Impact of Microfinance and Performance: A Study of Ibile Microfinance Bank, Ikeja

Impact of Microfinance and Performance: A Study of Ibile Microfinance Bank, Ikeja

Chapter One

Research Objectives

1. To investigate the job creation capacity of MSMEs through the services of Ikeja, Ibile Microfinance Bank.
2. To examine the contributions of Ikeja, Ibile Microfinance Bank to poverty alleviation in the
3. To examine the contributions of Ikeja, Ibile Microfinance Bank to women empowerment in Lagos
4. To investigate the accessibility of financial and non-financial services of Ikeja, Ibile Microfinance Bank by households in the
5. To identify the constraints affecting the accessibility to financial and non-financial services of Ikeja, Ibile Microfinance Bank in Lagos

CHAPTER TWO

LITERATURE REVIEW

This highlights the theoretical and empirical literature on MFBs. The review is organized thus: theoretical literature, empirical literature, summary of literature reviewed and justification for the study.

Review of Theoretical Literature

The concepts and theories of Ikeja, Ibile Microfinance Bank are discussed in this section. The major concepts are microfinance, microfinance banks/institutions (and the services as rendered/provided which impact on the customers/households for achievements of the objectives of the MPSRF framework), poverty alleviation, women empowerment and employment generation.

Conceptualization

 Microfinance:

Microfinance can be defined as the provision of financial services to the group (active poor) who are traditionally not covered by or served by the conventional financial institutions. It is characterized by the smallness of loans advanced, absence of asset-based collateral and simplicity of operation (Akinboyo, 2007). This implies that it is a policy by the government to ensure that targeted group/economically active poor assess financial and non-financial services

which will enable them to improve on their life-sustaining goods and enhance their standard of living. Microfinance emphasizes the provision of loans (micro-credits) to the economically disadvantaged and active group to help them engage in new productive activities and/or to expand on the existing ones. According to United Nation Capital Development Fund (UNCDF), cited in Adeusi (2015), the government of Nigeria identified microfinance as a useful tool in achieving the three objectives of:

1. A strong and focused emphasis on economic
2. Better access by the poor to social services and adequate infrastructure and

• Targeted interventions to protect the low-income population or the most vulnerable, because it helps poor people to expand their businesses, increase their revenue and augment employment thereby contributing to the economic development of the country through an improved standard of

Microfinance is a means of providing the economically active poor and low-income households with financial services such as credit (to help them engage in income-generating activities or expand their small businesses), savings, micro leasing, micro-insurance and payment transfer.

According to Khan and Rohaman (2007), microfinance is a form of financial development that primarily focuses on poverty alleviation, wealth creation, and empowerment through the provision of financial services to the poor. By focusing on particular objectives and targets, it is expected that through the assess, some policy objectives would be achieved for the overall benefit of the economy.

According to Ayodeji, Adesusi and Ibitoye (2013) microfinance banks give access to financial and non- financial services to low-income people who wish to access money for starting or developing an income-generating activity. Ronaldo (2010) describes microfinance bank as a medium supporting entrepreneur and improving economic growth. It provides poor borrowers with access to sustainable livelihood through zero or very low-interest rate.

Microfinance is small-scale financial services for both credits and deposits that are provided to people who farm or fish or herd; operate small or microenterprises where goods are produced, recycled, repaired, or traded; provide services; work for wages or commissions; gain income from renting out small amounts of land, vehicles, machinery and tools; and to other individuals and local groups in developing countries, in both rural and urban areas (Robinson, 1998). Microfinance involves the provision of financial services to the poor and the low-income segment of society. Largely, micro-financing has been identified as a potent instrument for promoting financial inclusion and consequently, poverty alleviation. Financial inclusion or inclusive financing is the delivery of financial services at affordable costs to sections of disadvantaged and low-income segments of the society. In traditional African societies like Nigeria, there was a dominance of microfinance intermediations in varying dimensions across all socio-ethnic and cultural group. For instance, the Esusu initiative in the Igbo society and Ajo saving scheme in the Yoruba society are classical cases of microfinance. Microfinance institutions provide a wide range of services. Their best -known activity is the provision of credit to poorer households and small enterprises, but many also take deposits. In addition, some offer other financial services, such as insurance, or advice and training to their clients. This training is often linked to the microfinance institutions main activities: training in business management, for example, might make the loan more valuable to the borrower and also enhance the chances of repayment. Sometimes microfinance institutions are used as a vehicle to provide other services and education, for example, in the area of health awareness (Hardy, 2002). In order to alleviate poverty, empower women and create jobs in the country, various microfinancing schemes have been initiated both in pre and post-Structural Adjustment Programme (SAP) era. Among which are: the various traditional and informal financial institutions which involve the accumulation of capital by a group and allocating the funds to one another on a rotational basis. The traditional microfinance institutions provide access to credit to the economically active population/groups with the sole aim of improving their life and economic status. Other providers of microfinance services include saving collectors and cooperative societies (CBN, 2005). According to Wrenn (2005), the importance of microfinance in the field of development was reinforced with the launch of microcredit summit in 1997. The summit aims to reach 175 million of the world‟s poorest families, especially women with credit for the employment and other financial and business services. The United Nation also declared the year 2005 as the international of microfinance which enhanced the formulation of MPRSF in December, 2005 and the establishment Microfinance Banks in Nigeria.

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CHAPTER THREE

RESEARCH METHOD

The chapter presented the procedure, the design and techniques of data analysis and the presentation is as follows: research design, research population and area of study, sample size and sample technique, method of data collection and research instrument, reliability and validity of research instrument, theoretical framework/model, estimation technique and procedure, evaluation of estimates and test of research hypothesis.

Research Design

Research design is a comprehensive plan for the collection of data in an empirical research project and it provides guideline which directs the researcher toward solving the research problem (Akuzuilo & Nwoye, 2003). The research design specifies three processes of data collection, instrument development and sampling which are discussed below. The choice of design according to Asika (1991) is conditioned by the nature of variables being interrogated by a study. As a survey, this research is interested in observing what is happening to sample subject/variables without any attempt to manipulate them. The kind of survey chosen is sample survey which allows the researcher to study only a part (sample) of a given population and generalize the result to the entire population.

Research Population and Area of the Study

The research population consists of all the 645,594 customers of 45 Microfinance Banks (MFBs)as sourced from various MFBs in Lagos State at the time of the survey.

The choice of Lagos State for the study is due mainly to the issue of proximity to the researchers as other states in Nigeria could as well be chosen for evaluating the performance of Ikeja, Ibile Microfinance Bank in Nigeria. Again, there are indications that the State hosts the largest number of Ikeja, Ibile Microfinance Bank in the South Eastern part of Nigeria (CBN, 2017).

CHAPTER FOUR

RESULT PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS

In chapter three, the study plan, and the description of how the research objectives will be achieved were presented. The chapter presents the results, the analysis and discussion of empirical results. The content of the chapter is as follows: result presentation and analysis, evaluation of research hypotheses, discussion of findings and policy implications of empirical results.

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

 Summary

MFBs were established in 2005 with specific objectives and as a strategy for poverty alleviation. The objectives would be achieved through the accessibility of the financial and non-financial services of Ikeja, Ibile Microfinance Bank. This study appraised the Ikeja, Ibile Microfinance Bank in Lagos state which has the second largest concentration of Ikeja, Ibile Microfinance Bank in Nigeria after Lagos. CBN (2005) maintained that MFBs are aimed at empowering the poor, through the needed financial services like provision of microcredits and loans. Credit is considered essential input to increased economic performance and productivity. Credit boosts income level, increase employment at the household level and thereby alleviates poverty. MBF services, including savings and loan enable MSMEs to acquire basic infrastructure and raw materials. The importance of Ikeja, Ibile Microfinance Bank therefore cannot be over-emphasized because it plays a role in making credits/funds available from the surplus to the deficit sector of the economy through its intermediary role especially to the poor segment of the economy.

The study, first reviewed the concepts of microfinance which is the provision of financial services to the group who are traditionally not covered or served by the conventional financial institution (Wrenn, 2005). Based on the reviews by the scholars, we conceptualize a framework which described the steps to the achievement of the MPRSF objectives. The basic theories of microfinancing discussed include microfinance theory of change which explains the benefits of assessing MFBs financial services. According to Dunford (2012), access to appropriate services like credit/loans, savings and the use will in short run increase business turnover and employment, education for children and in long run reduce poverty alleviation and raise standard of living. However, the effect will be felt by someone who follows the three steps of accessment, investment and repayment. Financial intermediation theory is based on transaction and asymmetric information. Supply leading and demand following hypotheses try to establish a nexus between economic development and finance as propounded by Schumpeters in 1911. Microfinance theory based on joint liability while life cycle theory of firm finance and investment outlines various options left for firms on path to expansion.From the empirical review exercise, it was discovered that different empirical studies on microfinance bank have been carried out with different methods ranging from Ordinary Least Square regression (OLS), descriptive statistics, multiple regression and ANOVA. The authors reviewed include: Babagana (2010); Babajide (2011); Chima (2012); Anusi (2012); Odebiyi&Olaoye (2012); Ajagbe (2012);

Gulani&Usman (2012); Akande (2012); Ngutor et al (2013); Agbo&Ebe (2013); Adbulazees (2014); Musa et al (2014); Gichuki et al (2014); EFInA (2014). Based on the empirical reviewed literature, the study therefore becomes justified to the best of my knowledge as among the first studies that appraised the Ikeja, Ibile Microfinance Bank in Lagos State, South East geopolitical zone. Secondly, unlike Jenyo and Adebayo (2014) who focused on thestructure and practicability of Ikeja, Ibile Microfinance Bank operations in North Central Nigeria, the present study focused on the three core objectives of MPRSF. Thirdly, the current study used both questionnaire and regression model analysis unlike previous studies that used either descriptive or OLS techniques of analysis.

The adopted design and framework for the study is the survey/questionnaire design. The research population and study area consist of all the customers of the 45 MFBs in the three senatorial zones in Lagos State. The area/population of the study is the 410 respondents. A pre-pilot structured questionnaire was used as the method of data collection. All the parts of the questionnaire were designed with close- end- questions which take the form of multiple-choice questions.

The research instrument was face validated by some researchers in the Faculty of Social Sciences, NnamdiAzikiwe University. The Cronbach Alpha Coefficient was used to confirm the validity of the research instrument. The theoretical framework of the study is financial intermediation theory as developed by Gurley & Shaw (1960). Based on the framework and using previous study models (Babajide&Iyha, 2013; Ayoeleji, Adewusi&Ibitoye, 2012; Niskanen&Niskanen, 2007; Karlan& Valdivia, 2006; Canagarajah et al, 1998; Dalt&Ravalin, 1996a; 1996b; Aryeetey&Gockel, 1999),three models were specified, formulated and estimated to give empirical contents to the questionnaire responses. The result presented shows that MFBs have contributed positively to the three objectives of poverty alleviation,women empowerment

and employment generation. On the otherhand, the result obtained reveals that most of Ikeja, Ibile Microfinance Bank concentrated in urban areas, and that lack of access to basic infrastructure e.g. internet services, competition with DMBs and high interest rates are constraints to the accessibility of Ikeja, Ibile Microfinance Bank services in Lagos state.

Conclusion

The main thrust of this study was to appraise the Ikeja, Ibile Microfinance Bank in Lagos state in line with the MPRSF objectives of employment, poverty alleviation and women empowerment. Particularly, the study focused on the accessibility of the financial and non-financial services of Ikeja, Ibile Microfinance Bank since MPRSF in 2005. The study also examined the constraints to the accessibility of the services of the bank. Findings from the study indicate that men patronize MFBs than women.That the employment, income and assets of MSMEs have increased. Women decision making ability have also improved relatively.Customers between the ages of 41-50 patronize MFBs more than other age groups and that mostly less uneducated people form the bulk of Ikeja, Ibile Microfinance Bank customers among other findings. From the results obtained and inferences drawn thereof, we conclude as follows. First, MFBs have significantly contributed to employment generation/jobs in Lagos state. With the financial and non-financial services, new MSMEs have started and old ones expanded. The findings, also revealed positive contribution to poverty alleviation and women empowerment though there are still areas for improvement.

Secondly, there are still financial and non-financial services that are not optimally provided. For example internet and mobile banking services, pre-loan training, business consulting and procurement services and the need to improve on them.

Thirdly, there are still inherent constraints to the accessibility of financial and non-financial services of Ikeja, Ibile Microfinance Bank. These constraints include high interest rate, short loan repayment period, competition with DMBs.

Policy Recommendations

The key findings from our study show that MFBs have contributed to the objectives of MPRSF despite some challenges. The following policy recommendations are provided for improvement:

1. Enabling Environment for MFBs Operations: The government should provide basic infrastructure especially in the rural areas to enhance the operations of the banks as most MFBs prefer urban areas where the cost of doing business is low.
2. In line with the world technology derive, the banks (MFBs) should acquire appropriate Information Communication Technology (ICT) so as to boost the internet and mobile banking services of the Ikeja, Ibile Microfinance Bank as evidences proved that its non- availability hinders the performance of Ikeja, Ibile Microfinance Bank.
3. Improve on the financial and non-financial services/products that will be beneficial and attractive to the economically active
4. Restriction of commercial banking activities on certain areas to reduce competition with DMBs so that MFBs could be harnessed for development in the rural
5. Creation of dedicated fund in the CBN for easy assessment by the Ikeja, Ibile Microfinance Bank to the benefit of the

Contributions to Knowledge

The study has contributed to the body of knowledge in the following ways:

• The study is an appraisal of microfinance banks in Nigeria has contributed to the literature of microfinance
• Unlike previous studies, for example (Jenyo and Adebayo, 2014) that focused on structure and practicality of Ikeja, Ibile Microfinance Bank in its evaluation in the North Central, our study focused on MFBs contribution to employment generation, poverty alleviation and women empowerment in Lagos State, the South Eastern Nigeria.
• Unlike previous studies that used questionnaire only (survey), the current study used a combination of survey and regression in appraising the Ikeja, Ibile Microfinance Bank in Lagos State,
• The theoretical contribution of the study to the existing knowledge is also quite significant. Unlike previous studies, this study used a broader based theory of poverty alleviation as

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