THE IMPACT OF MICRO-FINANCE ON ENTREPRENEURIAL DEVELOPMENT (A CASE STUDY OF UMUAHIA ABIA STATE)

ABSTRACT

This work investigated the relationship between micro finance and entrepreneurial development aimed at reducing poverty in the economy.

The primary method of data collected from small and medium enterprise were used for their study. In the analysis table and simple percentage were used.

Major findings of this work reveals that there is a strong positive relationship between micro financing and entrepreneurial development further findings shows that provision of long term loans and equity capital by micro finance bank for enterprise are factors that militated against micro finance in the economy.

This work recommended that guidelines for micro finance institutions to finance SME’s need to be flexible to accommodate the SME’s in terms of granting them long-term loans and quality capital participation.

This will be of immense benefit to SME’s micro finance banks authority and the students of body and firms who may be interested in further research on this topic.

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

The issue of sustainable development in the third world countries like Nigeria has been a growing concern to both the government and the private sector. The huge amount of money the government has been investing on this platform over the years have not yielded any meaningful result. Poverty is a characteristic OF Nigeria households or individuals. It has been realized in the recent years that there are limits to which government can single promote development. Most of the traditional functions being carried out by the government in most countries ranging from the provision of economic development are becoming increasingly difficult to accomplish. Nigeria as an nation has her own administration, corruption, infrastructural decay, insecurity of lives and properties, unstable macroeconomic regime and unpredictable fiscal policies by successive administration (Fasug, 2006).

Thus, both the public and the private sector of the economy and every segment of the society process of the country. It is on this basis that government begins to engage in privatisation policy with the view of allowing the private sector to participate in the economic development of the nation, consequently, various government process of the country’s economy.

One of the response to the challenges of development in the developing countries is the encouragement of the entrepreneurial development sachem. Nigeria had even taken more robust step by including entrepreneur studies in the academic curriculum of her educational system. the believe of such policy makes is that such decision will inculcate entrepreneur spirit in the mind of people so as to prepare them for wealth creation through small enterprises (Fasua, 2006).

A small scale enterprise is very crucial to the development, a of a country’s economy, especially countries like Nigeria. Entrepreneurship is sine qua non to national development, poverty eradication and employment general. It is the bedrock of any nations industrialisation. A number of studies have been carried out on the impact of micro-finance on entrepreneurial development. In fact, academic interest shows the impact of micro-finance on entrepreneurial development is evidenced by the fact that some academic journals have devoted special issues to research establishing this linkage.

According to Amin, Rai and Topa (2003) focus their article on the ability of micro-finance to reach the poor and vulnerable. They focus their article in such a manner because of concerns that micro-finance is only serving people slightly below or above the line of poverty, however the really poor and destitute are being systematically excluded.

Thus, the question of whether microfinance improves or worsens entrepreneurial development is still worthy of further research such as the one being undertaken in this study.

STATEMENT OF THE PROBLEM

In any country of the world, micro-finance helps in the development of the country by granting loans to low income earners. According to cope-stake, halotra and Johnson (2001) analyze the impact of micro-finance on firms and individual welling. Cope-stake at all focus on business performance and household income to establish a link between the availability of the time, it appeared that micro-finance are not financing to the poor and business client. The research went forward to research the problems of this study which are:

• Inability to encourage the development of new business.
• Inability to help existing business grow or diversity their activities
• Low rate of employment
• Inability to create employment and income opportunities through the creation and expansion of micro enterprises.
• Inability to increase the productivity and income of vulnerable group especially and the poor.
• High rate of poverty
• Economic dependence on foreign countries.

I.3 OBJECTIVE OF THE STUDY

The objective of micro-finance to entrepreneurial development made the central bank of Nigeria adopted it as the main source of financing entrepreneurship in Nigeria.

Despite this, however, finance is still considered as one of the major hindrance to entrepreneurial development in Nigeria. While government and non government organization (NGOS) have been engaging a number of programmes in the county. They specific objectives of this study is,

1. Examine the importance of entrepreneurial activates to the sustainable development of entrepreneurship in Nigeria.
2. Examine the impact of micro-finance institution on entrepreneurial.
3. Examine the challenges of accessibility to capital for the development of entrepreneurship in Nigeria.
4. Create the awareness of the importance of microfinance institution to entrepreneurship development in Nigeria.

RESEARCH QUESTIONS

In order to achieve the above stated objectives, the following research questions are advanced.

A: Does micro-finance contribute to entrepreneurial activities that can lead to sustainable development in Nigeria.

B: Do entrepreneurs have access to capital for the development of small and medium size entrepreneurship in Nigeria?

C: What are the prospects of micro-finance in the development of entrepreneurship in Nigeria?

RESEARCH HYPOTHESIS

• Do entrepreneurial development have any implication on the in development of Nigeria? The following null hypothesis are proposed and tested in the cause of this study.
• There is no significant difference between entrepreneurs who use microfinance and those who do not.
• There is no significant effect of micro-finance institution activities in predicting entrepreneurial productivity.
• There is no significant effect of micro-finance institutions activities in predicting entrepreneurial development.

SIGNIFICANCE OF THE STUDY

The important of micro-finance to the entrepreneurial development made the central bank of Nigeria adopted it as main source of financing entrepreneurship in Nigeria.

The significance of this study is to:

1. Microfinance help in the provision of financial service to low-income, poor and very poor self employed people (Otero 2000).
2. Microfinance has the ability to strengthen micro enterprise best practice among operators of small and medium scale enterprise.
3. The micro-finance help to provide financial service to low income client including the self employed.

SCOPE/DELIMITATION OF THE STUDY

The study would focus extensively on the impact of banks on entrepreneurial development of small, medium and large scale enterprises but focuses on small scale enterprises but focuses on growth and development in a stiffened economy of Nigeria.

The spread between the parallel and official of microfinance banks shall also be examined with the view of identifying the factors, responsibilities for the difference. And how it’s contributed to the growth of the country.

This study covers commercial places, sites, business environments, towns and cities in different states but focus extensively in Lagos state.

LIMITATION OF THE STUDY

Limitation is said to be the potential weakness if the study, that is to said, those attributed and difficult circumstance or challenges you find uneasy when writing up the project.

The weakness of the study arises as a result of certain factors encountered at several level of the exercise, such limitation includes

1. FINANCIAL AND MATERIAL LIMITATION: This limitation arises due to insufficient finances to going to some micro finance banks in Lagos state, in other to get vital information from our respondents.
2. THE SMALLNESS OF THE SAMPLE AS COMPARED TO THE ENTIRE POPULATION: It should be pointed out that limited resources to carry out the researchers disposal could not permit or allow for a greater sample size.
3. LACK OF CO-OPERATION FROM OUR RESPONDENTS: This limitation arises because of insufficient information from our respondents due to lack of co-operation from them.
4. UNNECESSARY BOTTLENECK MATTERS: for we to get to the bank for the materials, we had to pass through procedure that are not necessary, like signing of a document, going to one counter the other, please we are busy the management doesn’t want to see anybody. This becomes cumbersome.

DEFINITION OF TERMS

Microfinance has evolved as a economic development approach intended to benefits low income men and women. The term refers to the provision of financial services generally includes savings and credit. However, some micro-finance institutions also provide insurance and employment services.

ENTREPRENEUR: An entrepreneur is people who owns an enterprise or organization and also control and manage the affairs and activities of the business.

An entrepreneur can be said to be sole trader or sole proprietorship of a business. He or she runs the day to day activities of the business.

LOAN: Loans are said to be long term debit issued to business client by the financial institution to be paid back with interest at the specific period using collateral as security.

COLLATERAL: This is the property a borrower is willing to pledge to the banks as a secondary source of payment, should the first source (income and profit) dry up securities for bank lending according to Nzoha (1999). Security in this direction is a right or interest in property given to a creditor by a debtors so that is event of the debtor fairing to pay its is event of the debtor as when due, the creditor may reimburse himself for the debt out of the property changed.

PLEADING: Pleading entitles the creditor exclusive possession of (the property until the pledge repays a debt white ownership risk with the debtor subject to the exercise of his right.