1.0 Introduction
1.1 General Overview of the Study
Robust economic growth cannot be achieve without putting in place a well focused programme to reduce poverty through empowering the people by increasing their access to factors of production especially credit. The latest capacity of the poor for entrepreneurship would be significantly enhanced through the provision of microfinance service to enable them to be self reliant, increase employment opportunity, enhance household income, and increase wealth.
Micro-finance is about providing financial service to the poor who are traditionally not served by the conventional financial institutions. There are three features that distinguish micro-finance from other formal financial services. They are the smallest of the loans advanced and or saying collected, the absence of asset based collateral and simplicity of operations. In Nigeria, the formal financial system provides services to about 33% of the economically active population while the remaining 67% are excluded from access to financial services.
This 67% are often served by the informal financial sectors, through non-governmental organizations (NGO), micro-finance institution, moneylenders, friends, relatives and credit unions. The non-regulation of the activities of some of these institutions has serious implication for the central bank of Nigeria's ability to exercise one aspect of its mandate of promoting monetary stability and sound financial system.
1.2 Statement of Problems
Although the micro finance banks since its establishment has recorded a significant growth through its efforts to reduce poverty and has added more to the capacity building of the economy, there are still some lingering problems which prevents its optimal operations. They include:
- Weak capital base (inadequate capital base)
- Weak institutional capacity
- Poor corporate government
- Lack of well defined operations and restive regulatory supervisory requirement
- Existence of a huge unserved market
- Inadequate economic empowerment of the poor
- Lack of employment generation and poverty reduction
- Inadequacy of appropriate saving opportunity and products.
- Lack of an appropriate framework and confidence in the existing institutions.
1.3 Objective of the Study
Having known the above problems militating the development of micro finance bank in carrying out their work effectively in alleviating poverty the purpose therefore is:
- The relevance of the micro finance banks in poverty alleviation
- Contribution of the micro finance banks to the development of the industrial capital abilities of the small and medium enterprise and as well economic growth.
- Possible strategies to make financial service accessible to a large segment of the productive Nigeria population with no access to financial services.
- Possible strategies to adopt in order to enlarge the pool of micro finance facilities for the poor through partnership with stakeholders.
- Contributions of the micro finance banks to rural transformation.
- Promote linkage programmes between universal, development, specialized institutions and micro finance banks.
- The objectives of the micro finance policy in promoting the issue in the future.
1.4 Limitation of the Study
There were some constraints, which hindered the maximum achievement from the search operation such as time, and money constraint, moreover some respondent were reluctant to release the needed information, as a result of not being convinced that the information sought would be purely used for academic purpose only. To this extent a lot of useful information were concealed.
1.5 Research Question
- Is micro finance banks the ultimate solution for poverty alleviation?
- Does adequate credit have a significant correlation of small scale industry in Nigeria?
1.6 Significance of the Research
This study will be of great importance for those who find investment as a good factor live. The potential productive people who wants to wriggle out of poverty and those who have the interest of the poor at heart as well as the betterment of the economy as such.
- This work will enable any reader to realize the role of micro finance bank in poverty alleviation.
- It will go forth to distinguish micro finance banks from commercial banks.
- It is to let individuals, government organization and others involved to know the benefits of supporting the micro finance banks.
- It will enable the readers to known the activities of the micro finance banks in the capacity building.
- It will ginger the less privileged that had been looking for a way out of poverty to do so with dignity.
- From this study students shall derive pleasure when researching in future in similar topic.
1.7 Scope of the Study
The scope of this research is within the Nigerian micro finance institution and how it service as a finance for poverty alleviation. It is important to note that micro finance banks are not just on their own to meet this achievement but with a network of special organization that in various ways pool resources together and uses or utilizes such funds which will be emphasized in this study.
Thus the scope of this study will cover the Nigeria micro finance institutions, its operations and impact in the economy at large in alleviating poverty. It will also examine the regulatory body of the micro finance institutions.
1.8 Definition of Terms
Financial System:
The financial system is a conglomeration of financial institution, instrument and operators that help in fostering economic growth and development of the Nation.
Micro-Finance Institutions:
This is the provision of wide range of financial services such as loans, deposits, insurance etc to the poor who are traditional not served by the conventional banks.
Micro-Finance Institutions:
These are the institutions that provide micro-finance services to the low income groups example of MFIS is micro finance banks.
Micro-Credit:
micro credit refers to small package loans provided to the poor to enhance their capacity to engage in productive activities for the improvement of their livelihoods. As a form of credit its is recoverable within the provisions of the agreement under which it is disbursed.
Monetary Policy:
Combination of measures designed to regulate the value, supply and cost of money in the economy, in consonance with the level of economic activities.
Micro Finance Development Fund (MDF):
This is a funding support created for the purpose of providing wholesale funding service, refinancing facilities and wholesale guarantee for micro finance banks and other micro finance institutions in other to strengthen their needed capacity economic strength and commitment to save the poor.
Central Banks of Nigeria:
This is the nation's apex financial institution that regulates the value supply and cost of fund. It also regulates all other financial institution in Nigeria.
Credit Reference Bureau:
This is an agency that provides information on the credit history and habits of borrowers to credit grantors.
Capital Adequacy:
This is the cushion of equity and other accounts that function to absorb any shock the bank may experience as a result of losses or diminution of its assets
Capital Building:
Act of training of self help and other groups for livelihood, skill upgrading and micro enterprise development.
Economic Empowerment:
This is the act of empowering people by giving them financial support services that will improve their lives economically.
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