Micro finance bank and economic growth in nigeria

Thesis Overview

<p> </p><p><b>INTRODUCTION</b><br><b>1.1 &nbsp; &nbsp; OVERVIEW OF THE STUDY</b><br>It would be observed that, despite the presumed developments in the Nigerian<br>economy, the country is still largely being regarded as a developing country<br>(Onyema, 2006). More so, its industrial growth is not quite impressive. <br>Before the emergence of formal microfinance institutions, informal microfinance<br>activities flourished all over the country. Traditionally, microfinance in<br>Nigeria entails traditional informal practices such as local money lending,<br>rotating credit and savings practices, credit from friends and relatives,<br>government owned institutional arrangements, poverty reduction programmes etc<br>(Lemo, 2006). The Central Bank of Nigeria Survey in 2001 indicated that the<br>operations of former microfinance institutions in Nigeria are relatively new,<br>as most of them never registered after 1981.<br>Before now, commercial banks traditionally lend to medium and large enterprises<br>which are judged to be credit-worthy. They avoided doing business with the poor<br>and their micro enterprises because the associated cost and risks are<br>considered to be relatively high (Anyanwu, 2004).<br>The Federal and State governments have recognized that for sustainable growth<br>and development, the financial empowerment of the rural areas is vital, being<br>the repository of the predominantly poor in society and in particular the SMEs.<br>If this growth strategy is adopted and the latent entrepreneurial capabilities<br>of this large segment of the people is sufficiently stimulated and sustained,<br>then positive multipliers will be felt throughout the economy. To give effect<br>to these aspirations various policies have been instituted over time by the<br>Federal Government to improve rural enterprise production capabilities.<br>(Olaitan 2006)</p><p>In view<br>of this, the impact of micro finance bank in economic growth and development of<br>Nigeria started showcasing itself. With the initiative of microfinance, rural<br>areas are opportune to grow and develop as loan and fund are easily given to<br>rural farmers and entrepreneur. Jobs opportunities were created since there is<br>avenue for lending and investing.<br><b>1.2 &nbsp; &nbsp; STATEMENT OF PROBLEM</b><br>There are so many problems and challenges that hinder the functionality of the<br>microfinance bank in carrying out their major role of improving economic growth<br>in Nigeria. <br>These problems include</p><ul><li>poor attitude of Nigerians<br>towards MFBs</li><li>insufficient support from<br>the regulators and government</li><li>There are communication gaps<br>and inadequate awareness among the masses.</li><li>Undue competition rather<br>than cooperation from the mega banks, and undue malpractice/Sharp<br>practices by microfinance bank operation.</li></ul><p>The<br>researcher will in the research find possible ways of solving or making better<br>the conditions for the operation of MFBs.<br><b>1.3 &nbsp; &nbsp; OBJECIVE OF THE STUDY</b><br>The set objective of this research work are to:</p><ul><li>Investigate the impact of<br>micro finance bank and economic growth in Nigeria.</li><li>It will explicate in detail<br>ways in which micro finance banks can contribute in developing rural areas<br>and improving the life of the poor people.</li><li>It will investigate the ways<br>microfinance bank can contribute in building entrepreneurship within the<br>country.</li></ul><p><b>1.4 &nbsp; <br>RESEARCH QUESTIONS</b></p><ul><li>To what extent will the poor<br>attitude of Nigerians towards Micro finance banks affects the<br>economic growth in Nigeria</li><li>To what level will<br>insufficient support from the regulators and government affects the smooth<br>operations of Micro finance banks</li></ul><p><b>1.5 &nbsp; <br>TEST OF HYPOTHESIS</b><br>It is quite evidential that the major ways in which microfinance bank can help<br>in economic development is through the encouragement of entrepreneurial<br>development.<br>The essence of microfinance bank is to enable the poor individual to be able to<br>obtain loan and be able to manage their enterprise.<br>To this effect, the following hypothesis will be tested, thus.<br><b>Hypothesis I</b><br>H0: &nbsp; &nbsp; Micro finance bank is irrelevant to the economic<br>growth and development in Nigeria since the number of entrepreneurs that uses<br>their services is low<br>Hi: &nbsp; &nbsp; Micro finance bank is relevant to the economic<br>growth and development in Nigeria since the number of entrepreneurs that<br>uses their services is low<br><b>Hypothesis II</b><br>H0: &nbsp; &nbsp; Microfinance institution do not contribute to<br>entrepreneurial productivity<br>H1: &nbsp; &nbsp; Micro finance institutions do contribute to<br>entrepreneurial productivity.</p><p><b>1.6<br>&nbsp; &nbsp; SCOPE OF THE STUDY</b><br>The scope of the study is subjected around the frame work of microfinance bank<br>in Nigeria vis-à-vis its contribution to the economic growth and development.</p><p><b>1.7 <br>SIGNIFICANCE OF THE STUDY</b><br>This study is essentially significant in that it is directed towards evaluating<br>the impact and role that micro finance banks have on the economic growth and<br>development in Nigeria, especially the rural areas which is a criteria aimed at<br>measuring economic standard.<br>Owing to the fact that researcher has aimed at pinpointing the ways in which<br>micro finance bank can help in the revamping of the nation’s economy, the<br>findings of this research work will be of great help to most developing<br>countries who may wish to toe the part of Nigeria in MFB development.</p><p>It will<br>also serve as a reference point for future researchers who in one way or the<br>other will try to unveil the role and impact of micro finance bank to economic<br>growth and development.</p><p><b>1.8 LIMITATION OF STUDY</b></p><p><b></b></p><b><p>Due to this<br>topic, our area of concentration will be mainly based on the role of Micro<br>finance bank in the development of Nigeria economy.</p><p>In a research<br>work of this nature, there are bound to be factors that act on the contrary.<br>There militating against one’s effort. Time which no matter how abundant it was<br>limited, this is one of the factors. The time allowed for research work of this<br>nature is quite short, even though it gives room for supervisor’s day to day<br>consultation. However, the research work<br>was carried out within Kaduna and some part of Nigeria; therefore, it was<br>administered to a sample of population. This study should be interpreted with<br>caution in the light of fact that a sample can hardly be same as population.<br>The hesitant nature was also a limiting factors in carrying out this research<br>work. The conclusion therefore are based on the readily information provided,<br>but the limitation however does not render research work useless but allows it<br>to used as a basis for decision making and as a basis for further research<br>work.</p><p><b>1.9 &nbsp; DEFINITION<br>OF TERMS</b></p><p><b></b></p><b><p>v<br><b>INTEREST<br>RATE: – </b>Thisis a percentage that expresses the relations between the<br>interest for a particular period and the principal of a given loan.</p><p>v<br><b>BENEFICIARY:</b><br>– The last in the series of individual or group who gain from a particular<br>activities.</p><p>v<br><b>DISBURSEMENT:<br>– </b>This is the act of giving or paying out of funds.</p><p>v<br><b>POVERTY:<br>– </b>This is a situation or experience of being poor.</p><p>v<br><b>LOAN: – </b>Leveling<br>a sum of money by a lender to a borrower to be repaid with certain amount of<br>interest.</p><p>v<br><b>SCHEME: –<br></b>To device a plan specifically having certain motives in mind.</p><p>v<br><b>SECURITY:<br>– </b>This is what is put down as a guarantee by a borrower for the payment of<br>loan.<b></b></p><b><p><b></b></p><b><p><b>TAX CLEARANCE: – </b>This is a written testimony of having paid a<br>compulsory contribution levied on persons, individual, and business Inland<br>Revenue Development.</p></b></b></b></b> <br><p></p>