The Role of Microfinance Bank on the Economic Growth of Nigeria
Chapter One
AIMS AND OBJECTIVES
The mains objectives of this research work are to investigate the role of micro finance bank in economic growth and development of Nigeria.
Other objectives are to fellows
- it will explicate in detail ways in which micro finance banks can contribute in developing rural areas and improving the life of the poor people.
- It will investigate the ways microfinance banks can contribute to building entrepreneurship within the country.
CHAPTER TWO
LITERATURE REVIEW
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 (MFBs) 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 banks is N20 million for each branch. The branching should be gradual within a local council before it spreads to other local councils and state. (ii) Micro-Finance Banks licensed 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 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 Ni billion. About 600 Community Banks have migrated to Microfinance Banks by January 1 st, 2008 and there are several others that have been licensed to operate. (CBN, 2008)
ROLE OF MICROFINANCE BANKS IN PROMOTING• ECONOMIC GROWTH VIS-A-VIS ENTREPRENEURSHIP DEVELOPMENT
CREDIT DELIVERY
This is perhaps one of the most important roles of Microfinance banks, as the loans extended are used to expand existing businesses and in some cases to start new ones. According to CBN (2008) microfinance loans granted to clients is increasing from 2007 to date and most of it goes to financing microenterprises in rural areas. Ketu, (2008) observed that microfinance banks have disbursed more than N800 million micro credits to over 13,000 farmers across the country to empower their productive capacities. As such it is expected that agricultural output will increase with the increase in funding. The entrepreneurial capacity of the farmers will thus improve.
BOOSTING SMALL SCALE ENTERPRISES/AGRICULTURE
About 60 percent of poor people in the country live in the rural areas and 80 percent of them are farmers and artisans (NBS, 2005). Microfinance banks have therefore been the main sources of funding to these less disadvantaged groups. Rural people are empowered through microfinance loans and services, and hence small scale agricultural practice and microenterprise is developed. Governments go into co-operatives to partner with the microfinance banks to raise bulk loans to be disbursed to the beneficiaries, in so doing the banks are increasing and sustaining the number of people going into small businesses.
EMPLOYMENT GENERATION
Agriculture and microenterprises contributes immensely to job creation, and are of particular interest to all Microfinance Bank in rural areas. Microfinance banks have so far engaged in extending credits and other services to many rural enterprise and hence generating employment and promoting entrepreneurship. The promotion of employment in rural areas by microfinance banks covers the following areas; blacksmithing, gold-smiting, watch repairing, bicycle repairing, basket weaving, barbing, palm wine tapping, cloth weaving, dyeing, food selling, carpentry, brick-laying, pot- making, leather works and drumming. Even though found in urban areas, these industries are more prominent in the rural areas. It has, therefore, been acknowledged that the rural setting is an arena of many industries, which could be developed to contribute significantly to the national economy, just as rural people are more frequently self-employed than urban people (Ketu, 2008).
CHAPTER THREE
RESEARCH METHODOLOGY
The term methodology is a system of explicit rules and procedures in which claims to knowledge are evaluated (Ojo, 2003)
Therefore, this section focuses on the research techniques adopted and used i this study with the aim of achieving the research objectives
Survey research design was chosen because the sample elements and the variable that are being studied are simply being observed as they are without making any attempt to control or manipulate them.
RESEARCH DESIGN
According to Bryman and bell (2003) in the research work of Omoniyi (2011), it forms the framework of entire research process.
A good design will ensure that the information obtained is relevant to the research problem and that it was collected by objective and economic procedures.
According to Thomas and James (1983) in Omoni research work (2011), define it as the basic plan which guides the data collection and analysis phases of the research project. It is the framework which specifies the type of information to be collected, the sources of data and data collection procedures.
POPULATION OF THE STUDY
The population of interest here are some individuals that use Ndafia micro finance bank services and staff in micro finance bank in Enugu.
This population being used is finite in nature that is they are countable. Total population from the organization is 80.
CHAPTER FOUR
PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA
A BRIEF INTRODUCTION OF THE CHAPTER
This chapter deals with the presentations, analysis and interpretation of the data collected.
The data collected will be used to answer the research questions and test the hypothesis.
CHAPTER FIVE
FINDINGS, SUMMARY, RECOMMENDATIONS AND CONCLUSION
FINDINGS
In the analysis of the collected data, the following findings were observed thus:
- Microfinance bank in Nigeria helps in informal practices such as local money lending rotating credits and savings practices to entrepreneurs
- Micro finance can contribute in building entrepreneurship activities in the country
- Microfinance bank can help in the development of rural and improve the live of the poor people
- Microfinance bank assist in the eradication of poverty in the country
SUMMARY
The objective of this research work is to analyze the role of microfinance bank in revamping and enhancing the economic growth and development of Nigeria. It the bid to arrive at the objectives of this research work, the work will be sub-divided into five chapter, the first chapter by way of introduction will captured the concept of microfinance bank stating the hypothesis and defining the terms and key concepts used in this research work. The second chapter will conceptualize the concept of microfinance bank, stating the importance of microfinance in contributing to entrepreneurship development in Nigeria. It also stated the challenges facing microfinance back in Nigeria. The third chapter was the methodology in which the statistical tools used in the analysis of data was stated. The presentation and analysis of the primary data was carried out in the fourth chapter while the fifth chapter draws the findings of the research work, the summary, conclusion and recommendation of the research work.
CONCLUSION
The review of several literature shows that the microfinance institutions are evident tools for entrepreneurship development due to the various services they after and the role they performs towards the development of the economy.
Not overlooking the various challenges that affects microfinance operations, the current banking reforms introduced by the C.B.N governor is a welcome development as its employment is set to fortify the microfinance institution operation in order to contribute meaningfully to entrepreneurship development in the country. Microfinance institutions in allover the world and especially Nigeria are identified to be one of the key players in the financial industry that have positively affected individuals, business organizations, other financial institutions, the government and the economy.
It is expected that with the current reforms put in place by the federal Government through its regulatory authorities, microfinance institutions in Nigeria will be able to compete favourably in the global market and gainfully increase entrepreneurship development in Nigeria.
Microfinance institutions have positive relationship with the Nigeria economy represented by expanded GDP (Gross domestic) product. Although, interest rate is not significantly influential, the results of findings of this study can still be summarized that the microfinance institutions and their activities go a long way in the determination of the pattern and level of economic activities and development in the Nigeria economy.
RECOMMENDATION
The role of microfinance bank in economic growth and development is quite clear and distinct as prove by the research work. And this contribution of the micro finance bank in economic development is situated within the frame work of entrepreneurial development since the major reason for the establishment of the microfinance bank is to ensure the economic growth through the enforcement of the business entrepreneurs.
Owing to this fact, the following recommendation can be of great help in revamping the status of our microfinance bank at large, thus;
- Government through their monetary and economic policies should provide a suitable ground for the growth of microfinance bank
- Seminar and lectures should be conducted in our rural areas on the functionality and the importance of the microfinance bank so that individual entrepreneurs can be able to harness their importance to their own development and that of the economic development of Nigeria
- The different microfinance banks in the country should endevour to render good services to the people and be able to encourage the growth of entrepreneurs by their financial operation within the community.
- The financial institution need to put more effort in financing SMEs, their role need to be felt by the SMEs in terms of growth and development.
References
- Anyanwu C. M, 2004, Microfinance institution in Nigeria, policy practice and potentials paper presented at the G24 workshop on constraint in growth in sub Sharan African, November, 2004, p-4, Pretoria south Africa.
- Central bank of Nigeria (2008) “Guidelines and Procedures for the establishment of Microfinance banks in Nigeria” Published by the CBN
- Hansen J.J (2007) “The Poor as Producers in Rural Economy” http//www. aclaimlinf/actr. Htm
- Jamil B (2008) “Microfinance as a tool for poverty alleviation in Nigeria” Paper Presented at Sensitization Workshop on Microfinance Banking in Kano State.
- Ketu A. A (2008) “Microfinance banks in Nigeria: An Engine for Rural Transformation” West African Institute for Financial and Economic Management, Lagos Nigeria.
- Lemo, T (2006) Transforming the Nigerian economy through microfinance initiative “national workshop on empowerment through microfinance, p.1, Calabar Nigeria.
- National Bureau of Statistics (2005)” Social Statistics in Nigeria” Published by NBS
- Ojo, O. (2003) Fundamentals of research methods Ibadan, Nelson Clemmy press.
- Olaitan M.A (2006) “Finance for Small and Medium Scale Enterprises in Nigeria” Journal of international farm management Vol 3 No 2 January
- Olajide O.A (1980) “Financing Enterprises in Nigeria Through Cooperative” Nigerian Institute of Social and Economic Research NISER), Ibadan
