CHAPTER
ONE

1.0    
INTRODUCTION
1.1     OVERVIEW OF THE STUDY
It would be observed that, despite the presumed developments in the Nigerian
economy, the country is still largely being regarded as a developing country
(Onyema, 2006). More so, its industrial growth is not quite impressive. 
Before the emergence of formal microfinance institutions, informal microfinance
activities flourished all over the country. Traditionally, microfinance in
Nigeria entails traditional informal practices such as local money lending,
rotating credit and savings practices, credit from friends and relatives,
government owned institutional arrangements, poverty reduction programmes etc
(Lemo, 2006). The Central Bank of Nigeria Survey in 2001 indicated that the
operations of former microfinance institutions in Nigeria are relatively new,
as most of them never registered after 1981.
Before now, commercial banks traditionally lend to medium and large enterprises
which are judged to be credit-worthy. They avoided doing business with the poor
and their micro enterprises because the associated cost and risks are
considered to be relatively high (Anyanwu, 2004).
The Federal and State governments have recognized that for sustainable growth
and development, the financial empowerment of the rural areas is vital, being
the repository of the predominantly poor in society and in particular the SMEs.
If this growth strategy is adopted and the latent entrepreneurial capabilities
of this large segment of the people is sufficiently stimulated and sustained,
then positive multipliers will be felt throughout the economy. To give effect
to these aspirations various policies have been instituted over time by the
Federal Government to improve rural enterprise production capabilities.
(Olaitan 2006)

In view
of this, the impact of micro finance bank in economic growth and development of
Nigeria started showcasing itself. With the initiative of microfinance, rural
areas are opportune to grow and develop as loan and fund are easily given to
rural farmers and entrepreneur. Jobs opportunities were created since there is
avenue for lending and investing.
1.2     STATEMENT OF PROBLEM
There are so many problems and challenges that hinder the functionality of the
microfinance bank in carrying out their major role of improving economic growth
in Nigeria. 
These problems include

• poor attitude of Nigerians
  towards MFBs
• insufficient support from
  the regulators and government
• There are communication gaps
  and inadequate awareness among the masses.
• Undue competition rather
  than cooperation from the mega banks, and undue malpractice/Sharp
  practices by microfinance bank operation.

The
researcher will in the research find possible ways of solving or making better
the conditions for the operation of MFBs.
1.3     OBJECIVE OF THE STUDY
The set objective of this research work are to:

• Investigate the impact of
  micro finance bank and economic growth in Nigeria.
• 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 bank can contribute in building entrepreneurship within the
  country.

1.4   
RESEARCH QUESTIONS

• To what extent will the poor
  attitude of  Nigerians towards Micro finance banks affects the
  economic growth in Nigeria
• To what level will
  insufficient support from the regulators and government affects the smooth
  operations of Micro finance banks

1.5   
TEST OF HYPOTHESIS
It is quite evidential that the major ways in which microfinance bank can help
in economic development is through the encouragement of entrepreneurial
development.
The essence of microfinance bank is to enable the poor individual to be able to
obtain loan and be able to manage their enterprise.
To this effect, the following hypothesis will be tested, thus.
Hypothesis I
H0:     Micro finance bank is irrelevant to the economic
growth and development in Nigeria since the number of entrepreneurs that uses
their services is low
Hi:     Micro finance bank is relevant to the economic
growth  and development in Nigeria since the number of entrepreneurs that
uses their services is low
Hypothesis II
H0:     Microfinance institution do not contribute to
entrepreneurial productivity
H1:     Micro finance institutions do contribute to
entrepreneurial productivity.

1.6
    SCOPE OF THE STUDY
The scope of the study is subjected around the frame work of microfinance bank
in Nigeria vis-à-vis its contribution to the economic growth and development.

1.7 
SIGNIFICANCE OF THE STUDY
This study is essentially significant in that it is directed towards evaluating
the impact and role that micro finance banks have on the economic growth and
development in Nigeria, especially the rural areas which is a criteria aimed at
measuring economic standard.
Owing to the fact that researcher has aimed at pinpointing the ways in which
micro finance bank can help in the revamping of the nation’s economy, the
findings of this research work will be of great help to most developing
countries who may wish to toe the part of Nigeria in MFB development.

It will
also serve as a reference point for future researchers who in one way or the
other will try to unveil the role and impact of micro finance bank to economic
growth and development.

1.8 LIMITATION OF STUDY