IMPACT OF MICRO CREDIT SCHEME ON POVERTY ALLEVIATION POLICY IN NIGERIA

ABSTRACT

The study which was conducted in lfako ljaye Local government area of Lagos state examined the influenceof micro credit on poverty alleviation policy in Nigeria.  The study among other things examined the importance Of small and medium enterprises in the development any given economy can not be over emphasized, hence, the need to undertake this study it was equally the focus of this study to examine the various ways that micro credit could affect the investment decision on poverty alleviation policy of SMEs in carry out this study and for the purpose of better understanding the historical development of micro credit usage financial institution and banking industry to eradication of poverty alleviation policy in particular was also given in depth consideration.

The researcher made of a Secondary data, although the use of micro credit on poverty alleviation policy in Nigeria economy is an objective this research work.

The SMEs were categorized into four namely: Bakery, Stationary Shop, Fashion Designer and petty trader, the data use in the research work was generated from the central bank of Nigeria bulletin and National Bureau statistic based on micro credit, poverty index and level of investment between the periods of 1995 – 2010.

The results obtained were analyzed through the use of a descriptive analysis and application software of (SPSS 17:00) which revealed micro credit is an effective tool that show a significant relationship between micro credit and poverty alleviations policy in Nigeria. In conclusion the regression run for the hypothesis stating that there is significant relationships between micro credit and investment in Nigeria.

The study recommends a greater coverage of the state by the scheme; Recipients should also be encouraged to reinvest their profit in other productive economic activities.

CHAPTER ONE

BACKGROUND TO THE STUDY

1.1     INTRODUCTION

The provision of micro credit has been recognized as instrumental tool for reducing poverty by many developing countries.  From various studies, micro credit programs have increased incomes and had other positive effects such as gender empowerment, improved nutrition, higher educational attainment and reduced consumption variability.

The human livelihood is characterized by a sharp contrast of increasing disparity between the rich and the poor.  Poverty alleviation is thus becoming one of the most important challenges faced by the policy makers of many less developed countries.  The provision of financial services to low income households is believed to eradicate poverty through the transformation of social and economic infrastructures (Morduch, 2000).

However, there is partial evidence and is contested that micro credit would make a larger contribution to reduce poverty or promote small and micro enterprise development in most developing countries as compared to investments in social and economic infrastructures.

It has remained persistently unabated despite many laudable programmes designed to alleviate it.  Moreover, the country ranked 142nd in human development rating.  Thus poverty has become a major concern for development experts and international agencies.  The level and incidence of poverty have been on the increase since the implementation of the Structural Adjustment Programme (SAP) in the 1989s.  Report from UNDP (2010), Federal Office of Statistic (2001) and World Bank, (2001) showed that the incidence of poverty rose from 28.1% in 1980 to 43.6% in 1985, and by 1996, it rose to 65.5%.  As far back as 1990, the UNDP, Human Development report described Nigeria as a rich country with poor population and also as the poorest and most deprived OPEC Country (UNDP, 2010).  Moreover, the country ranked 152nd in human development rating.  Apart from the increase in the incidence of poverty the population of the poor has been on the increase.  Report from Federal office of statistic (2001) revealed that the percentage of the core poor increased from 62% in 1980 to 93% in 1996 whereas, that of the moderately poor rose from 28.9 to 36.3% within the same period.  The depth and severity of poverty can also be seen in the proportion of income spent on consumption.  The core and moderately poor spent 75 and 73% of total income for consumption purpose, respectively, while the non poor spent only 53% of total income on consumption.

This is more or less an indication that the economy is still largely under developed.

It cannot be gain said that poverty is the bane of rural development in development, standard of living and efficiency and production of labour.

The rural areas are characterized by social, economic, cultural, political and environmental deprivation.  Among other things; the rural areas are plagued with vicious cycle of poverty, that is, low income, low productivity, low saving, low capital formation, low investment and back to low productivity.  One of the most crucial problems of rural development is lack of rural credit facilities from the formal financial institution because of their inability to provide required collateral securities.  On the other hand, credit facilities from the informal sectors are often accompanied with high interest rates which make it unprofitable for the poor small holders.  Therefore, the introduction of micro credit in the rural areas will go a long way to break the vicious cycle of poverty and hence accelerate the pace of development among the rural dwellers.

1.2     STATEMENT OF RESEARCH PROBLEM

For a meaningful development to occur in the poverty alleviation operation theJ’11!t must be a gross increase in building micro credit in order to expand business in the country. Micro credit is one of the instrumental tools in the poverty alleviation operations that reduces operational cost and thus increase competition in the small and Medium Enterprises. The introduction of micro credit has brought about and has lead to an increase in the poverty alleviation to attend to low capital than ever. The problem therefore comes thus. How do we articulate the micro credit as an important tool for increasing the poverty alleviation ope1ation and can this lead to the expansion of small and medium scale enterprises in economy? This exactly the i:pSion that researcher would address in subsequent chapters.

1.3    OBJECTIVE OF THE STUDY

The purpose of the study is to review the impact of micro credit on poverty alleviation in Nigeria the objective of the study includes:

(i)      To provide comprehensive information on the process of acquisition availabilities and use of (IT) gadget in Nigerian poverty alleviation policy in lfako Ijaye L.G.A.

(ii)     To establish the advantage or otherwise of the adoption of micro credit in the operation of poverty alleviation policy in Nigeria.

(iii)     To examine the effect of micro credit on the operation of the Nigeria poverty alleviation policy.

1.4     CONCEPTUAL FRAMEWORK OFMICROCREDIT TO POVERTY ALLEVIATION POLICY.

Into this environment, we introduce micro credit.  While being agnostic about the underlying innovation behind micro credit, we view it as a collateral free institutional loan to jointly liable poor member further self employment and income generation.  Since we model economy wide micro credit, everyone has access to it in principle.  However, since the wealthy already have access to financing beyond the micro credit and micro finance limit,only the poor who tend to have low poverty alleviation productivity have their choice seteffectively expanded by micro credit. However, micro credit may not include other services such as saving, insurance. payment services.

1.5     RESEARCH QUESTIONS

The research work tends to ask the following question in relation to the effectiveness of micro credit in poverty alleviations policy.

(i)      Will micro credit affect the performance of poverty alleviation policy in Ifako Ijaye Local Government Area of Lagos State?

(ii)      Will micro credit has useful impact to play in poverty alleviation policy in Ifako          Ijaye local Government Area of Lagos State?

(iii)     Will micro credit be essential tools in enhancing poverty alleviation policy in Ifako Ijaye Local Government Area of Lagos State?

1.8    RESEARCH HYPOTHESIS

Hypothesis is often defined as supposition, a preposition assumed for the sake of argument, a theory to be proved or disproved by references to the facts, and a provisional expiration of anything. Therefore, for the purpose of this study the following hypothesis will be tested to establish the impact of micro credit on poverty alleviation policy.

HYPOTHESIS 1

Ho:      There is no positive effect of micro credit on poverty Alleviation Policy in Ifako Ijaye Local Government of Lagos State.

H1:     There is positive effect of micro credit on poverty Alleviation Policy in Ifako Ijaye Local Government of Lagos State.

HYPOTHESIS II

Ho:     There is no significance relationship between micro credit and investment in Nigeria.

H1:    There is significance relationship between micro credit and investment in Nigeria.

1.7     SIGNIFICANCE OF THE STUDY

The emphasis of this project will be base on the revolution impact of micro credit on poverty alleviation policy operation in Ifako Ijaiye Local Government Area of Lagos State.  This study is very significant because the impact of micro credit on poverty alleviation policy operation in Nigeria will be revealed, most especially in the stiff competition in Ifako Ijaye Local Government Area of Lagos.  Thus this research work is significant for a number ofreasons.

(i)      The study finding will serve as useful instruments to government to formulate and implement policy in poverty alleviation.

(ii)     The study will serve as a reverence material for individual. For further and higher studies in the body of literature in a relevant area.

(iii)     The study will serve as the body of literature on the operational

and efficiency in Nigerian poverty alleviations policy.

1.8     SCOPE OF THE STUDY

The emphasis of this project will be base on the revolution of impact of micro credit on poverty alleviation policy operation in Ifako Ijaye Area of Lagos State. Various financemeans will be put place by different business in Nigeria.

1.9     RESEARCH METHODOLOGY

Secondary sources of data is used in this study Statistical tool to be employed includes percentage, regression analysis & ANOVA The stat8tical significance of the valuables used in the models will be tested by considering some means of significant testing such as T-statistic,F-Statistic, R2-Coefficient of determination.

1.10            TYPE AND SOURCE OF DATA

Secondary data will be used for this study, Central Bank of Nigeria & national Bureau statistic (1995 – 2010)

1.11   PLAN OF THE STUDY

This project is organized into five Chapters.

Chapter one comprises of the introduction, statement of the problem, aim and objectives of the study, research questions, statement of hypothesis, research methodology, significance of the study, scope and limitation of the study, definition of terms, plan of the study, and references related to the study.

Chapter two consists of the literature reviews.

Chapter three consists of the structural composition.

Chapter four consists of the research methodology process, data presentation andinterpretation of results.

Chapter five: This comprise of the summary of findings, conclusions, recommendation, and then the references.