1.1 Introduction
Microfinance literally means building finance system that effectively and efficiently serves the needs of the poor. It is a powerful tool for fighting poverty the world over. This is true because when poor people have access to financial services, they can earn more, build their assets and cushion themselves against external shocks as they arise Microfinance banking today in Nigeria and the world over, occupies a very strategic position in the enhancement of the socio-economic well-being of the poor who are typically self–employed low income entrepreneurs such as traders, street vendors, small farmers, hairdressers, barbers, GSM commercial operators, artisans and a host of others (Drechsel et al., 2012).
As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitations of the Study and Definition of technical terms.
1.2 Background of Study
The Federal and State governments have recognized that for sustainable growth and development, the financial empowerment of the rural areas is vital, being the repository of the predominantly poor in society and in particular the SMEs. If this growth strategy is adopted and the latent entrepreneurial capabilities of this large segment of the people is sufficiently stimulated and sustained, then positive multipliers will be felt throughout the economy. To give effect to these aspirations various policies have been instituted over time by the Federal Government to improve rural enterprise production capabilities. (Olaitan 2006)
According to Central Bank of Nigeria (2013), microfinance bank is the provision of a broad range of financial services such as savings, loans payment services, money transfers and insurance to the poor and low income persons, households and their microenterprises.
According to Central Bank of Nigeria (2013), microfinance bank is the provision of a broad range of financial services such as savings, loans payment services, money transfers and insurance to the poor and low income persons, households and their microenterprises.
According to the United Nations (2012), Nigeria has a total population of about 160 million people with approximately 70% (98 million) living below the poverty level estimated at US $1.25 per day. GNI per Capita is approximatey US$ 1140 with life expectancy at 48. The total adult population (18 years and above) is 84.7million and 70% of adults live in rural areas with 51% male and 49% female.
According to Osamwonyi and Obayagbona (2012), the role of microfinance banking in the growth and development of the Nigerian economy cannot be underestimated in view of the astronomically growing population, coupled with the rising unemployment rate and youth restiveness; the government is facing a lot of challenges in providing enough jobs for the populace. One sure way to combating unemployment is to empower people with the necessary microfinance loans and services that will enable them start up or run business ventures of their choice.
In view of this, the impact of micro finance bank in economic growth and development of Nigeria started showcasing itself. With the initiative of microfinance, rural areas are opportune to grow and develop as loan and fund are easily given to rural farmers and entrepreneur. Jobs opportunities were created since there is avenue for lending and investing. Therefore, in Nigeria where the research was carried out, the activities that was conducted is to know the Impact of Microfinance Bank on Economic Growth.
1.3 Statement of Problems
Investigation revealed that there are so many problems and challenges that hinders the functionality of the microfinance bank in carrying out their major role of improving economic growth and development in Nigeria. These problems include:
- Poor attitude of Nigerians towards MFBs
- Insufficient support from the regulators and government
- There are communication gaps and inadequate awareness among the masses.
- Undue competition rather than cooperation from the mega banks, and undue malpractice/Sharp practices by microfinance bank operation.
The researcher will in the research find possible ways of solving or making better the conditions for the operation of MFBs.
1.4 Aim and Objectives of Study
The aim of the study is to examine the Impact of Microfinance Bank on Economic Growth in Nigeria. In achieving this aim, the following specific objectives were laid out as follows:
- To investigate the impact of micro finance bank in economic growth and development of Nigeria.
- To investigate the ways microfinance bank can contribute in building entrepreneurship within the country.
- To assess the ways in which micro finance banks can contribute in developing rural areas and improving the life of the poor people.
1.5 Research Questions
The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:
- In what ways microfinance bank can contribute in building entrepreneurship within the country?
- What is the impact of micro finance bank in economic growth and development of Nigeria?
- What are the ways in which micro finance banks can contribute in developing rural areas and improving the life of the poor people?
1.6 Research Hypothesis
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
Hypothesis One
- H0: Microfinance institution do not contribute to entrepreneurial productivity
- H1: Microfinance institutions do contribute to entrepreneurial productivity.
Hypothesis Two
- H0: Micro finance bank is irrelevant to the economic development and growth of Nigeria since the number of entrepreneurs that uses their services is low
- H1: Micro finance bank is relevant to the economic development and growth of Nigeria since the number of entrepreneurs that uses their services is low
1.7 Significance of Study
This study is essentially significant in that it is directed towards evaluating the impact and role that micro finance banks have on the economic growth and development of Nigeria, especially the rural areas which is a criteria aimed at measuring economic standard.
Owing to the fact that researcher has aimed at pinpointing the ways in which micro finance bank can help in the revamping of the nation’s economy, the findings of this research work will be of great help to most developing countries who may wish to toe the part of Nigeria in MFB development.
It will also serve as a reference point for future researchers who in one way or the other will try to unveil the role and impact of micro finance bank to economic development.
1.8 Scope of Study
The scope of the research is focused on the Impact of Microfinance Bank on Economic Growth in Nigeria.
1.9 Limitations of the Study
During the course of this study, many things militated against its completion, some of which are:
- Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
- Research material: availability of research material is a major setback to the scope of the study.
- Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
- Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
1.10 Definition of Terms
Impact: According to the advanced oxford learner’s dictionary, impact is the powerful effect that something has one somebody or something
Microfinance Bank: Microfinance banks are institutions constructed as a company licensed to carry on the business of providing microfinance services such as collection of savings, loans provision, insurance money transfer services and other non financial services that are needed by the poor.
Economic Growth and Development: This term has generated a lot of controversies over the years. Some economics see it as political and structural change while others are of the opinion that it relates the progress in the basic human needs over time.
Nigeria: A nation in the African continent and located in the western part of Africa. it was colonized by the British and got its independent in 1960.
