micro
entrepreneurs who are excluded or denied access to financial services on
account of their inability to provide tangible assets as collateral for
credit facilities (Jamil, 2008).
Microfinance can be seen as a supply of
loans, savings and other financial services to the poor. It is the
practice of delivering those services in a sustainable manner so that
poor households will have access to financial services so that they can
build sustainable microenterprise. While microenterprise is a business
that is independently owned and operated by its owners and does not meet
certain standards of size which in most cases operated as informal
Credits to microenterprises are assuming
importance in rural areas in response to the need of the less
privileged entrepreneurs with limited capital base. In Nigeria, access
to formal credit is a major problem facing the small and medium scale
entrepreneurs due to the prevalence of some factors such as delays in
loan disbursement on the part of the financial institutions and payment
defaults on the part of the beneficiaries (Olajide, 1980).
The aim of microfinance is not only to
extend credits to beneficiaries but to promote entrepreneurship and
boost rural financial markets that will provide sustainable access to
financial services by creating a relationship between those with
financial resources and those who need them.
Microfinance banking is about providing
financial service to economically active poor who are traditionally not
served by conventional banks in Nigeria.
The formal financial system provides services to about 35% of the economically active population while the remaining 65% are not getting access to bank funding.
In an attempt to solve the above
problems and in order to empower economically active poor, reduce the
level of poverty in the world and to assist the micro small and medium
scale industries, the microfinance bank was introduced.
Microfinance banks perform similar functions like commercial banks except for the size of their transactions.
The population of Nigeria and the size
of the target customers/markets of microfinance banks, it cannot be over
emphasized that the potentials of microfinance bank is huge and the
profitability of the business is enormous (Solad Consulting Nigeria,
1.1 DEFINITION OF MICROFINANCE
Microfinance unless otherwise stated
shall be constructed to mean any company licensed to carry on the
financial services such as savings, loans, domestic fund transfers and
other forms of services that economically active poor, micro enterprises
and small and medium scale enterprises need to conduct or expand their
business as defined by guidelines issued by CBN in exercise of powers
conferred on it by the provisions of Section 28 sub-section (l)(b) of
the CBN Act 24 of 1991 (as amended) and in pursuance of the provisions
of section 56 - 60 of the Bofin Act 25 of 1991 (as amended).
An entrepreneur is a person of very high
aptitude who pioneers change, organizes production and takes the risks
associated with the production process. Entrepreneur can also be viewed
as a person that wants to work for himself; it is sometimes synonymous
with self-employment. Entrepreneurship therefore by implication is the
act of being an entrepreneur, it involves all the activities and
function undertaken by an entrepreneur. Entrepreneurship is believed to
provide and important avenue for individuals to advance up the income
ladder. For some, it may provide a better route than paid employment,
while for others, who may be disadvantaged when pursuing paid
employment, it may provide the only route. Entrepreneurs are charged
with the responsibility of innovating new products, better production
method, creation of markets and managing the production process. They
are in a nutshell engaged in wealth creation. Financing therefore is
needed by entrepreneurs to enable them carry out their function
1.3 OVERVIEW OF MICROFINANCE BANKS IN NIGERIA
Currently, microfinance banks are of two
forms, as all licensed community banks in Nigeria that met CBN
guidelines have been transformed to Microfinance Bank. The two forms of
microfinance banks (MFBs) are:
(i) Microfinance Banks licensed to
operate as a unit. These are hitherto community banks licensed to
operate branches and/or cash centres subject to meeting the prescribed
prudential requirements and availability of free funds for opening
branches/cash centres. The minimum paid-up capital for this category of
N20 million for each branch. The branching should be gradual
within a local council before it spreads to other local councils and
(ii) Microfinance Banks license to
operate in a state. These are MFBs licensed to operate in all parts of
the state at once without recourse to gradual coverage (spread) as m
unit MFBs. Branches are opened subject to meeting the prescribed
prudential requirements and availability of free funds. The minimum
paid-up capital for this category of banks is WI billion. About 600
Community Banks have migrated to Microfinance banks by January 1st, 2008
and there are several others that have been licensed to operate. (CBN,
1.4 BRIEF HISTORY ABOUT THE PEOPLE OF AWORI OTO AND IJANIKIN
The people of Awori migrated from Ile-Ife where their father Oduduwa was king.
The name Awori was derived from "Awowatirin", an exclamation which emanated from "Ogunfunmire", a great hunter.
Ogunfunmire left Ife in search of
greener pasture as a hunter. After several consultation from the god of
divination (Ifa), it was revealed that he was to embark on a journey. He
was given a white dish and was told to place it on the river as he
travels on, anywhere it sinks should be considered as a place for
Ogunfunmire heeded to the advice and
embarked on the journey and did was he was told, when the dish sank, he
exclaimed "Awowatinrin" meaning "our dish has sank", this spot was at
The people of Awori are scattered all
over Lagos and Ogun States. They are also located at Oto and Ijanikin
which are the researcher's area of concentration. These two communities,
have things in common that is, cultural, social and political
inclination. Their major occupations are basket weaving, mat weaving,
fishing, coconut plantation, etc. Their dialect is Awori. They have
separate royal heads.
1.5 PURPOSE OF THE STUDY
The microfinance bank will be looked as a
concept donating an arrangement of mobilizing idle funds available to
the active poor community and channeling of funds for investment and
development. Also, it aims at evaluating microfinance bank in the area
of financial resource mobilization and provision of credit facilities of
the rural dwellers. It shall critically appraise the impact of rural
banking on rural saving.
1.6 METHOD OF RESEARCH AND RESEARCH QUESTIONS
The method of research is based on
personal interview and questionnaire. It is assumed that this research
would provide answers to the following questions.
(i) What are the effects of the development of microfinance banks in Nigeria?
(ii) Does the development of microfinance banks in Nigeria have any influence on the macro-economic variables?
(iii) Does the activity of microfinance bank in Nigeria have any significant effect on the citizenry?
1.7 RESEARCH HYPOTHESIS
(i) Ho: There is no relationship between the development of microfinance bank and macroeconomic variables.
H1: There is relationship between the development of microfinance bank and macro-economic variables.
(ii) Ho: There is no significant effect of microfinance banks activity on the citizenry.
H1: There is significant effect of microfinance bank activities and the citizenry
(iii) Ho: There is no relationship between the development of microfinance and economic growth and development.
H1: There is relationship between the development of microfinance banks and economic growth and development.
1.8 PROBLEM OF THE STUDY
Microfinance Banks (MFB) cannot engage in the following financial services.
(a) Foreign exchange transactions
(b) International commerce papers
(c) International corporate finance
(d) International electronic fund transfer
(e) Cheque clearing activities
(f) Entering into leasing, renting
and sales/purchases of any kind with its director, officers, employees
or persons who either individually or in concord with their family
members own 5% of the equity of the MFB without the prior approval in writing of the Central Bank of Nigeria. (Solad Consulting Nig.)
1.8 DEFINITION OF BASIC TERMS
Some technical terms that will be used
in the process of this study will be defined and clearly explained to
eliminate misinterpretation and misunderstanding of research objectives.
They are as follows:
(a) Bank: This is an organisation that provides various financial services such as: keeping or landing money.
(b) Rural banking: Can
be seen as the business of accepting money deposits and giving out
advances as well as performing other services to customers in rural
(c) Commercial bank: They
are retail bankers that mobilize deposit on saving terms. Current
account withdrawable by cheque and extend credit facilities to its
(d) Finance: This is a money set aside, used to run a business or to carry out a project.
(e) Microfinance: It
is seen as rendering financial services to the economically active poor
in form of loans to enable them start income generating activities or
expand their little business which include: saving, payment transfer,
micro leasing and micro insurance.
(f) Mobilization: An act of working together in order to achieve a particular aim.
(g) Infrastructural facilities: Basic services that is needed or necessary In a community or organisation.