The Effect of Microfinance Banks Services on Agricultural Production of Members of Cooperative Societies
Chapter One
OBJECTIVES OF THE STUDY
In this study therefore, the researcher hope to accomplish the following objectives:
- To determine how microfinance loans/credit granted to the farmers can influences the agricultural output in Nigeria economy.
- To determine policy actions in which agricultural output can be improved through microfinance bank credit.
CHAPTER TWO
LITERATURE REVIEW
THEORETICAL LITERATURE
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 denied access to financial services on account of their in ability to provide tangible assets 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 delivery those services in a sustainable manner so that, poor households will have access to financial services so that they can build sustainable micro-enterprise while micro-enterprise is a business that is independently owned and operated by its owners and does not meet certain standards size which in most cases operated as informal business. 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, 1. Microfinance Banks (MFBS) licensed to operate as a unit. These are hitherto community Banks licensed to operate branches and cash centre subject to meeting the prescribed prudential requirements and availability of free funds of opening branches/cash centre. The minimum paid-up capital for this category of banks is #20 million for each branch. The branching should be gradual within a council local before it spreads to other local council and state. 2. Microfinance banks licensed to operate in a state. These are MFBS licensed to operate in all part of the state at once without recourse to gradual coverage (spread) as in 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 #1 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, 2008.
The ministry of finance and central bank of Nigeria (CBN) have been advised to stop the bank of agriculture (BOA) from setting up microfinance banks. The development follows the decision of the banks of agriculture to establish microfinance banks in the 776 local government councils giving the advice, the national association of microfinance Banks (NAMB) said is tantamount to the aduictrain of duties and responsibilities on the part of bank of agriculture . NAMB’s chairman, Lagos state chapter, Mr. Olufemi Babajide, said the bank of agriculture would lose focus if it goes ahead with the decision to set up microfinance banks. He said the policies of setting up microfinance banks and the banks of agriculture are different. While the former was setup to reduce poverty to a minimal level, the letter was established to provide loans to small and medium scale farmers at a more flexible and lower rate. The inability to stop the bank of agriculture on the issues that would affect the operations of the microfinance industries.
CHAPTER THREE
RESEARCH METHODOLOGY
THE ORDINARY LEAST SQUARE (OLS)
The ordinary least square method shall be used in estimating the specified models, since parameters under this method of estimation have the blue property i.e. best linear unbiased estimators. The model will be subjected to the economic a prior theoretical as well as the statistical and economic criteria.
MODEL SPECIFICATION
In this research we have focused on secondary type of data. All data is collected from the different official publications of respected banks and state bank of Nigeria. In this study we are going to adopt three variables namely, gross domestic product, and micro finance bank loan agricultural output. After selection of the above variables we can describe the economic growth function of Nigerian in the following way:
Agri.output= f (loan, GovExp, fso)——————————— 1.1
Above the equation shows a positive relationship between agriculture output and microfinance bank and the financial sector output, this means that a change in microfinance, government expenditure and financial sector output brings about a significant change in the agricultural output. The model is further designed to make it amenable for statistical verification.
Agrioutput= a0 + a1 loan + a2GovExp +a3fso + e—————————- 2
Agrioutput=Agricultural output dependent variable Loan=microfinance bank loan GovExp=Government Expenditure
Fso= financial sector output
ao =intersect parameter of the equation a1= the slope of the equation
e= stochastic variable or error terms.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
PRESENTATION OF RESULT:
In this chapter we are going to present the result of the estimate model as well as interpret and analyze it.
Dependent variable: LDGP
CHAPTER FIVE
SUMMARY, CONCLUSIONS AND POLICY RECCOMENDATION
SUMMARY
From the analysis and interpretation of results in chapter four, some findings were made during the process and they are summarized as follows
- There is a positive relationship between microfinance bank loans and gross domestic products which means that an increase in microfinance bank loans will bring about an increase in
- There is a positive relationship also between the financial sector output (FSO) and gross domestic product(GDP), which implies that an increase in financial sector output will result to an increase in GDP
- A positive relationship also exist between government expenditure and gross domestic product which means an increase in government expenditure will bring about an increase in GDP Since microfinance bank loans, financial sector output, and government expenditure has a positive impact on gross domestic product, therefore microfinance bank loans will promote agricultural productivity and development.
CONCLUSIONS
In conclusion, microfinance bank loans have a vital role to play in the agricultural sector in Nigeria. Because of this, microfinance bank loan serve as a catalyst for agricultural production in Nigerian economy.
References
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- Anyanwu, C. M. (2004). Microfinance Institution in Nigeria: Policy Practice and Potentials. Abuja: CBN Press.
- Ketu, A. A. (2008). Microfinance Banks in Nigeria: An Engine for Rural Transformation. Lagos: Economic Management Press.
- Olajide, O. A. (1980), Financing Enterprises in Nigeria through cooperative. Ibadan: Niser Publishing Co.Ltd.
- Abayomi, Y. P. (1997). “the Agricultural sector in Nigeria the way forward” CBN Bulletin.
- Adubi, A.A (2001). “Agriculture in the Nigeria Economy: An Overview.” Paper Presented at a Workshop of Planning and Management of the Agricultural Sector, Ibadan August14th-25th, 2000.
- CBN. (2005). Microfinance: Policy Regulatory and supervisory framework For Nigeria. Abuja.
- CBN. (2008). “Guidelines and Procedures for the Establishment of Microfinance Banks”. Nigeria: Lagos State, Published by the CBN.
- Jamail, B. (2008). “Microfinance as a tool for Poverty Alleviation in Nigeria.” Paper Presented at Sensitization Workshop on Microfinance Banking in Kano state.
- Kolawole, S. E. (2006). the effect of Microfinance in the Nigeria Economy.” Business Leadership, June 5th.
