1.0 Introduction
1.1 General Overview of the Study
Robust economic growth cannot be achieved without putting in place well focused programmes to reduce poverty though empowering the people by increasing their access to factors of production, especially credit. The latent capacity of the poor for entrepreneurship would be significantly enhanced through the provision of microfinance services to enable them engage in economic activities and be more self-reliant increase, employment opportunities, enhance house hold income and create wealth. (Iweala, 2005).
Microfinance is about providing financial services to the poor who are traditionally not served by the conventional financial institutions. Three features distinguish microfinance from other formal financial products. These according to Ogbunka (2003) are:
- The smallest of loans advanced and/or savings collected.
- The absence of asset-based collateral.
- Simplicity of operations.
In Nigeria, the formal financial system provides services to about 35% of the economically active population while the remaining 65% are excluded from access to financial services. This 65% are often served by their informal financial sector, through Non-Governmental Organization. (NGO). Microfinance Institutions, Money lenders, friend, relatives and credit unions. The Non-regulation of the activities of some of these institutions have serious implications for the Central Bank of Nigeria (CBN) ability to exercise one aspect of its mandate of promoting monetary stability and a sound financial system.
A microfinance policy which recognizes the outstanding existing informal institutions and brings them within the supervisory preview of the CBN would not only enhance monetary stability, but also expand the financial infrastructure of the country to meet the financial requirements of the micro small and medium enterprises (MSMEs) such a policy would create a vibrant microfinance sub sector that would be adequately integrated into the mainstream of the national financial system and provide the stimulus for growth and development.
It would also harmonize operating standards and provide a strategic platform for the evolution of microfinance institutions, promote appropriate regulation, supervision and adoption of best practices. In these circumstances an appropriate policy has become necessary to develop a long-term sustainable microfinance sub sector.
1.2 Statement of the Problem
- The research study is geared towards solving the following problems, is microfinance necessary for the economic development of Nigeria?
- The ways through which microfinance programme can be sustained.Can microfinance be a solution to the problem of ineffective banking service at the grassroots (rural areas)?
- Microfinance scheme, a solution for Nigeria entrepreneurial and industrial development.
1.3 Objective of the Study
The purpose of this study is:
- To find and bring to our understanding the need for the development of small and medium scale entrepreneurs
- The importance of microfinance to the nation
- To increase the monetary stability function of central bank
- To improve on the supervision and best practices of the scheme/microfinance.
- To make recommendations on how to solve the problems associated with microfinance in Nigeria.
1.4 Significance of the Study
- It provides opportunities for sourcing short-term funds for small and medium scale.
- It introduce policies that check and regulate activities of the operators of the scheme
- It provides opportunities for reaching the poor and the less privileged in the society
- It creates opportunity for students who are studying financial management and other related courses to have in depth knowledge of microfinance.
1.5 Statement of the Hypothesis
To achieve a meaningful result the following hypothesis have been proposed for the present study:
- Ho: Microfinance banks play prominent role in the economic development of Nigeria
- Hi: Microfinance banks have positive impact in enhancing service delivery of micro small and medium enterprises.
1.6 Scope of the Study
This research work is worth particular reference to selected microfinance banks in Lagos State such as New Life MFB, Sunrise MFB, Integrated MFB, Traders MFB, Unique MFB, etc
1.7 Limitations of the Study
In this research work many problems were encountered but the most existing thing is that, despite the problems, the study was completed.
Time constraints was not left out from the limitations because carrying out a research is time consuming and combining it with classroom work and exams, was not an easy task.
Finance was also one of the constraints I faced in carrying out this research work but in view of all the constraints, the project was successful and it covered only Lagos microfinance banks.
1.8 Definition of Terms
Ancillary:
Providing necessary support to the main work to activities of an organization.
Credit:
Buying or borrowing on the promise to repay in at a later date.
Delinquencies:
When consumer fails to make monthly payment
Devastation:
Great destruction or damage, especially over a wide area
Disbursement:
Paying money to somebody from a large amount that has been collected for a purpose
Empowerment:
To give somebody more control over their own life or the situation they are in.
Entrepreneur:
A person who makes money by starting or running business
Facilities:
Building, services, equipment, etc that are provided for a particular purpose.
Framework:
A set of beliefs, ideas or rules that is used as the basis for making judgments decisions.
Gigantic:
Extremely large.
Grassroots:
Ordinary people in society or in an organization.
Infrastructure:
The basis systems and services that are necessary for a country or an organization to run smoothly
Metropolis:
A large important city often the capital city of a country or region.
Paucity:
A small amount of something less that enough of something.
Prospect:
An idea of what might or will happen in the future.
Purview:
Within the limits of what a person an organization can do.
Robust;
Strong and not likely to fail ort become weak
Scheme:
A plan for getting money or some other advantage for yourself
Surfeit:
An amount that is too large
Thrill:
A strong feeling of excitement or pleasure.
Vulnerable:
Weak and easily hurt physically or emotionally.
