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CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND 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 AIMS
AND OBJECTIVES
The
mains objectives of this research work are to investigate the impact of micro
finance bank in economic growth and development of Nigeria.
Other objectives are as
fellows
i.
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.
ii.
It will investigate the ways microfinance bank can contribute in building
entrepreneurship within the country.
1.3 STATEMENT OF RESEARCH PROBLEMS:
There
are so many problems and challenges that hinders the functionality of the
microfinance bank in carrying out their major role of improving economic growth
ad development 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.
1.4 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 of 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 development.
1.5 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.
For
accuracy and coherency, the research work will take as a case study of fortis
micro finance bank Abuja to enable precision and distinctiveness.
1.6 LIMITATION OF THE STUDY
During the course of this research, a lot of
obstacles were encountered.
Thus,
the uncooperation of most people working in the library and other offices where
the researcher needed to get materials posed great problem to the researcher.
Some of the staffs do not feel safe letting us have access to some materials
while others will charge me more than double cost of Photostat before I can get
what I wanted.
Financial
constraint is another limitation to this work which is as a result of high cost
of transportation fare to the areas of study to gather data, combined with the
cost of materials to carry this work to conclusive end.
It
also took great strength to convince the respondents that their responses to
the questions in the questionnaire will be treated with great confidentiality
and are purely academic.
1.7 STATEMENT OF RESEARCH 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 development and growth of Nigeria since the number of entrepreneurs
that uses their services is low
Hi: Micro finance bank is relevant to the
economic development and growth of 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.
1.8 DEFINITION
OF TERMS
IMPACT:
According
to the advanced oxford learner’s dictionary, impact is the
Powerful
effect that something has one somebody or something
MICROFINANCE BANK
According
to the Nigerian Banking Act, 1969 (as amended Bank amendment act 1979),
Microfinance banks are institutions constructed as a company licensed to carry
on the business of providing microfinance services such as collection of
savings, loans provision, insurance money transfer services and other non
financial services that are needed by the poor.
The
clients of microfinance banks are typically self employed low income
entrepreneurs in both urban and rural areas, they include traders, subsistence
farmers, street vendors, motorcycle riders and blacksmith etc.
ECONOMIC GROWTH AND DEVELOPMENT:
This
term has generated a lot of controversies over the years. Some economics see it
as political and structural change while others are of the opinion that it
relates the progress in the basic human needs over time. Another school of
thought defines it as growth accomplished by changes i.e. change in structure
of the economic in the country’s social structure and its political structure.
Others
have tended to make basic human needs approach, an approach which defined
economic development in terms of progress toward reducing the incidence of
poverty, unemployment and income inequalities and for those whose living
standards have not been rising. This approach also seeks ways and means of
improving their conditions,
NIGERIA:
A
nation in the African continent and located in the western part of Africa. it
was colonized by the British and got its independent in 1960.
REFERENCE
Lemo, T (2006) Transforming the Nigerian economy through microfinance initiative
“national workshop on empowerment through microfinance, p.1, Calabar Nigeria.
Onyema M. E (2006), Transformation of
the Nigeria economy through the microfinance initiatives operators and
entrepreneurs perspectives pp. 1-5 Abuja Nigeria
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.
Olaitian M. A (2006)
Finance for small and medium scale enterprises in Nigeria Journal of
international farm management Vol. 3 No 2 January
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