CHAPTER ONE

1.1 INTRODUCTION

Economic self-reliance which actually means the Fusion of economic

growths development and stability cannot be achieved without putting in

place well focused programmes to reduce poverty through empowering the

people, by increasing their access to factors of production, especially finance

and credit.

In recent years, increasing emphasis has been placed on “Micro-

financing” as a tool for poverty alleviation, economic growth, economic

development and socio-political empowerment. Efforts of government have

been geared towards narrowing the income gap between the urban and the

rural sectors through breaking the cycle of unemployment, economic

stagnation and poverty. In the past two decades there has been an

overwhelming consciousness in Nigeria, on the need to put forward,

improvement on the living standard of the people especially those in the

rural areas. This can be seen through the numerous awareness programmes

that have emerged and also with the increase of microfinance institutions in

1
Nigeria since 1980, when formal microfinance institutions were registered

with the Central Bank of Nigeria (CBN Survey, 2001).

According to Robinson (2002), “microfinance refers to small scale

financial services for both credit and deposits that are provided to people

who are engaged in small or micro enterprises” and also providing financial

services to the poor who are traditionally not served by the conventions.

Financial institutions (banks, insurance companies; discount houses).

Schremer: (2000), stated that Microfinance is a formal scheme designed to

improve the wellbeing of the poor through better access to saving and

services loans.

In essence, a microfinance institutions (MFI) acts as bank for the

poor. In some cases, Micro-finance institutions is actually a bank, but

usually it is a non-governmental organization (CGO) or a governmental

programme and at poverty reduction and alleviation. The purpose of

microfinance is to provide financial loan to the poor that are not made

available to them through eh traditional banking system (Brandsma and

Chaoul, 1998:1). These loans can range from at tiny as N5000 to N20,000 or

more, and are typically used by the client to start a small business. In 1976,

2
the world finally witnessed a truly effective approach to economic growth

and development, through microfinance. Muhammad Yanus, a professor at

the University of Chittangon in Bangladesh, decided to give act a few $50

loans to women in rural Bangladesh. A few moths later when the returned to

the villager, the women had started small tailoring and weaving businesses.

Not only were the women able to pay back their loans, but their small

businesses were profitable enough to improve their living conditions of the

women, their families and on the whole, the community in which they

resided convinced that he had discovered a solution to poverty, Dr. Yanus

launched an ambitious programme to provide credit to entrepreneurs in

Bangladesh. Thirty years later the Grameen Bank had 3.7 million borrowers,

1,267 branches in 46,000 village worldwide and has proved to the world that

if presented with the right opportunities, the poor can be empowered to

improved their own lives (Grameen Bank 2005) so Muhammad Yanus

approach to poverty alleviation is known as microfinance.

Microfinance is a relatively new concept that has growth

exponentially in the last two decades as private individuals investors,

donors, and banks realize the potential for capital that can be provided

3
through banking to the poor. In the past, it was assumed that poor people

were not bankable since they were only capable to taking out small loans,

and had no collateral (Brandsma and Chaouli 1998:12; (Simanowitz and

Walter 2002:5). Grameen Bank in Bangladesh, proved that not only is it

possible to bank with the poor, but microfinance in the informal sector can

be quite profitable (Brandsma and Chaouli 1998:1). Since their microfinance

institutions have sprung up all over the world and reached million of people.

The United Nations’ General Assembly, gathered at UN headquarters

in New York from September 14th to 16th 2005 to hold the 60th High-Level

Plenary Meeting 151 heads of state from around the world were presented.

The Summit was held for world leaders to review progress in reaching the

Millennium Development Goals (MDGs), whose primary aim is to eradicate

extreme poverty by the year 2015. Microfinance was prominent on the

agenda of this historic gathering. The most significant recognition of its

importance was made in the 2005 World Summit Outcome Document

adopted by the gathering, which states “we recognize the need for access to

financial services, in particular for the poor, including financial microfinance

and microcredit” (Paragraph 23(i)).

4
 Support for microfinance was also strongly implied in the

endorsement by the summit of the 2002 Monterrey Consensus which states:

“Microfinance and Credit for micro, small and medium-sized enterprises,

including. In rural areas, particularly for women, as well as national savings

schemes, are important for enhancing the social and economic impact of the

financial sector” (Paragraph II, A, 18).

Many countries today are developing at an incredible pace, national

currencies are fusing, English in transpiring as the world language, the

European Union (EU) and African Union (AU) are uniting their countries,

and it seems that in the future all nations will be united one language, one

currency, one leader, and one global market. But while these countries

rapidly expand they leave behind a large portion on their own people.

(Simanowitz and Walter: 2002). This is from the fact that the growth of

many countries is majorly paper work and just very small portions of the

country’s citizenry is actually productive and posses the resources for

production. The gap between the rich and the poor continues to grow at an

alarming rate and in response to the increase in poverty, affluent countries

have instituted large amount of programmes to these impoverished regions,

5
so as to get an even development of their countries and thus become

economically self-reliant.

Thus, the purposes of this research work is to demonstrate that

microfinancing is an effective approach to the socio-economic growth and

Nigeria and also that microfinance institutions play a vital role in Nigeria’s

strive for economic self-reliance through reduction of poverty and financial

empowerment of the poor.

1.2 STATEMENT OF RESEARCH PROBLEMS

The research is focused on Microfinance institutions in Nigeria and

the Socio-Economic significance in the achievement of Nigeria’s economic

self-reliance.

A number of questions still persist, even though lots of measures have

been taken by the Government, Non-Government Organizations (NG) and

private individuals, to boost the economic self-reliance of Nigeria’s

Economy through the establishment of microfinance institutions. The

questions are a follows:

1) What it is the contribution of Microfinance Institutions to the Nigeria

economy presently?

6
 2) What is the relationship between Microfinance Institutions in Nigeria

and Nigeria’s Socio-Economic growth, and to what extent have

Microfinance institutions been able to influence the socio-economic

growth of the Nigeria Economy?

3) What is the growth trend of Microfinance Institutions in Nigeria?

4) What are the contributions of Microfinance Institutions to the growth

of Small and Medium Enterprises in Nigeria?

5) What challenges do Microfinance Institutions constrain their

effectiveness?

6) What is the future for Microfinance Institutions in Nigeria?

7) Is capital a major problem facing Small and Medium Scale

Enterprises in Nigeria?

1.3 OBJECTIVES OF THE STUDY

The research was prompted by the fact that all Eyes are focused on the

fast and quick ways to set the economy up and going so as to enable Nigeria

compete in the International Market and Standard, and at doing this, the

basis for boosting any economy has been neglected and almost forgotten.

Also it is an obvious fact that the major problem facing Small and Medium

7
Scale Enterprises in Nigeria is inadequate finance hence this neglected parts

refers to the simple and slow but tremendously effective ways of achieving

economic growth and development. Microfinance is one of such way. The

goals to achieve through this research work are as follows:

1) To show the present level of contributions to Nigeria’s economic self-

reliance Microfinance Institutions.

2) To show the growth trend of Microfinance Institutions.

3) To find out the impact of microfinance institutions on the Expansion

of Small and Medium Scale Enterprises (SMEs) in Nigeria.

4) To disclose the problems and challenges constraining the

effectiveness of Microfinance Institutions in Nigeria.

5) To show the extent to which the poor and small scale enterprise have

embraced and utilized the products and services offered by the

microfinance institutions in Nigeria.

6) To examine and disclose the possible future for Microfinance

Institutions in Nigeria.

8
1.4 STATEMENT OF RESEARCH HYPOTHESES

The basic assumptions of this research work is that microfinance

institutions is a gateway to the attainment of Nigeria’s economic self-

reliance and as such, the following hypotheses were formulated to serve as a

guide in the research work and also to help us show the relationship between

Nigeria economic self-reliance and the microfinance institutions in Nigeria.

Hypotheses 1

Ho: There is no relationship between the growth of Microfinance

Institutions in Nigeria and the eradication of poverty.

Hi: There is a relationship between the growth of Microfinance

Institutions and the Eradication of Poverty.

Hypothesis 2

Ho: Microfinance Institutions has relationship with the growth of small

micro and small lower scale enterprises in Nigeria.

Hi: Microfinance Institution do promote the growth of Small and Medium

Scale Enterprises in Nigeria.

9
1.5 SIGNIFICANCE OF THE STUDY

One would wonder what a research work like this is set out to impact!

Majority of Nigerians do not have the smallest of knowledge as to the

activities of Microfinance Institutions even when they are opposite their

homes. This is also to show the roles that these M.Is plays or are supposed to

play in the ‘development’ of the country’s economy and on the well-being of

the citizens.

1) To the Government: This will give them updated information as to

the contributions of M.Is in Nigeria’s strive for economic self-reliance

and draw a reasonable attention to the betterment of the Microfinance

Institution in Nigeria.

2) To the Society: It will enlighten the society on the functions and

nature of Microfinance Institutions in the society, and their

importance in the economic well-being of Nigerians.

3) To Small and Medium Scale Enterprise and Other Organization:

It will enlighten the small and medium scale enterprises on the

operations and activities of Microfinance Institutions in the Nigeria

10
 Economy and how well to utilize the products and opportunities

provided by these microfinance institutions.

4) To the Microfinance Institutions: It will serve as a reminder of their

goals and objectives with regards to expectations owing from their

existence.

5) To the Student: It will add to their strength of knowledge and also

serve as an academic exercise for gaining academic excellence.

6) To Database: It will be a source of information, reference and a guide

for future research and investigation for people who intend to study

the Microfinance Institutions in Nigeria and other related topics.

1.6 SCOPE AND LIMITATION OF THE STUDY

The research will intensively examine Microfinance Institution and

the socio-economic significance toward the achievement of Nigeria’s self-

reliance. An eleven-years empirical review is the time for this study: 1998:-

2008.

The research consists of all the Microfinance Institution in Nigeria but

for the purpose of this study, ten (10) Microfinance Institutions in Edo State

11
were chosen, five () from Oredo Local Government Area in Edo State, and

five (5) from Egor Local Government Area also in Edo State.

The following are the limitations we encountered during the

researcher work:

1. Lack of sufficient and analytical data on the subject matter.

2. Inadequate indigenous literature on the subject matter.

3. The problem of generalization which is due the smallness of the

sample size in representing the whole population.

12
 CHAPTER TWO

LITERATURE REVIEW

2.1 EVOLUTION OF MICROFINANCE

The concept of microfinance emanated from the combination of

various small informal financial and credit activities that have evolved over

time, in different parts of the world. Many societies had different name and

system through which their own small scale credit and saving scheme

operated. An overview of the savings and credit group that have operated for

centuries throughout the world includes the “Susus” of Ghana, “Chit Funds”

in Sri Lanka, “tontines” in some parts of West African, “Pasanaku” in

Bolivia, “Paliuwagan” in Philippines, “Gameyo” in Egypt, “Ekub” in

Ethiopia, and “Cuchubal” in Guatemala as well as numerous savings clubs

and burial societies (Series and Damach, 1982).

In 875 AD the Romans had a vision to rule the world market. To

achieved, this, soft Blacksmith, Goldsmith, Carpenters, Farmers, and Potters

that were involved in international trade market. By the Roman’s

Government (Dambatta, 2000). These loans were collected through the

leader of various craftmen involved. Loans were paid back at over market

13
day (21 days) with little interest attached to it. In the period since 1940, the

world had witnessed two waves of economic depression. These had become

a matter of concern to most nations of the world (Clark, 2002). In 1947 a

summit was held in Japan which was aimed at alleviating poverty and

reformation of posts war regions (World Bank 2006).

In the early 1900s, various adaptations of theses models began to

appear in parts of the rural Latin America. While the goals of such rural

finance interventions was usually defined in terms of modernizing the

agricultural sector. They usually had two specific objectives: increased

commercialization of the rural sector by mobilizing “idle” savings and

increasing investment through credit, and reducing oppressive feudal

relations that were enforced through indebtedness. In most cases, these new

banks for the poor were not owned by the poor themselves, as they had been

in European, but by the year, these institutions became inefficient and at

time, abusive.

Between the 1950s and 1970s, government, non-governmental

organizations and individual donors focused on providing agricultural credit

to small and medium scale farmers in hopes of raising productivity, and

14
incomes. These efforts to expand access to agricultural credit emphasized

supply-led government interventions in form of targeted credit through state-

owned development finance institutions or farmer’s co-operatives in some

cases that received rates. These subsidized schemes were rarely successful.

Rural development banks suffered massive erosion of their capital base due

to subsidized lending rates and poor repayment discipline and the funds did

not always reach the book, often ending up concentrated in the hands of

better-off farmers.

The 1970s conceived and gave birth to the modern day concept of

Microfinance institutions. This was accomplished through experimental

programmes in 1970 by Muhammad Yunus, Professor in Chittagong

University, Bangladesh. The experiment was carried out through the issuing

of small loans to groups of poor women without any collateral attached to

the loans. Issuing the loans was based on solidarity group lending system; a

system in which every member of the group guaranteed the repayment of the

loan for all the members in the group (Yanus & Kari 2007). The loans were

given on the condition that the women were to invest it in micro-businesses.

Empowerment of rural poor women was addressed by Professor M. Yanus

15
through his programme of action-research. He achieved this by designing an

experimental credit programme to serve these women. His hypothesis was

that “people who had too little land to support themselves as farmers could

make productive use of small loans that they would repay” this formed what

could be described a the mission of the Grameen Bank Grameen Bank) The

Bank then set out to encourage the rural poor, whose, productivity was low

despite the effort they put in. the Bank through it’s activities was determined

to identify this set of people and equipment through training skills

acquisitions encourage them to make regular savings and them to credit for

the sustenance of their household and micro-enterprises. The success from

the venture was recorded throughout Bangladesh and at such it spread

rapidly to hundreds of villages. The Grameen Bank was founded in 1983 and

now serves more than 6 million borrowers. The initial success of Grameen

Bank also stimulated the establishment of several other gain microfinance

institutions like BRAC, ASA, Proshits, e.t.c. (CGAP 2003). Since then the

concept of microfinance has received a worldwide attention, and it has been

adopted by many countries, national and international organization, in hope

of eliminating poverty in the rural regions of their various countries Nigeria

16
is one of such countries. The Grameen Bank is considered to be the

beginning of Modern Microfinance Institutions.

2.2 MICROFINANCE INSTITUTIONS IN NIGERIA

Microfinancing is the provision of financial services to poor and low

income households without access to Formal Financial Institutions (Conroy

2003). Microfinance programmes provide loans, savings and other financial

services to low-income and poor people for use in small business. Originally

based on traditional forms of community financing (a cross between finance

and development assistance), microfinance is found all over the world. The

microfinance movement began in earnest in the early 1980s in places like

Bangladesh and Bolivia and has, over the last 25 years, captured the interest

of multilateral donor agencies and private sector bankers. Microfinance

institutions are essentially needed to serve the poor because they lack access

to basic services such as education for children and health care.

Before the emergence of formal microfinance institutions in Nigeria,

informal microfinance activities had flourished over time. These informal

microfinance activities varied from each other because of the diversity of

culture inherent in Nigeria. Informal microfinance is provided by traditional

17
groups that work together for the mutual benefits of their members,

providing saving and credit services to their members. The informal

microfinance arrangements operated under different names with respect to

the various ethnic groups in different parts of Nigeria: to the Yorubas of

Western Nigeria, their own system of informal microfinance was referred to

as “Esusu”, “Etoto”, “Osusu”, “Nsusus” for the Igbos in the Eastern Nigeria

and “Adashi” in the North for the Hausas (CBN Report, 2000).

All the informal microfinance system mentioned above, through

different, in name and culture had the same key feature which were savings

and credit granting to the group members. These informal microfinance

systems, were only found among the poor and very low income earners in

both the rural communities and urban areas in Nigeria (Out, 2003). The

informal microfinance systems exhibited their effectiveness through the

formation of informal self-helps. Groups (SHSs) or Rotating Savings and

Credit Associations (ROSCAs).

2.3A INFORMAL MICROFINANCE SYSTEM IN NIGERIA

Informal microfinance institutions are institution embracing all the

financial transactions that take place beyond the function scope of various

18
countries’ banking, and other financial sector regulations. (Aryeetey, 1998).

Chipeta and Mkandawaivre (1991) opined that they are financial institutions

that are not directly amenable to control by the key monetary and financial

policy instruments inherent in a country. There is no known timeline for the

periods that the various types of informal microfinance systems operated in

Nigeria, it must however be noted that even from the medieval times, like

many other countries, informal thing activities and informal lending groups

had existed in Nigeria. These activities have again passed through various

stages including trading farm seeds for farm lands, borrowing of crops in

some seasons to be returned in other season rotational savings and loan

which are still quite prevalent today in most villages, market places,

Churches and Mosque association as well as corporate in offices.

It is a well established fact that these informal microfinance

institutions actually existed, this dates back to when the need for money,

savings and banking started. Informal microfinance systems still exist in

Nigeria, though not as much as they were decades ago Nigeria beings not a

country that is characterized by low levels of per capital income and

disparities in both the distribution of the meager income as well as wide

19
variations in the savings propensity at different level of income, which is

further compounded by the vicious cycle of poverty in which low levels of

per capital income only allows for low levels of savings and in turn limits

the rate of investment and capital formation and subsequently, growth of

income, require all the sectors of the economy to be up and doing in the

pursuit of the socio-economic growth in the pursuit of the socio-economic

growth of the country for the betterment of all Nigerians.

The role of the informal microfinance institutions cannot be

underestimated with regards to the growth of the Nigeria economy. Bell

(1990), posited that the informal sector of a country is better positioned than

the formal sector generally, and at such, the role that the sector plays in the

economy is far reaching into the rural economy of Nigeria. Imagine the non-

existence of informal microfinance system sector in the rural sectors of

Nigeria, it would have been unthinkable and (then Nigeria economy would

have been a write off. Though the sector has not achieved it’s optimal level,

its impact so far cannot be understated and it is therefore important for the

government to give the necessary attention to this sector so that the possible

optimal to this sector so that the possible optimal level achievable can still

20
be achieved. This doesn’t means that they should put all their efforts in the

rural informal microfinance sector for it would lead to overregulation, which

would result to the loss of trust from the contribution of this informal sector.

The informal microfinance finance institutions can be broadly

classified into three namely:

1. Proprietary informal financial entities, such as self-help

groups, small money lenders and smallholders, farmers.

2. Rotating saving and credit Associations (ROSCAs); and

Mutual aid entities, such as, Accumulating Saving and Credit

Associations (CACAs); and

3. Staff and social welfare schemes such as those run by

employers, friends relatives and neighbours e.g. co-operative

societies.

2.3 B FORMAL MICROFINANCE SYSTEM IN NIGERIA

Prior to 1980s, the form of microfinance institution that exited in

Nigeria was referred to as informal because their activities were wholly

unregistered with the Central Bank of Nigeria (CBN), and also they were not

under the supervision or regulation of (CN or any other recognized legal

21
framework in Nigeria (Anyanwa 2004) The Central Bank of Nigeria Survey

(2001) indicated that the operations of formal microfinance institutions in

Nigeria are relatively new, as most of them were registered after 1981. As at

1982, there were only three registered microfinance institutions in Nigeria,

Community Women and Development (COWAD), African Traditional

Responsive Banking (ATRB) and Country Women Association of Nigeria

(CWAN). There were established by non-governmental organization and

they operated in the rural and urban areas of Western Nigeria, taking care of

the low-income earners. Their major focus was the empowerment of the

women population of the region in which they existed. This can be seen

from the percentage of their woman beneficiaries, which was 99% as at

1982. (Anyanwu 2004). Apart from the general belief that women re

marginalized in terms of economic opportunities, the view was that women

are marginalized in terms of economic opportunities, the view was that

women perform better than men in managing meager resources and

promoting microenterprises and also, the ego problem of men makes it

difficult for them to solicit for small sums of money; and some of the

22
cultural practices prevent men from engaging certain businesses , such as

petty-trading, hair-dressing, e.t.c (Anyanwu, 2004).

From 1983 the number of NGOs involved in microfinance activities

increased significantly. These NGOs were Charity, Capital lending and

credit, only membership based institutions, their sources of funds were

majorly from grants, feeds and contributions from their members. However,

they had limited outreach dues, largely to unsustainable sources of funds.

Some of the notable Non-Governmental Organization (NGOs) that existed

during this period include;

1) Development Education Center (DEC): Established in 1988 in

Enugu State, to provide financial aid and non financial services to

rural poor women and unemployed females in order to enable them

achieve self reliance. DEC, provided services that stimulate women in

rural areas to act for positive change in their situations through self

help initiatives. The organization also encouraged individuals to

transform themselves by becoming actors in the transformation of

their societies. The organization provided various types of financial

services to its members both on group and individuals basis.

23
 However, they are presently de-emphasizing the individual lending

basis. DEC used a credit plus approach that is providing training and

savings facilities which are integral to its lending activities. some of

the non-financial services provided by DEC includes; offering of

training programmes to village health workers. More than 200 village

health worker have been trained by DEC since 1993.

2) Lift About Poverty Organization (LAPO): Established in 1988 as a

non-government organization. It is a poverty focused development

organization with the broad aim of assisting it members to break out

of the grip of poverty.

Beneficiaries are men and women, but mostly women who could be

considered poor. Women constituted over 90% of it’s beneficiaries.

LAPO provided its members with various types of financial services

such as:

(a) Regular Loan: This is obtained by members through their groups

for income generating purpose.

(b) Emergency Loan: This is given to a member on a request to meet

certain urgent needs.

24
(c) Joint Project Loan: This is granted to LAPO unions to establish

joint projects.

(d) Christmas Business Loan: This is disbursed in the monthly of

October to enable members benefit from the boom in business

activities during Christimas/New Year Festiviteis.

3) Farmer Development Union (FADU): Founded in Ibadan, Oyo

State in 1989 to provide development programmes aimed at reaching

the poor and vulnerable groups with basic economic and social

services for improved rural income, nutrition, employment and living

condition. In addition to the above mission, FADU’s activities and

objectives were those that were community interest driven, emphasize

community ownership, create plans for long term solutions provide

structure for integrated programs, facilitate and empower grassroots

institutions that are services oriented, support community initiatives

that also emphasize quality of life and building partnership with

government agencies, donor agencies and other NGOs.

4) Anambra Self Help Organization (ASHO): Established in 1996 to

provide savings and loans services to poor indigenes engaged in micro

25
 enterprise and farmer. It started with a pilot group of 10, but to date

over 20 groups have benefited. It was a multi-purpose organization

that conducted literacy campaigns for boy’s school enrolment so as to

reduce drop-out rate (which was a very serious issue in Anambra

State, at that time). ASHO supported the development of 14 savings

and credit groups (10 women’s group and 4 men’s group0. the

organization received financial and technical assistance from both

local agencies and international agencies. Also as a self help

organization, it generated funds through it savings schemes. They also

received fund from other NGOS. ASHO provides financial services. It

grants loans to its group members – 4 times the amount saved. It

charges 36% p. 9 on its loans.

By 2001, almost twenty years later, the Registered Microfinance Bank

with CBN were up to 160 and as at the third quarter of the same year

(2001), 96 out of the 160 registered Microfinance Institutions had an

aggregate savings worth N99.4 million and outstanding credit of over

N649.6 million, indicating huge business transaction in the sector (CBN

Report 2001).

26
 The total number of approve Microfinance Banks at the end of June

2008 was 782, which was made up of 607 community banks (CBs) that were

converted to Microfinance Banks at the conclusion at December 2007, 87

new investors in the Microfinance Bank sub-sector that were granted final

operating licenses and 88 other investors that were granted approved

microfinance Banks to 782 at the end of June 2008.

An analysis of the total number of licensed microfinance banks

showed that there was high concentration of the Microfinance Banks in

Lagos States (152), Anambra State (81), Ogun State (53), Oyo State (46),

Imo State (47). These five states accounted for 379 or 48.1 percent of the

total number of approved Microfinance bank. The remaining 31 states and

Abuja accounted for 403 or 51.9 percent of the total number of approved

Microfinance Banks (Fabomwo: MIF Newsletter 2009.

2.4 THE NEED FOR MICROFINANCE INSTITUTIONS

Microfinance is “the provision of financial services to low-income

earners and the poor, both in rural and urban communities “. These financial

services generally include savings and credit but can also include other

financial services such a insurance and payment services (Mathons 2003).

27
Cornford (2000) opined that microfinance is “the attempt to improve access

to small deposits and small loans for poor household neglected by the

traditional banks”. Therefore, microfinance involves the provision of

financial services such as savings, loans and insurance to poor people living

in both urban and rural areas who are unable to obtain such services from the

formal financial sector.

The common and most used words when talking of microfinance or

“poor” and “poverty”, this tells us that the concept for microfinance came

into existence because of the need to reduce and if possible alleviated

poverty. Thus microfinance cannot be mentioned without bearing the poor or

poverty in mind. It is therefore correct to state that “Microfinancing in

Nigeria” came up with sole objective of empowering the poor and giving

them the opportunity to break free from poverty while contributing

significantly to the socio-economic growth of Nigeria. It should however be

noted that microfinance services is at optimal when they are directed to the

economically active poor, not the extreme poor person that demands fund

for survival (Hirschland, 2005). Economically active poor refers to the low

income earners and poor individuals, who want fund as to get engaged in a

28
business venture that will lead to the upliftment of themselves and their

families (Robison, 2001). The services of microfinance institutions are

aimed at the economically active poor, who are already involved in some

ventures and need some leverage to boost their activities. The economically

active poor have some financial literacy, they known how to diversify, their

portfolios, how to save and where to invest. To such people microfinance is

useful, by increasing their income and improving their lives (Robinson,

2001). Hirchland 2005) divided the people classified as poor into 4

categories. First, “Impoverished People”: who do not even feed their

families; second, “Poor”: who have irregular income and they are financially

active. They are engaged in some ventures. These groups need micro-credit

to stimulate or accelerated their financial activities. Third group he defined

as “Upper poor”; they have small but regular cash flows they even can save

but due to their living conditions they are considered below poverty line.

Fourth group is “near poor” they consistently meet minimum standards of

living like food and health services but they do not have excess funds to face

unseen problems like prolong illness, pregnancy or death of a partner. From

29
Hirschland’s point of view, the economically active poor refers to the last

three classification of poor people, i.e. poor, upper poor and near poor.

The economically, active poor makes the concept of microfinance an

admired reality because when such poor people are microfinanced, it gives

them the needed boost for growth and sustainability. But when an individual

or group of individuals, who live in utter poverty, with no race or businesses

venture, except for the means of surviving, are microfinanced,

microfinancing might not be effective since the first income that gets into

the hands of the individual will have to go for the means of survival which is

wholly a loss on the part of the microfinance institution, demeaning their

efficiency, sustainability and going concern.

2.5 MICROFINANCE AND POVERTY ALLEVIATION

Schwartz (1005) stated that poverty the shortage of common things

such as food, clothing, shelter and safe drinking water, all of which

determine a quality of life. It may also include the lack of access to

opportunities such as education and employment which aid the escape from

poverty. According to Hazell and Haddad (2001) poverty consists of two

interacting deprivations which are physiological and social deprivations.

30
Physiological deprivation describes the inability of individuals to meet or

achieve material and physiological needs which can be measured either as a

lack of income, which limits access of food and to education, health,

housing, water and sanitation services or by the failure to achieve desired

outcomes such as a high quality diet rich in micronutrients, health status,

educational attainment and the quality of health, water and sanitations

services received, while social deprivation refers to an absence of elements

that are empowering, such as autonomy, time information, dignity and self-

esteem.

Poverty is a major problem in developing countries including Nigeria

(UNDP Report 2001). Nigeria’s case is relatively serious. As at 2001 about

70% of Nigerians were living in poverty. In addition to this, the UNDP

report of year 2001, ranked Nigeria as the 25th poorest country in the world.

Nigeria is characterized by high level of poverty as pointed out by World

Bank report (2008). Fortunately the level of poverty is decreasing with time.

The yearly report by the Economist Intelligence Unit (EIU) and the World

Bank, indicated that Nigeria’s G.D.P at purchasing Power Party (GDP PP)

nearly doubled from $170.7 billion in 2005 to $292.6 billon in November

31
2007, and GPP per head moved from $692 per person in 2006 to $1.754 per

person in 2007, also there was a significant growth rate in the various sectors

of the Nigeria Economy. Barring all these the poverty, level in Nigeria is

still at an unwanted level.

Economies categorized as Least Developed Countries (LDCs) suffer

from a “vicious circle of poverty” which is depicted below:

Low Productivity

Low Per Capital Low Per Capital

Accumulation Income

Low Savings

Vicious Circle of Poverty.

(Source: Enugu Forum Policy Paper 7, 2006)

The poverty circle in LDCs is vicious because savings are generally

low and therefore it is difficulty to accumulate capital for investment

32
purposes. Lack of investment leads in turn to low productivity. This is it’s

turn leads to low per capital income, low per capital income obviously leads

to low savings and the cycle repeats itself. World Bank Development report

(1990 indicated that microfinance can assist immensely in poverty

alleviation through promotion of the productive use of the greatest asset

accessible to the poor – their labour. This can be achieved through wage

employment, raising marginal farmers as well as increasing opportunities for

self-employment in diverse areas. For all these to be realized, there has to be

an improvement in social services (e.g. family health care, family planning,

nutrition and education). It is in the light of the foregoing that microfinance

in the least development countries (LDCs) has been seen as an intervention

strategy that helps the poor expand their economic activities, and increase

their income and assets. it also helps to improve their health and nutrition as

well as to improve their health and nutrition as well as build an enabling

environment for the growth of and development in the country in which

they reside.

In the year 2000, the United Nation drew up a list of eight (8)

Millennium Development Goals which aim to spur globalization,

33
development and eradicate extreme poverty (UNDP, 2009) poverty is

defined as those living on less that $1 a day (Simanowitz and Walter,

20002). The UN resolution adapted by the General Assembly States” “we

will spare no efforts to free our fellow me, women, and children from the

object and dehumanizing conditions of extreme poverty, to which more than

a billion of them are currently subjected “ The eight Millennium

Development Goals are as follows:

1) To eradicate extreme poverty and hunger.

2) To achieve universal primary education.

3) To promote gender equality and empower women.

4) To reduce child mortality.

5) To combat HIV/AIDS, Malaria, and other diseases; and

6) To improve maternal health.

7) To ensure environmental sustainability.

8) To develop a global partnership for development.

These goals, which are to be achieved by the year 2015, are

monumental steps in the direction of poverty alleviation. As a result of the

above, in 2002 Jonathan Murdoch and Barbara Haley, leading experts in

34
study of microfinance and its effect on poverty alleviation, were authorized

to determined the impact that microfinance has on the realization of the

seven Millennium Development Goals. In an extensive research paper

entitled “Microfinance and its Effects of Poverty Alleviation”, Murderoch a

Haley concluded that there is ample evidence to support the positive impact

of microfinance on poverty reduction as it relates to (the first six of the

eight) Millennium Development Goals”. If microfinance can expedited the

attainment of six of the Millennium Development Goals, it can therefore be

used as a valuable means to eradicate poverty. In fact, microfinance has been

proven again and again to be effective method of poverty alleviation

Murdorch and Haley, 2002). Clients who participate in microfinance

programs have enjoyed increased household income, better nutrition and

health, the opportunity to achieve higher education, as decrease in

vulnerability to economic shock, greater empowerment, and in some cases,

the ability to completely lift themselves and their families out of poverty.

2.6 MICROFINANCE IN LIVELIHOOD SECURITY

Carney (1998) defines a livelihood as comprising the capabilities,

asserts (including both materials and social resources) and activities required

35
for a meaning. Chambers (1997, p. 10) stated that livelihood security is

“basic to well-being” and that security “refers to secure right and reliable,

access to resources, food, income and basic services. It includes tangible and

intangible assets to offset risk, ease shocks and meet contingencies”

Gindenberg (2002) defines livelihood security as “a family’s or

community’s ability to maintain and improve its income, assets and social

well-being from year to year” Concern (2003), also stated that livelihood

security is more than just economic well-being as they define livelihood

security as “the adequate and sustainable access to and control over

resources, both materials and social, to enable households to achieve their

rights without undermining the natural resource base”. Livelihood security

therefore, like poverty, is not just about income, but includes tangible and

intangible assets, and social wellbeing.

Johnson and Rogaly (1997), stated that “NGOs aiming for poverty,

reduction need to asses the impact of their services on users’ livelihoods”.

They argue that in addressing the question of the impact of microfinance

NGOs must go beyond analyzing quantities data detailing the numbers of

users, and volumes and size of loans disbursed, to understanding how their

36
project are impacting on clients’ livelihoods. They state the provision of

microfinance can give poor people “the means to protect their livelihoods

against shocks as well as to build up and diversifying their livelihood

activities” therefore when analyzing the impact of microfinance, the overall

impact of the microfinance services on the livelihood of the poor, needs to

be taken into consideration.

A livelihood security approach according to Concern (2003), aims for

a holistic analysis and understanding of the root causes of poverty and how

people cope with poverty. They identify livelihood shocks such as natural

disasters and drought, the social, political and economic context, and

people’s livelihood resources such as education and local infrastructures as

factors affecting people’s livelihood security (Concern, 2003), Therefore,

when analyzing the impact microfinance is having on livelihood security, a

holistic analysis of people’s livelihood security must be conducted, rather

than just focusing on the material/economic impact microfinance is having

on the livelihoods of the poor.

37
2.6.1 SOCIAL IMPACT ANALYSIS OF MICROFINANCE

PROJECTS

Traditionally, the impact of microfinance projects was asserted by the

changes by in the income or well being of the clients. Mansell-Carstens,

cited in Rogaly (1996), argues that such a focus is flawed because

respondents may give false information. It is also very difficult to ascertain

all the sources of income of a client, so a casual effect is difficult to

establish, and it is also difficult to establish what would have happened if the

loan was not given. Therefore a broader analysis is needed that takes more

than economic impact into consideration. We have see that poverty and

livelihood security consist of economic and social condition, therefore, when

analyzing the impact of microfinance social impact must be assessed.

Kabeer (2003), stated that wider social impact assessment is important

for an organizations internal learning process as an MFI should be aware of

the “full range of changes associated with its efforts and uses these to

improve its performance”.

She considers social impact to relate to human capital such as

nutrition, health and education, as well as social networks. Impact must be

38
assessed on each of these issues if a true picture of the impact of

microfinance is to be obtained.

However, Kabeer moves beyond individuals or household analysis to

state that analysis should also be conducted at community, market/ economy

and national/state levels. She refers to these as “domains of impact” because

societies are comprised of different institutions domains each with their own

rules, norms and practices which can be influenced by microfinance

interventions in different ways. IABEER (2003), not only refereed to

domains of impact but also highlights dimensions of change that should be

assessed. She lists cognitive change, behavioural change, material change,

relational change and institutional change as dimensions of change, that need

to be taken into account if the wider efforts of microfinance interventions

are to be understood.

Zohir and Motin (2004), made a similar point when they stated that

the impact of microfinance interventions is being-estimated by

“conventional impact studies which do not take into account the possible

positive externalities on spheres beyond households”. They propose that

impact should be examined from cultural, economic, social and political

39
domains at individuals, enterprise and household levels. Chowdhurb,

Mosley, and Simanowitz (2004) argued that if microfinance is to fulfill it’s

social objectives of bringing financial services to the poor, it is important to

known the extent to which it’s wider impacts contribute to poverty

reduction.

CURRENT DEBATES ABOUT MICROFINANCE INSTITUTIONS

AND THEIR ROLE IN SOCIO-ECONOMIC GROWTH

When examining the impact microfinance has on poverty and the

socio-economic growth of a country, it is important to be aware of the

current debates that are taking place in the field of microfinance.

There are two major debates with regards to microfinance and its role

in the socio-economic growth of a country and poverty alleviation. These

debates are: reaching the poor and financial sustainability.

2.7.1 MICROFINANCE IN REACHING THE POOR

As highlighted, one of the main roles microfinance has to play in

growth is in bringing access to financial services to the poor, to those who

are neglected by the formal banking sector. This is their social mission.

Main stream banks targets clients that have collateral. The poor do not have

40
assets to act as collateral. Therefore, they are ignored by the formal financial

sector. These banks tend to be found in urban centres while the majority of

the poor in the developing world live in rural areas, where financial services

are not provided. Therefore, if microfinance institutions are to fill this void

they must reach the rural poor. However, according to most studies,

microfinance is only reaching a small functions of the estimated demeans of

the poor for financial services (Little field and Rosenberg, 2004).

Microfinance Institutions do not have the depth of outreach that is

needed to meet the demands of the rural poor. Serving the rural poor in the

developing world involves a major financial commitments, as it is expensive

to run rural microfinance projects. Claessens (2005) stated that high

transaction costs, small volumes and the costs of expanding outreach make it

unprofitable to serve the rural poor. It is for this reason that commercial

banks are positioned in areas of high population density. However, if

microfinance institutions are to meet their social mission of serving the poor

then financial services need to reach the rural poor people.

41
2.7.2 MICROFINANCE INSTITUTION AND FINANCIAL

SUSTAINABILITY

Another common criticism of the current operational procedures of

microfinance institutions, for instance, peer group self selection and the

drive for self-sustainability, is that they end up working with the moderately

poor, and marginalizing the poorest of their poor.

Simanowtiz (2002), highlights a number of factors leading to the

marginalization of the poorest, which lessens the impact microfinance has in

poverty; self-exclusion, exclusion by other members exclusion by MFI staff

and exclusion by design.

Markowsky (2002) and Rogaly (1996), argue that microfinance

institutions in their project designs are failing to meet the needs of the very

poor and destitute, who do have a demand for microfinance services,

especially for savings Littlefield and Rosenberg, 2004 and Dichter, 1999),

Organizations have shown that the poorest people can be targeted in a

sustainable manner (Halder and Mosely, 2004). Johnson and Rogaly (1997)

stated that some features of savings and credit schemes are able to meet the

needs of the very poor. In relation to reaching those living in extreme

42
poverty, Littlefield, Murduch and Hashemi (2003) refers to a study of 62

Microfinance Institutions that have reached full financial self-sufficiency

with 18 microfinance institutions that targeted what they defined as “the

poorest clients” averaging better profitability than the others. This shows

that when properly managed, programmes that target the very poor can

become financially sustainable. The onus is therefore on other microfinance

institution to develop products and services that will meet the needs of the

very poorest if the social mission of microfinance is to be achieved.

Microfinance institutions therefore need to improve their depth and breadth

of outreach. They must design appropriate products based on the needs of

the poorest and they must ensure products are delivered in a cost-effective

manner (Simanowitz and Walter 2002) financial sustainability versus

serving the poor. Microfinance institutions have more than just a social

mission, Markowski (2002) stated they have a dual mission: social mission

“to provide financial services to large numbers of low-income persons to

improve their welfare”, and a commercial mission “to provide those

financial services in a financially viable manner”.

43
 Simanowitz and Walter (2002), argued that microfinance is a

compromise between this social mission and commercial mission. As there

is more emphasis on financial and institutions performance, opportunities for

maximizing poverty impact and depth of outreach have been compromised.

They call for a balancing of social and institution performance, opportunities

for maximizing poverty impact and depth of outreach have been

compromised. They call for a balancing of social and financial/ commercial

objectives because the current focus on financial objectives means fewer of

those most in need of microfinance services are being targeted. To do this

they argue “it is now time to innovate and design services that maintain high

standards of financial performance, but which set new standards in poverty

impact”.

Markowski (2002), state that (GAP) estimates that only about 55 of

Microfinance Institutions Worldwide are financially sustainable while the

IMF (2005) put the figure at only 1%, 80 this is a huge issue for the

microfinance sector. To achieve financial sustainability. According to

Havers (1996), an MFI must cover the cost of funds, operating costs, loan

write-offs and inflation with the income it receives from fees and interest.

44
According to the IMF (2005), the microfinance institutions that have become

self-sustainable tend to be larger and more efficient. They also tend not to

target and more efficient. They also tend not to targeted the very poor, as

targeting the less poor leads to increases in loan size and improved

efficiency indicators, whereas Microfinance Institutions focusing on the

poorest tend to remain dependent on donor fund (IMF 2005). This is where

the compromise exists. In order to achieve such sustainability, while at the

same time reaching those most in need, microfinance programmes need to

be managed in a rigorous and professional manner, subsidies must be

removed, and tight credit control procedures and follow-up on defaulters

needs to be in place (Havers, 1996). There is no doubt that sustainability is

also very important from clients’ perspectives, as they place a high value on

continued access to credit, and if they feel that the MFI will not survive it

reduces their incentive to repay loans (Von Pischke, 2002),

Appropriate loan sizes for clients matching their needs, realistic

interest rates, savings as a prerequisite, regular, short and immediate

repayment periods and achieving scale can contribute to sustainability

(Havers 1996), if these measure to achieve sustainability are put in place,

45
while focusing on the needs of the poorest, then both the social and

financially objectives can be achieved. In simple terms, the tradeoff between

financial and social objectives can be balanced, if they MFI is well managed

and understands the market and it clients (Morduch 2004 and by combing

both objectives, financial returns can potentially be increased in the long run

(Pawlak and Matul 2004).

2.8 CHALLENGES FACING MICROFINANCE INSTITUTIONS

IN NIGERIA

IMF-Act (2004) stated in when assessing the performance of an MFI;

both its financial and social performance must be assessed, as both are need

for the successful running of an MFI. Simanowtiz, quoted in IMP-Act

(2004) do refers to this as an MFI’s “double bottom line”. As stated by

Morduch (1999) “achieve profitability and strong social performance is the

ultimate promise of microfinance. It is not impossible but neither is it easy”

and this is the challenge facing all microfinance institutions.

Therefore, the current challenges facing Microfinance Institutions are

threefold, but also outreach-extending the services together numbers of the

46
poor, and depth of outreach-trying to each the poorest members of the

society.

Other challenges facing microfinance institutions in Nigeria include:

1) Governance problems.

2) Funding of loan and advances.

3) Huge unsaved/underserved market.

4) An uneducated population.

5) The active Poor’s current preference for gift than loans.

6) Undue Competition Roth than Cooperation from

formal/Commercial Banks.

7) Poor Correspondence Banking Attitudes by Correspondence

Banks.

8) Poor structuring of some Micro-Finance Banks due to sacrifice

of quality for cheap and inexperienced staff and operational

facilities.

47
2.9 THE ROLES AND RESPONSIBILITY OF STAKEHOLDERS

IN MICROFINANCE INSTITUTION IN NIGERIA

The overall test of a good microfinance institutions design is

sustainable poverty reduction through increasing outreach resource

mobilization, cost coverage, profitability and dynamic growth.

In Nigeria we need to be wary of the problems that be deviled past

microfinance operations of development institutions such as Peoples Bank.

Many of them were ineffective on account of incompatibility with existing

traditional savings and loans schemes operated by local communities, the

lack of adequate professional staffs, had tortuous lending procedures, were

poorly funded, suffered high administrative costs, and had inappropriate

expectations from poor, uniformed and illiterate clients. Building effective

and sustainable microfinance institutions in Nigeria will require a lot of

innovation on the part of the promoters, the government, NGOs and donors.

Governments, donors and promoters of microfinance institutions should

from the beginning take some decision that are not necessarily of structure

but have to do with social choice and ideology and may have implications

for the ultimate structure and functional approaches of the microfinance

48
institutions in specific local context. For instance, should it be savings first

or credit first? The savings first Mantra is appropriate in low return

subsistent activities such as certain aspects of trading. What do the people

want, access to credit and other services or interest rate subsidy? Targeted

public sector credit tends to benefit the non-poor far more than the poor.

How much government involvement in the development of microfinancing

system of Nigeria is desirable?

The roles and responsibilities of stakeholders include the following:

2.9.1 GOVERNMENT

Government shall be responsible for:

i) Ensuring a stable macro-economic environment, providing basic

infrastructures (electricity, water, roads telecommunications e.t.),

political and social stability;

ii) Fostering adequate land titling and other property rights sufficient

to sere the collateral needs of borrowers and financial, institutions;

iii) Instituting and enforcing donor and foreign and guidelines on

microfinance to streamline their activities in like with this policy;

49
 iv) Setting aside an amount of not less than 1% of the annual budgets

of state government for on lending activities of microfinance banks

in favour of their residents.

2.9.2 CENTRAL BANK OF NIGRIA (C.B.N)

The roles of the CBN shall include the following:

i) Establishing a National Microfinance Consultative Committees;

ii) Evolving a clear micro-finance policy that spells out eligibility and

licensing criteria, provides operational/prudential standards and

guidelines to all stakeholders;

iii) Evolving a microfinance sub-sector and institutional policies

aimed at providing regulatory harmony, promoting healthy

competition and mainstreaming microfinance with formal

intermediation;

iv) Adopting an appropriate regulatory and supervisory framework;

v) Minimizing regulatory arbitrage through per role reviews of the

policy and guidelines;

vi) Promoting linkage programmes between universal/development

banks, specialized-finance institution and the microfinance banks.

50
 vii) Continuously advocating market-determined interest rates for

government-owned institutions and promote the channeling of

government microfinance funds through microfinance bank; and

viii) Implementing appropriate training programmes for regulators,

promoters and practitioners in the sub-sector, in collaboration with

stakeholders.

2.9.3 MICROFINANCE INSTITUTIONS

Microfinance service providers shall:

i) Provide efficient and effective financial services, such as

credit, deposits, commodity/inventory collateralization,

leasing and innovate transfer/payment services;

ii) Undertake appropriate recruitment and retention and

competitive processes;

iii) Adopt continues training and capacity building programmes

to improve the skills of staff; and

iv) Strictly observed their fiduciary responsibility, remain

transparent and accountable in protection saver’s deposits.

51
2.9.4 PUBLIC SECTOR POVERTY ALLEVIATION AGENCIES

Public sector microfinance institution and poverty alleviation agencies

such as the National Poverty Eradication Programme (NAPEP) in the

development of the sub-sector, shall be encouraged so as to perform the

following functions.

i) Provision of resources targeted at difficult-to-reach clients and the

poorest of the poor.

ii) Capacity building.

iii) Development of microfinance institution’ activities nation wide;

iv) Nurturing of new microfinance institutions to a sustainable level;

and

v) Collaborating/partnering with other relevant stakeholders.

2.9.5 DONOR AGENCIES

Donor agencies offer free or subsidized funds, donations or technical

assistance for the development of the microfinance industry in nigeria.

They include bilateral and multilateral institution. NGOs and

missionaries with a pro-poor orientation. The services provided by

donor agencies include grants, donations, technical assistances, e.t.c.

52
 The donor agencies, in conducting their microfinance activities, shall

comply with the relevant provision of this policy, or the target clients

for donor’s support may include: Microfinance Institution, NGOs,

regulators and other relevant agencies. However for the purpose of

averaging the evolving microfinancing initiative, donors are expected

to direct most of their assistance to lincesed Microfinance Banks to

ensure an orderly resource injection, transparency and synergy.

2.10 APPROACHES TO MICROFINANCE

According to Robison (2001), there are basically two leading

approaches to microfinance which are: poverty lending approach and

financial systems approach. Both of the approaches tend to provide neither

the availability of financial services for the poor, despite having consonance

in their goals, each approach tends to adopt a different modus operandi nor

the achievement of their desired aim. We will look at how these two

approaches tend to operate.

53
2.10.1 POVERTY LENDING/SUPPLY LENDING APPROACH

Robinson (2001), opined that “poverty lending approach focuses on

reducing poverty through credit and other services provided by institution

that are funded by donor and government subsides and other concessional

funds”. The basic aim of the poverty lending approach is to reach the poor

people through the services of credit. Robinson furthermore stated that

saving is not given any significance. In the poverty lending approach the role

of saving is of a retrieval nature i.e. mandatory saving is only considered as

a pre-condition for the purpose of receiving a loan, other than this role there

is no other role for the saving to play in the poverty lending approach.

Gulli (1999), however stated that the overall goal of the concept of

microfinancing should be the reduction poverty and empowerment of the

poor financial stability of microfinance institutions is worthless unless these

institutions have any impact on the lives on the poor. He donor funding is

important. The supply lending approach perceives credit as an important and

effective tool for poverty reduction the target market is poorest of the poor.

In view of enhancing the economic growth in the rural areas of any

country, Development Economists are of the view that the farmers need

54
credit to attain the production inputs. The supply lending approach is based

on the assumption that farmers are faced with shortage of capital and/or are

devoid of access to financial resources. As a result, these farmers look

forward towards informal money leaders for relying upon these sources is to

organize funds for fulfillment of their needs especially during the cultivation

season. Consequently they re exploited by the informal lenders who charge

unreasonably high interest rates. In this available to supply loans and inputs

required for cultivation of improved varieties of crops at subsidized interest

rates. Institutions using the poverty lending approach are not sustainable in

the long run because they charge subsidized rates on credit advanced, the

internet rates charged by these institutions are not adequate enough to cover

their operating expense (Robinson, 2001). These institutions also do not

cater to the demand for micro saving services among the poor. The focus of

poverty lending approach is upon micro-credit not microfinance.

2.10.2 FINANCIAL SYSTEM/DEMAND DRIVE APPROACH:

The financial system approach focuses on the commercial financial

intermediation among poor borrows and savers. It emphasizes on the

institutional self sufficiency. They provide micro-credit and saving services

55
to the economically active poor, financing their loans by savings and

different commercial investments. Commercial microfinance (financial

system approach0 is not for the starving borrowers, it’s not for the people

who are literate, who do not have skills. Starving borrowers spend their

loans for buying food and other things for their survival. On the other hand

economically active poor spend their loans on their ventures and ‘they have

the capacity to repay the loans (Robinson, 2001). The financial system

approach focuses on demand of commercial financial services of the poor

borrows and savers. The aim of the institutions operating under the financial

the financial systems approach is to provide dual benefits to their clients i.e.

these institutions not only provide easy access to credit at reasonable interest

rates to the economically active poor and micro-entrepreneurs but also

facilitate the provision of convenient and safe saving services to these who

want to store cash and gain positive interest rte upon donors for the

availability of funds, the aim of this model is to enable microfinance

institutions reach self-sufficiency and expand outreach of services to low-

income clients profitability. The financial systems approach represents a

more globally acceptable model of microfinance.

56
Poverty Lending Approach Financial System Approach
1) Poor can’t afford market rate. 1) Poor can afford market rates.
2) Need of services like training health to 2) Focus on full cost recovery and saving.
supplement credit
3) Mobilization of saving not a core principle. 3) Institutional sustainability as the core
principles
4) Donor/Government funds required. 4) Government roles is limited to
regulations.

Microfinance services, particularly, those sponsored by government,

have adopted the traditional supply-led subsidized credit approach mainly

directed to the agricultural sector and non-farm activities, such as trading,

tailoring, weaving, blacksmithing, agro-processing and transportation.

Although the services have resulted in an increased level of credit

disbursement and gains in agricultural production and other activities, the

effects were short lived due to the unsustainable nature of the programme.

2.11.1 MICROFINANCE INSTITUTIONS IN NIGERIA THE WAY

FORWARD

In many development countries, governments are still struggling with

how to regulate microfinance (Arun, 2005). Many Central Banks are

inclined to attempt to regulate Microfinance Institutions in the same way as

57
they do formal sector banks. Whilst in theory this will provide savers with

security, in practice it discourages the evolution of Microfinance Institutions

and often means that established Microfinance Institutions cannot develop

savings products. This keeps depositors ‘safe’ from unscrupulous or poorly-

managed Microfinance Institutions, but means that they have to use other

savings mechanisms (hiding ash in slum dwellings, buying livestock or

asking a trader to hold cash). These other mechanisms are often riskier than

the services that Microfinance Institution can provide. Although the

enhanced financial options can offer valuable services to poor people, there

is a need to regulate the entry of bad practices and products, which could

harm the financial system itself, lenders may disproportionately target

minority and lower-income people with higher-priced products on inferior

terms. The entry of aggressive consumer lenders and their competition may

encourage underwriting practices and poor-loan screening which devalues

the portfolio quality. These kinds of situations pose new regulatory

challenges for the microfinance institutions and the economy of the country.

58
2.11.2 APPROACH

The debate whether Microfinance Institutions should pursue a

‘poverty lending’ or a ‘financial system’ approach (Robinson, 2001) is

largely resolved. In most parts of the world the microfinance sector is

adopting a financial system approach, either by operating on commercial

lines or by systematically reducing reliance on interest rate subsides and/or

aid agency financial support. This is well-illustrated by the experience in

Bangladesh, where the Grameen Bank has shifted from its classic ‘Grameen

I’ group lending to the poor model, to ‘Grameen II’, which is much closer to

the financial system model (Hulme, 2008).

The move towards the financial system approach and growth of the

competitive environment has put the client back at the centre of

microfinance operations. This shift in the composition of two main

processes the first, illustrated by the Grameen Bank, is of existing

Microfinance Institutions reducing the ‘poverty lending’ focus of their

activities and shifting to the financial service needs of low-income

households, i.e. operating savings alongside loans.

59
 The second process is of established formal banks and financial

institutions moving into microfinance. This is happening with many

commercial banks than have public acknowledged the potential profits they

believe can be generate d from potential profits they believe can be

generated from engaging in the microfinance sector.

2.11.3 TECHNOLOGICAL CHANGE

The original ‘microfinance revolution’ took advantage of the

technological advances in ICTs of the 1990s and 2000s. However, often this

was as a relatively late adopter, with many Microfinance Institutions having

to convert manual records to electronic system in the mid 2000s. The

dramatic reductions in the cost of new ICT products-mobile phones; palm

pilots and even laptops-and the rise in connectivity through mobile phones

and the internet mean that in the next decade there is enormous potential for

microfinance institutions to develop new services: Services that in the past

would have been economically infeasible because of high transaction costs.

These technological changes have made it easier to address two main

obstacles in providing financial services to the poor people-managing

information and services delivery costs (Economists, 2005). The challenges

60
for microfinance institutions is rethink their business models and to innovate

ways they deliver and receive the services, so that products are more

convenient and cheaper for customers, services can be accessed by people in

remote areas, and security is enhanced. Until now, the predominate use of

technology among microfinance institutions has been to internally manage

information. However, technology has an immense potential in other areas,

such as payment services and credit underwriting for instance, as mobile

phone usage expands opportunities to provide financial services in remote

rural areas become feasible. The concept of mobile banking, ‘M-banking’,

has great promise safe-save in Bangladesh provides low income slum-

dwellers with flexible financial services. On six days a weak its clients can

deposit or withdraw savings and take out or repay loans, when their collector

calls at their house or business place. Such flexibility creates relatively

complex micro-finance portfolio, but the use of palm pilots by collectors

provides a real-time record of transaction and permits the bank’s books to be

balanced, at a very low administrative cost, shortly after the close of

business each day. The stage is now set for many other innovations of this

type.

61
 The concept and practice of microfinance have changed dramatically

over the last decades. Conceptually the financial systems approach has

gained ground over poverty lending and most serious analysts how view

micro-credit as only one of several components of microfinance. The

arguments advanced by Robinson (2001) that microfinance should seek to

meet the demand of low-income people for finance services, rather than poor

and extremely poor people, widely informs present-day practice.

Microfinance is seen as a set of services that raises the prospects for low-

income house holds, and some poor people, to achieve their goals, business,

consumption, education, health and other areas and not as a magic bullet

that automatically lifts poor people out of the poverty through micro-

enterprise. Microfinance specialist concerned with poverty reduction and/or

extreme poverty are increasingly focusing on “graduation” programmes

(Hulme and Arun, 2008; Matin and Hulme, 2003) that link microfinance

sector seems set to continue to. However, the speed and nature of these

processes is unclear in Africa. While many factors will shape the future of

microfinance, one factor merits highlighting in this conclusion. That factor is

the social energy of the tens of thousands of people who are committed to

62
analyzing microfinance and debating how additional financial services can

be made accessible to the hundreds of millions of people who have no access

to formal financial services very few other development issues have

managed to generate such passion and commitment as that of microfinance.

It is the collective imagination and social energy of this dispersed

community of anti-poor researchers that hat created the microfinance

revolution of the late 20th century and will take it forward in the coming

years.

63
 CHAPTER THREE

3.1 INTRODUCTION

This chapter is directed at the description of various processes

involved in obtaining, analyzing and interpreting the relevant theoretical and

empirical data, which should yield this required information to satisfy the

research purposes. It shows the modes of data gathering, collection of

information and classification of such data according to their importance to

the research study and how they are analyzed in due course. Specifically; the

chapter explains the research methodology, sources of data, sample size and

sampling technique, questionnaire design and administration, techniques of

data analysis and model to be used for study.

3.2 RESEARCH DESIGN

An ex-port facto research design was adopted for the study. This is

because the relationships that exist between Microfinance Institutions in

Nigeria and Nigeria Economic Self-reliance cannot manipulate for result.

64
3.3 RESEARCH POPULATION

The research population of a study is the totality of a group about

whom the research wants to draw conclusion(s) on. In our case, the

population of the study is made up of microfinance institution in Nigeria, all

small and medium scale enterprise in Nigeria and the Nigerian

economy/citizenry.

3.4 SAMPLING PROCEDURES

Judgmental and purposive sampling procedure was adopted to draw

the sample. The choice of this became necessary because of the fewness in

the number of Microfinance Bank in Benin City, Edo State.

3.5 SAMPLE SIZE

The sample of the study consist of 10 Microfinance Institutions from

Oredo and Egor Local Government Areas of Edo States the Small and

Medium Scale Enterprise resident in these local government areas, and the

residents of these Local Government Ares in Edo State.

65
3.5.1 SOURCES OF DATA

These are majorly two sources from which data for this research were

gathered, they are the primary and the secondary sources of data.

 Primary Sources: Questionnaires, Personal interviews and direct

observation.

 Secondary Sources: Textbooks, Journals, Seminar Papers,

Newspapers, Magazines newsletters, Internet and workshop materials,

and CBN Annual Reports.

3.6 RESEARCH INSTRUMENT AND FIELD WORK

Together the research information from respondent the two sources of

data as mentioned above were used.

1. PRIMARY SOURCE OF DATA

(a) Questionnaire administration. The questionnaires were administered

to information from microfinance clients the questionnaires

contained questions on the social and economic effects of

microfinance institutions on them as client and on their family; the

level of awareness of Nigeria in microfinance services and products;

the ways in which microfinance institutions have impacted the

66
 livelihood of clients and beyond their households, and the exact

ways that micro-loan and savings are carried out. Combinations of

open-ended and closed-ended questions were used in the

questionnaire design.

(b) Direct interview was also conducted to elicit information about the

history of background, types and functions, operations and activities

of microfinance institutions both in Nigeria and in the global world.

The interview was directed majorly at the microfinance institutions.

(c) The use of direct observation was also helpful. It was directed at the

clients of microfinance institutions, their livelihood and their

households, and also on the entire community in which they reside.

(2) SECONDARY SOURCES OF DATA

Data from the published annual statistical and financial report of the

central bank of Nigeria (year 1998 to 2008) was primarily used to determine

the effectiveness of microfinance institutions in the economy of Nigeria. It

constituted the main source of empirical data related to the Microfinance

Institutions and their contribution to the economic self-reliance of Nigeria.

67
 The data from textbooks, journals, seminar papers, newspapers,

Newsletters, Magazine Online (Internet) and workshop materials were all

used; mostly for descriptive and explanatory purposes.

3.7 DATA PRESENTATION

The data from this research work will be presented using tables and

charts. These methods were chosen because of their simplicity and clarity.

3.8 METHOD OF DATA ANALYSIS

Since the data collected were non-parametric in nature, the methods

used for data analysis were the simple statistical table, regression technique

is expected to identify the relationship between the dependent and

independent variables.

3.9 MODEL SPECIFICATION

In order to capture the relationship between microfinance institutions

and the socio-economic growth of Nigeria, the following model was

specified.

The model in it’s functional form:

GDP = F (TCR, TLA, TDL, TA, TI)

The model in it economic form

68
 GDP –β0 + β1TCR+ β2TLA + β3TPL + β4TA + β5 T + ut

Where:

GDP = Gross Domestic Product used as proxy to measure the socio-

economic growth of Nigeria.

TCR = Total capital Reserve of Microfinance Institutions.

TA = Total Assets, used as a proxy to measure the growth of

microfinance institutions.

TDL = Total Deposit liabilities of microfinance institutions.

TLA + Total Loans and Advances of microfinance institution to clients

and SMEs.

TI = Total Investment of microfinance institution.

Ut = stochastic error term.

B0 - B5 = Parameters to be estimated

A – prior expectation: β0 > 0, β1 > 0, β2 – 0, β4 > 0, β4 > 0,

If TCR, TA, TDL, TLA and TI of microfinance institution are

increasing over the yeas, it deductively means that their clients thus far, are

being economically empowered. The empowerment of these clients should

have an increasing effect on the socio-economic growth of the communities,

69
in which they reside, (thus leading to increased per capital income of the

average. Nigerian, and a general positive contribution to the self-reliance of

Nigeria economy

DATA FOR REGRESSION

GDP At TOTAL TOTAL TOTAL TOTAL TOTAL

YEAR CURREN CAPITAL ASSET DEPOSILIABILITIES LOAN & INVESTMENT

T PRICES RESERVE ADVANCES

1998 2,765.67 1,479 5.961.8 3,870.8 1,972.5 244.7

1999 3.193.67 2,048.6 7,913.4 5,102.8 2,6310.0 436.7

2000 4,537.64 2,773.6 12,014.7 7,689.4 3,666.6 450.2

2001 4685.90.90 1,034.8 4,884.4 3,294.0 1,314.0 304.3

2002 5,405.01 3,825.6 15,463.5 9,699.2 4,310.9 925.5

2003 6,947.82 7,011.1 28,689.2 18.,075.0 9,954.8 2,261.0

2004 8,264.96 8,156.4 34.162.3 21,409.9 11,353.8 2,612.7

2005 14,572.24 10,054.10 46.062.70 28,728.40 14,547.40 3,594.10

2006 18,564,59 12,619.9 55,056.10 34.008.80 16,498.60 3868.20

2007 20,657.32 14,250.70 55,616.10 33,088.30 16,450.80 2,592.40

2008 23M842.16 33,361.30 11,5124.30 58,481.30 42,024.40 7,317.70

70
 CHAPTER FOUR

4.1 INTRODUCTION

In this chapter, we will attempt to analyze the data collected, and

present the regression results. Equal the stated hypothesis will be tested,

using the regression result.

The chapter is divided into two sections, Section One and Section

Two.

Section one contain the presentation and interpretation of the results

from the regression that was run in order to determine the impact of

microfinance institutions in the socio economic growth of the Nigerian

economy towards the economic self-reliance of Nigeria. A graphical

illustration was also used to show the trend of the research variable through

the research period.

In section two, the stated hypotheses were tested using the regression

result. The results from the tested hypotheses were presented alongside the

decision rules.

71
PRESENTATION AND INTERPRETATION OF REGRESSION

RESULT

4.1.1 Regression Result

Table 4.1 Cochrane-Orctt Method AR(2) Converged after 25 Interactions

Dependent Independent Co-efficient t-Ratio

Variable Variable
GDP INPT 1.35 3.79

TCR -15.72 -8.96

TA 7.35 9.89

TDL -4.65 -7.43

TLA 1.18 2.14

TI -11-83 -9.03

R2 = 0.998 R2 0.991

F – Stat. F (7.1) = 140.02

DW – Stat = 3. 19

Equation 4:1

72
Interpretation of Result

The result from the regression shows that R 2 with a value of 99.8% of

the systematic variation in GDP was explained by the regressors. After

adjusting for the degree of freedom, it showed R2 with a value of 0.991,

meaning that the model could still explain about 99.1% of the systematic

variation in GDP. Only about 0.8% was left unexplained by the model,

which was capture by the stochastic error term. This show a significant

linear relationship between GDP and the regressors.

On the basis of the overall significance of the model, the F – Statistics

shows that there is no significant linear relationship between GDP and

independent variable at 5%, since the F –value of 140.02 is less than the

critical F – value of 236.8 at 50% level of significance.

The DW – statistic with a value of 3.19 indicates the absence of first

order auto-correlation which are eliminated using Co-chrane Orccutt Method

AR (2) which converged after 25 iterations.

4.1.2 INTERPRETATION OF GRAPHICAL RESULT

73
 The graph above shows the trend of all variables that were used in the

research model. It illustrates the growth trend of the variables through the

period of the research:1998 to 2008.

From the graph above, it can be deduced what all the independent

variables had a steady growth trend between the year 1998 and 2000, but in

the year 2001 they all suddenly dropped, except the dependent variable

(GDP Curve). The drop in all the independent variable was as result of the

activities of the Central Bank of Nigeria with respect to the establishment of

Other Financial Institutions Department (OFID), for the supervision and

regulation of the community banks in Nigeria. A total of 1,013 community

banks were covered in two inspection exercises carried out in October 2000

and October/November 2001. Of these 1,013 community bank, 747 or 74%

were in operation while 366 or 26% were either inactive or had closed shop.

These gave rise to the dramatic drop of the activities of community thereby

reducing the independent variable, as depicted in the graph.

It can also be observed from the graph, that in the year 2002, the

financial result of the community banks were better and this led to another

74
growth trend, with higher percentage growth rate as depicted I the table

below:

Table 4.2 Percentage Changes In the Variable

YEAR GDP At TOTAL TOTAL TOTAL TOTAL

Capital ABSENT Deposit Loans advances Investment
reserves % % Liabilities % %
%
1998 79.80 35.70 41.80 21.40 196.6

1999 38.50 32.70 31.80 33.40 78.5

2000 35.40 51.80 50.70 39.40 3.1

2001 -62.70 -59.30 -57.20 -64.20 -32.4

2002 269.70 216.30 194.50 228.10 204.1

2003 83.30 85.50 86.40 130.90 144.30

2004 16.30 19.10 18.40 14.10 15.60

2005 23.30 34.80 34.20 28.10 37.60

2006 25.50 19.50 18.40 13.40 7.60

2007 12.90 1.00 2-70 -0,30 -33.00

2008 134.10 1.00 -2.70 -155.50 182.30

Source: Annual Statistical and Financial Report of CBN 1998-2008

The year 2005 showed another positive turn in the growth trend, as

depicted in the graph and the table above. This was due to the activities of

the CBN, with regard to the emergence and launch of the official regulatory

framework in 2005, and the conversion of community banks to microfinance

75
banks in 2007. From 2005, more investors trooped into community banking

and this led to higher levels of activities in the sector.

In the year 2008, the graph shows a dramatic geometrical increase in

all variables (both the dependent and the independent variables), resulting

from the injection of fresh capital by the new investors as well as the higher

level of retained earnings by the existing institutions.

SECTION TWO

Test of Hypothesis

The hypothesis was tested using the regression result of the

independent variables. The t-Radio was used in testing the hypothesis.

The study adopts 5% level of significance under the two tailed

tests.

Hypothesis One

Ho: There is no relationship between the growth of microfinance

institutions in Nigeria and the economic growth of Nigeria.

H1 : There is a relationship between the growth of microfinance

institutions in Nigeria and the economic growth of Nigeria.

76
Figure 4.1

Acceptance
Region

-2.26 2.26
6.72

Decision Rules: From the result above, it can be observed that the calculated

t-value of 6.723 is greater than the table t-value of 2.26 which falls outside

the acceptance region into the rejection region as show in figure above.

Therefore we reject the null hypothesis and acceptance the alternative

hypothesis, which states that there is a positive relationship between the

growth of microfinance institution in Nigeria and the economic growth of

Nigeria.

77
Hypothesis Two

Ho: Microfinance institutions do not promote the growth of small and

medium scale enterprises in Nigeria.

H1 : Microfinance institutions promote the growth of small and

medium scale enterprises in Nigeria.

Figure 4.2

Acceptance
Region

Rejection
Region

-6.7 -2.26 2.26

Decision Rules: Since the calculated t-value of 6.7 is greater than the critical

t-value of 2.26, which falls outside the acceptance region and into the

rejection region as depicted in the figure above we therefore reject the null

hypothesis and accept the alternative hypothesis which states that

microfinance institutions promote the growth of small and medium scale

enterprises in Nigeria.

78
 CHAPTER FIVE

5.1 SUMMARY OF FINDINGS

This study has been on the social and economic impact of

microfinance institutions in Nigeria towards the economic self-reliance of

Nigeria’s economy and ten microfinance institution in Edo State were used

as case studies.

During the course of the study various issues relating to the practices

of Microfinance Institutions were carefully discussed and analyzed. These

issues include: the target market of microfinance institutions, specialist

knowledge of microfinance, as well as effects of microfinance on poverty

alleviation, socio-economic growth and livelihood security. Impacts of

microfinance both at the household levels and beyond the household levis

were also discussed.

After a careful analysis of both the primary and secondary data, the

following discoveries were made:

1. The level of awareness of Nigerians with regard to the operations and

activities of formal Microfinance Institutions is relatively low, although

it is still in the development stage.

79
2. Nigeria believe that the concept of Microfinancing the poor is a tool for

poverty alleviation.

3. There is a positive impact of microfinance institutions both in the

household levels of the clients and beyond the households of the clients.

4. There has been a positive growth trend for microfinance institutions in

Nigeria for the past 11 years, in client based operations and financial

results.

5. CBN polices of regulations have had a positive impact on the

effectiveness and efficiency of microfinance institutions in Nigeria

since the inception of the Microfinance Policy, Regulatory and

Supervisory Framework in December 2005.

6. There is a positive relationship between Microfinance Institutions in

Nigeria and Nigeria’s Socio-economic growth. Also, it was discovered

that Microfinance Institutions have been able to influence the Socio-

economic growth of the Nigeria-Economy.

5.2 CONCLUSION

The coming into being of microfinance institutions in Nigeria has

helped to reach those who otherwise would not have access to credit from

80
the formal finance sector. Although the figures of membership of these

institutions appear small compared to the vast population of their supposed

areas of operation, they are impressive in the light of the literacy level and

the cultural, legal and economic environment under which they operate in

Nigeria. Not to mention the relatively small capital base and lack of access

to adequate funds, needs to scale up their activities. The lack of proficient

and efficient personnel needed to provided professional services and

training, alongside the credit facilities granted to clients so as to ensure

successful repayment of loan, is also a mitigation factor. A host of so many

other challenges limit the overall contribution of microfinance institutions to

the economy of Nigeria.

In conclusion, at an aggregate level, microfinance services are means

of broadening economic growth and this can be heightened by having more

stakeholders participate in the correct of microfinance. Microfinance

institutions alone cannot improve roads, housing, water supply, education

and health services to those in the rural area, nor can they lift the poor (in

entirely) in the economy out of poverty. Perhaps the greatest contribution of

microfinance is that it empowers people-poor people providing them with

81
confidence, self-esteem and financial means to play a larger role in their

socio-economic growth and the economic self-reliance of the Nigerian

economy.

5.3 RECOMMENDATIONS

From the analysis and observation of microfinance institutions records

and activities, the following recommendations are suggested:

1) In order to increase the rate of repayments, an Audit (monitoring)

unit should be introduced as a full fledged section to help monitor

credit and repayment rates (status). This unit must act to check the

flaws, loopholes and excesses in the activities of the operation

(credit) unit. The unit must be aggressive n chasing its goals

especially in gathering data on current state of clients and it must

ensure a follow up of actual verification of their records, because

sometime paper reports differ from the realities on ground, clients

may be making repayment without corresponding recording of such

repayments.

82
2) The organization should strive to reduce its expenditure cost. This

will involve reducing cost of operations in order to increase funds

available for disbursement as credit of clients.

3) Efforts should be made to gradual clients to the formal financial

sectors. This becomes necessary especially when clients have

exceeded the loanable funds that microfinance institution can

deliver.

4) Consultants, both local and international, including multilateral

donors, should be signed on to give technical support, capacity

building and back-up funding to starters and existing MFIs.

5) Government should facilitate and not over-regulate microfinance

operations. Governments and policy-makers must ensure that

financial regulation does not result in financial repression, which

make it difficulty for Microfinance Institutions to Operate. Examples

of financial repression are impose interest rate ceilings, subsidized

credit, and tax structures that discourage investment in microfinance.

i. Recognize the multidimensional nature of poverty and bring on board

and relevant institutions and agencies dealing with livelihood

83
 provisioning in the planning and coordination of microfinance

developments including development partners (bilateral, multilateral

and non-governmental).

Other policy recommendation to the government includes:

i. Recognizes the multidimensional nature of poverty and bring on

board all relevant institutions and agencies dealing with livelihood

provisioning in the planning and coordination of microfinance

developments including development partners (bilateral, multilateral

and non-governmental).

ii. Providing for demonstration models and encourage replicability of

successful microfinance institutions approaches in line with best

practice, but with clear sensitivity to local contexts.

iii. Mount campaigns through the National Orientation Agencies to

enlighten people on the usefulness of micro-credit and microfinance

institutions.

iv. Design microfinance institutions to complement what already exits in

terms of other supporting institutions, tradition institution and

practices (Isusu, e.t.c) human capabilities, and available technologies.

84
v. Microfinance Institutions that finance manufacturing and technology-

intensive activities should received more incentives in the policy. This

is because evidence shows that loans disbursed by major

Microfinance Institutions in Nigeria. Up to 2003 were mainly to trade

and commercial activities (78%), leaving manufacturing (3.5%),

Agriculture, (14.1%) multipurpose (4.0%) services (0.7%) and others

trailing behind (Anyanwu 2004).

vi. Provider clear guidelines for weaning dependants Microfinance

Institutions from Financial dependency as soon as possible as part of

legislation guiding the operations of Microfinance Institutions in

Nigeria.

vii. Provide for the establishment of national and apex organizations for

guidance, training, consultancy services, self-regulation and

supervision, liquidity exchange and refinancing of microfinance

institutions.

85
 BIBLIOGRAPHY

Anyanwu, C.M (2004); “Microfinance Institutions in Nigeria” Paper

Presented at the Gs4 Workshop on “Constraints to growth in sub-
Saharan Africa Pretoria, South Africa, Nov 29th-30th.

Armendariz De Aghion, B.A. & Morduch J. (2005); “The Economics of

Microfinance” Journal of Economic MIT Press, Cambridge.
Massachusetts.

Arun, T.G. (2005); “Regulating for Development” The Quarterly Review of

Economics and Finance, Vol. 45 (2-3), 345-357.

Aryeetey, E. (1998); “Information Finance for Private Sector

Development in Africa”. African Development Bank Economic
Research Paper. No. 41.

Bell C. (1990); “Interaction Between Institutional and Information Credit

Agencies in Rural India”, The World Bank Economic Review, 4(3);
295-327.

Brandsma T&R Chaouli (1998); “Making Microfinance work in the Middle

East and North Africa Private and Financial Sector Development
Group. Human Development Group, Middle Easter and North Africa
Region”, Washington D.C. World Bank Report 23076.

86
Brocokleshy, M.A & Fisher, E. (2003); “Community Development and
Sustainable livelihoods”, An Introduction, Oxford University Press.

Banerjee A. V. & Duflo E. (2007); “The Economic Lives of the poor Journal
of Economic Perspectives.

Carney, D. (1998); “Implementing the Sustainable Rural Livelihood

Approach in Carney, D (ed), Sustainable Rural Livelihoods
Department for International Development (DFIN) What Contribution
can we make? London: pp. 3-23.

CBN Annual report & Financial Statements for the Year Ended 31
December, 2002.

CBN Annual Report & Financial Statements for the Year Ended 31 st
December, 2008,

CBN Annual Statistical Bulletin. Vo. 18 Dec. 2007.

Central Bank of Nigeria Survey (2001); “Report on Microfinance

Institutions in Nigeria” unpublished.

Consultative Group to Assist the Poorest (CGAP) “Case Studies (July 2003);
In Donor Good Practices” No. 8. Donors as Silent Partners in MFI
Product Development: Microsave-Africa and Equity Building Society,
in Kenya.

87
Consultative Group to Assist Poorest (CGAP) UNCDF Donor Training,
“The New Vision of Microfinance: Financial Services for the Poor”.
http://cgap.org Accessed:7/6/2009.

Chowdhury, A.M. R. & Bluiya, M., (2004); “The Wider impacts of BRAC
Poverty alleviation programme in Bangladesh”, Journal of
International Development, pp. 369-386.

Chowdhury M. Mosley P. & Simanowitz A. (2004; “The Social Impact of

Microfinance: Introduction” Development, Vol. 16, Issue 3, pages
291-300.

Cohen M., (2002); “Making Microfinance more Client-led” Journal of

International Development Vol. 14, pp. 335.

Cornford, R. (2000); “Micro Credit, Microfinance or Access to Financial

Services. What do Pacific People Needs? The Foundation for
Development Cooperation. Brisbane QLD 4000. Australia.

DFID (2005); “Banking the Underserved: New Opportunities for

Commercial Banks, Exploring the Business Case” London:
Department for International Development.

Dichter, T.W. (1999); “Ngos In Microfinance: Past, Present and the Future”
in Breth S.A. (Ed) Microfiance in Africa. Sasakawa Global 2000,
Sasakawa Africa Association Mexico City .

88
Economist (2005); A Survey of Microfinance ; The Economist, 5 November,
12. Economic Intelligence Unit (EIU).

Enugu Forum (2006); “Policy Challenge for Microfinance Design and

Practice in Nigeria”. Debating Policy Options for National
Development, Policy Papert.

Olake, A.F. (2005); “Microfinance as a Policy tool for Poverty Alleviation:

A Study of the Performance of Ten Microfinance Institution in
Nigeria”, Morgan State University.

Graham A. N. Wright, (1999); “Examining the Impact of Microfinance

services, increasing income or reducing poverty”.

Grameen Bank (2000); Microfinance-Credit Lending Models (Online).

Grameen Bank Website:http//www.grammenbank.org. Accessed on 29 Oc.

2010.

Hashemi, & Roseberg, R. (2006); “Graduating the Poorest into

Microfinance: Linking Safety Nets and Financial Services” (GAP
Focus note 24. Availabel at:http//www.(gap.org.

Hazel, P. and Haddad, L (2001); “Agricultural Research and Poverty

Reduction, International”. Food Policy Research Institute. Food,
agriculture and the Environment Discussion. PAPER No. 34.

89
Hirshcland, M. (2005); “savings Services for the poor”, Kumarian Press,
Bloomfield. Pp. 378.

Hulme and Mosley (1996); “Finance against Poverty”, Volume 1 and 2,

Routledge. London.

Hulm, D and Moore, K. 92008); ‘Assisting the Poorest in Bangladesh:

Learning from BRAC’s “Targeting the Uttra-poor” Progamme. In
Barrietos, A. and Hulme, D. (Eds), Social Protection for the poor and
Pooest. Concepts Policies and Practices. London, UK: Routledge.

IFAD (2004); “Rural Finance Institution building Project Formulation

Report, October.

IMF (2005); Microfinance: A view from the Fund, IMF, Washington DC.

Izedonmi, F.O. (1998); “A Quick Guide to Project Writing” EL Fazek.

Nig. Ltd. Benin City.

Johnson, s. & Rogaly, B. (1997); Microfinance and Poverty Reduction,

Oxfam UK and Ireland, Oxfam Publications.

Kabeer, N. (2003); Assessing the “Wider” Social Impact of Microfinance

Services: Concepts, Method, Findings. IDS Bulletin, Vol. 34, No. 4,
106-114.

Landenberg, M. (2002); Reading Beyond the Family: New Non-

governmental Organization Alliances for Global Poverty, Alleviation
90
 and Emergency Response. Non profit and voluntary Sector, quarterly,
230, 603-615.

Littlefield, E., Morduch, J. and Hashemi, S. (2003); “Microfinance an

Effective Strategy to Reach the Millennium Development Goals?”
(GAP) Focus Note 24.

Littlefield, E. and Rosenberg; R. (2004); “Microfinance and the poor:

Breaking down walls between Microfinance and Formal Finance”
Finance and development, 41 (2): 38-40.

Marconi, R. and Mosley, P. (2004); “The FINRURAL Impact Evaluation

Service: A Cost-effectiveness Analysis”. Small Enterprise
development, Vol. 15, No. 3, 18-28.

Matin, J. and Hulm, D. (2003); “Programs for the Poorest: Learnng from the
IGUGD Program in Bangladeh”, World Development 31 (3), 647-
665).

Mrthin, S. (2005); “Economy and Epidemic; Micro Finance and HIV/AIDS

in Asia”. The Foundation for Development Operation British and
Australia.

Microcredit Summit (2004); State of Microcredit Summit Campagin Report-

2004 (Online) Available from www.microcreditsummit.org
/enews/200412_index.html.

91
Murdoch J., and Barbara, H. (2002); “Analysis of the Effects of
Microfinance on Poverty Reduction”. NYU Wagner working paper
No. 1014.

Navajas, S. Schreiner, M, Gonzalez-Vega, C. and Rodriguez-Meza, J.

(2000); “Microcredit and the Poorest of the Poor: Theory and
Evidence from Boliviat” World Development, Vol. 28 no. 2, 335-346.

Markowski, P. (2002); ”An Example of Systemic New Product

Development for life Micro-Insurance”- Micro-Insurance Center
Briefing note Number 4 Microsave.

Otero, M.(1999); “Bringing Development Bank into Microfinacne” Journal

of microfinance, Vol. 1, 8-19.

Otu, M.F. (2003); “Informal Credit Market and Monetary Management in

Nigeria”. Central Bank of Nigeria Research Department, Occasional
Paper No. 29.

Pawlak D. & Matul, M. (MFC) 2004 “MFC Spotlight Note # 11: client
Desertion I microfinance: How to Diagnose it successfully”.

Robinson, M. (2000); “The Microfinance Revolution: Sustainable finance

for the poor” World Bank, Washing 2001, pp. 199-215.

92
Robinson, M. (2000); “The Role of Microfinance Entrepreneurship and
sustainability in reducing poverty in developing countries” world
bank, Washington Vol 12, No 2, pp 1-34.

Rogaly B (1996); Microfinance evangelism ‘destitute a women’ and the

hard selling of a new anti-poverty formulation, Development in
Practice Vol. 6, No. 2, 100-112.

Schreiner, M. & Colombet, H.H. (2001) “From Urban to Rural: Lessons for
Microfinance from Argentina”. Development Policy Review, Vol. 19,
No. 3, 339-354.

Seibel, H.D. (2003); “Commodity Finance: A Commercial Proposition?

Micro and Meso-Finance for Agricultural Commodity Production
Precessing and Trade”.

Simanowitz, A (2002); “From event to Process Current Trends in

Microfinance Impact Assessment”. Small Enterprise Development,
Vol. 12, No. 4, 11-21.

Simanowitz A. & Brody (2004); “Realizing the Potential of Microfinance: id

21 Insights, December, Issue-51.

Sachs, J. (2005); “The end of Poverty-how we can make it happen in our

lifetime” (England: Pengium Books).

93
The Nigerian Microfinance Newsletter – A News Letter of the International
Year of Microcredit 2005, Vol. 5, July-December 2007.

The Nigerian Microfinance Newsletter – A Newsletter of the International

Year of Microcredit 2005, Vol. 5, January-June 2008.

UNDP (2007) Development of a Sustainable Pro-poor Financial Sector

Phase II Micro Start Nigeria. www. Uncd.org. Acessed on12/6/09.

UNDP (2009); “About the MDGs: Basics, What are the Millennium
Development Goals?” http://www.undp.org/ Mdg/basis. shtml.
Accessed21/ 10/09.

UNCDF (2004); Basic Facts about Microfinance.www. undf.org.english.

microfinance/fcts.php.

Von Pischke, J.D. (1999); “Towards Standards for Microfinance Operations

in Post-Conflict Environments” Geneva” ILO, Paper Presented at the
ILO/UNHCR Technical workshop on Microfinance in Post-Conflict
Countries, Sep. 15-17.

Von Pischk, J.D. (2002); Microfinance in Developing Markets, in CARR, J.,

TONG Z., eds, Replicating Microfinance in the United State w.
Wilson Centre Press Washington.

94
Wright, G.A.N. (2000); “Microfinance Systems: Designing Quality
Financial Services for the poor”, Zed Books Ltd, London and New
York.

Yomere, G.C. and Agbonifoh, B.A. (1999); “Research Methodology in

Social Science and Education”, Lagos Centre Price Constants.

Yunus, M. (2003); “Expanding Microcredit Outreach to Reach: The

Millennium Development Goal –Some Issues for Attention”, Paill
Karma-Sahajak Foundation, Dhaka Bangladesh.

Yunus M. & Karl W. (2007); “Creating a World without Poverty; Social

Business and the Future of Capitalism” Public Affairs, New York,
2007.

Zohir, S. and Martin, I. (2004); “Wider Impacts of Microfinance Institutions:

Issues and Concepts”. Journal of International Development, Vol. 16,
No. 3, 301-330. 19.

95