MICROFINANCE: THE WAY FORWARD TO EMPOWERING THE CITIZENRY

CHAPTER ONE

1.0 BACKGROUND TO STUDY

Microfinance is the provision of financial services to the very active poor or mainly members of the main stream sector of the economy. Apart from small loan it includes savings micro insurance and other financial innovation micro credit which is an integral part of micro finance provides access for the “active poor” to borrow, save, invest and insure family against risk. The economic status may not have ordinarily qualified them to access traditional credit provisions (CBN, 2005).

Micro credit is an innovation of the United Nations Organization a declared in 2005. While our erstwhile President Chief Olusegun Obasanjo on Thursday 15th December 2005 inaugurated the National Empowerment Development Strategy both at the federal, state and the local government levels (National Orientation Agency, 2005).

This and other facts on its successes in Asia (Bangladesh Prof Yunus) has successfully enable extremely impoverished people especially women to engage in self employment projects that allows them to generate an income and in many cases began to build wealth and exit poverty.

The topic is so chosen as a way of adding to word of knowledge the required recipe to kick starting the small and medium scale enterprise (mainstream sector) of our economy as such enhance economic development. Enhanced individual economic empowerment self sufficiency, lifting above poverty and of course community development.

The failure of community banks, both structurally and operationally could be traceable to weak corporate governance, inadequate internal control, poor deposit mobilization, unacceptable risk management practice, tax credit administration and lack of seriousness attached to its formation. This is why community banks did not record an improved performance in the years of its existence.

Consequently, a micro finance policy which recognizes the existing informal institutions and brings them within the supervisory preview of the Central Bank of Nigeria (CBN) was launched on 15th December 2005. The policy is expected to compliment the emerging banking sector reforms, to build strong pillars for the financial sector and significant outreach in services provision to the un-served segment of the Nigerian economy especially the poor, low income earners, small and medium scale enterprises etc. It is meant to enhance monetary stability and expand financial infrastructure of the country to meet the financial requirement of the lower segment of the market.

1.1 STATEMENT OF THE PROBLEM

The research is necessitated due to the fact that development economically has to be spread through all the sectors of the economy. Micro finance in its real sense is provision of financial services (savings loans etc) to micro enterprise, micro entrepreneurs for meeting business need, life cycle needs or taking advantages of opportunities for investment and savings for business or personal development old age reserve wealth creation, flexible structures of delivery on a sustainable basis. Recognizing the peculiar features and challenges of the active poor and micro entrepreneurs who are unable to provide collaterals;

i. Rather the syndrome of the rich getting richer and the poor getting poorer.

ii. The problem of people living below poverty line especially women (women economic empowerment)

iii. The unavailability of young graduates and the economically active persons to have access to funds for business or to establish a trade.

iv. Inability of previous administration to kick start the economy by enabling the small and medium scale enterprise.

v. The hazard of money lenders and local thrift collectors running away with funds and heavy interest rates charged.

vi. The use of Ekiosa Market in Benin City is a sample area of study and to measure the trickily down effect of micro finance banks on their respective businesses.

1.2 OBJECTIVE OF STUDY

The specific objective of this study is to establish the fact that micro finance option if carefully perused will:

i. Make financial services accessible to a large segment of the potentially productive Nigerian population which other wise would have little or no access to financial service.

ii. To promise synergy and mainstreaming of the informal sub-sector into the national financial system.

iii. To ginger enhanced service delivery by microfinance institutions to micro, small and medium entrepreneurs.

iv. Contribute to rural transformation (agricultural loans).

v. Promote linkage programmes between universal development, specialize institutions and microfinance banks.

vi. And finally rate the extent of the tricking down effect on microfinance banks of the business of customers in Benin City (Ekiosa Market as a case study).

1.3 RESEARCH HYPOTHESIS

Hi: Microfinance banking services will be able to kick start the economy and empower the citizenry enabling the small and medium enterprise.

Ho: Microfinance banking services will not be able to kick start the economy and empower the citizenry enabling the small and medium enterprise.

1.4 SIGNIFICANCE OF STUDY

This research work is intended to contribute to the researcher’s knowledge in the research methodology and economics as well as increase the writers understanding of the microfinance business and its associated problems coupled with its benefits if properly instituted and monitored.

Furthermore, it is hoped that the project work will provide more informed knowledge on microfinance operations for would be investors and client

As Nigeria progresses to increase its share of micro-credit as a percentage of total credit to the economy from 0.9 percent in 2005 to at least 20 percent in 2020, and it share of microfinance as a percentage of GDP from 0.2 percent 2005 to at least 5 percent in 2020. Also to cover majority of the economically active population by 2020 thereby creating millions of jobs and reducing poverty to its bearest minimum.

To this fact, a fore knowledge of the problems that may likely stall or slow down the pace of its development effects and likely measures for solutions cannot be over-emphasized.

1.5 SCOPE OF THE STUDY

The treatment of the emerging regulatory supervisory of micro-finance banking since its inception will be mainly centered around the period of 2005 – 2009 since this period was when tangible and reliable attempts to institutionalize micro-finance banking was most recorded and also the aftermath of this period under study.