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Abstract
Microfinance banking is the only anti-poverty program that combines financial intermediation with provision of financial services to the poor in the society. This paper therefore examine the impact of microfinance bank operations on poverty alleviation in Nigeria. The study specifically sought to examine the relationship between MBF operations and PCI. Data for the study were generated via secondary source and analyzed using the OLS method our findings are as follows:- microfinance banks credit delivery has positive but in significant influences on the alleviation of poverty in Nigeria. Microfinance banks has also impacted significantly on poverty alleviation through deposit (savings). It is therefore recommended that government should support microfinance development by promoting macro-economic stability and avoiding interest rate cape and high inflation, ensure that the benefit of microfinance banking are targeted at the core poor.
Table of Contents
Title Page i
Cover Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Abstract vi
Table of Contents vii
List of Tables ix
List of Figures x
CHAPTER ONE 1
INTRODUCTION 1
1.1 BACKGROUND OF THE STUDY 1
1.2 STATEMENT OF THE PROBLEM 2
1.3 OBJECTIVE OF THE STUDY 4
1.4 RESEARCH QUESTIONS 4
1.5 RESEARCH HYPOTHESIS 5
1.6 SIGNIFICANCE OF THE STUDY 5
1.7 SCOPE AND LIMITATION OF THE STUDY 6
1.8 ORGANIZATION OF THE STUDY 7
1.9 DEFINITION OF TERMS 8
CHAPTER TWO 10
2.1 CONCEPTUAL FRAMEWORK 10
2.1.1 DEFINITION OF MICROCREDIT AND MICROFINANCE MICRO CREDIT 10
2.1.2 FUNCTION AND CONCEPTIONAL DEFFERCES BETWEEN MICRCREDIT AND MICROFINACE 12
2.1.1.1 CONCEPT AND NATURE OF MICROFINACE BANK 13
2.1.2.2 DOES MICROFINANCE REALLY ALLEVIATE POVERTY? 15
2.1.2.3 CHARACTERISTICS OF MICROFINANCE 17
2.1.2.4 THE CONCEPT AND DEFINITION OF POVERTY 20
2.2 THEORITICAL FRAMEWORKK 22
CHAPTER THREE 33
RESEARCH METHODOLOGY 33
3.1 RESEARCH DESIGN 33
3.2 DATA COLLECTION METHEOD 33
3.3 DATA ANALYSIS TECHNIQUES 33
3.4 MODEL OF SPECIFICANT/DEFINITION 34
CHAPTER FOUR 35
DATA PRESENTATION AND ANALYSIS 35
Table 4.1: Loans and Deposits of MFBs and GDP 36
4.1.1 Graphical Presentation of Data 37
Figure 4.1 Loans and Advances of MFBs in Nigeria (1995-2018) 37
Figure 4.2 Deposits of MFBs in Nigeria (1995-2018) 37
Figure 4.3 Deposits of MFBs in Nigeria (1995-2018) 38
4.2 Data Analysis 38
4.2.1 Descriptive Statistics 38
Table 4.3 Descriptive Statistics 39
4.2.2 Multiple Regression Test 39
Table 4.3Least Square Regression Test 40
4.6 Discussion of Findings 41
CHAPTER FIVE 43
SUMMARY, CONCLUSION AND RECOMMENDATIONS 43
5.1 Summary 43
5.2 Conclusion 44
5.3 Recommendations 45
Bibliograp\hy 48
Appendix 50
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Microfinance banks, like any other banking institution play a mediator role between the surplus and deficit units of the economy. They try to achieve their two known mission which are; financial sustainability and social sustainability. To ensure that they remain in business, they pursue their financial mission with Vigor. To achieve the purpose for which they were established, they equally pursue their social mission by granting financial services to the poor (OJIEBE, NWARU & DURUECHI 2005). The question then is what is “Micro-finance Bank”? this bank is a company licensed to carry out the business of providing micro finance services such as savings, loans, domestic funds transfer and other financial services to the economically active poor, micro enterprises who need financial services to conduct or expand their business.
To balance this sustainability and social mission, microfinance banks focus on the financial aspect and to achieve its special objectives; the banks try to clearly define their social performance goals, the type of clients to serve, client status monitoring and benefits to community and clients impacts by comparing non-client (ASHAMU & JOHN AYODELE 2015).
All over the world, poor people are excluded from formal financial system. Exclusion range from partial in developed countries to full or nearly full in less developed countries. Because this reason, the poor have developed a wide variety of information based financial arrangement to meet their financial needs. Microfinance is created to fill this gap (IROBI, 2008).
It is against this backdrop that micro-finance banking which helped to move many poor people out of poverty in many developed countries of the world was introduced in Nigeria (OJIEGBE, NWARU &DURUECHI 2015). It started as a concept to provided financial services to the poor, because those who by circumstance of not being rich are excluded from access to the conventional commercial banks and other financial institutions for lack of collateral microfinance is not a recent development neither is the regulation and supervision.
1.2 STATEMENT OF THE PROBLEM
This study shows that the poor are bankable and willing to borrow, microfinance banking concept is to provide financial services to the poor. This banking concept which has helped in the reduction of poverty in developed economics and some developing economics in the world was introduced to Nigeria in 1988. This bank has been in existence for over 20 years in Nigeria, yet poverty persists. The population of the poor in Nigeria increased fourfold in absolute term between 1980’s and 1996 (CBN2005). There is an evidence that the 86.9millions Nigerians now living in extreme poverty represent nearly 50% of its estimated 180 million population. Now the percentage of core poor increased from 6.2% in 1980 to 29.3% in 1996 and the decline to 22.0% in 2004 before reaching 38.7% in 2010 and then back to 36% in 2013 and decline further to 28.9% in 2018. For the moderate poor, the picture is quiet different as the proportion rose between 1980 and 1985 from 21.0% to 34.2% and it went down between 1996 and 2004, from 36.3% to 32.4% and even further between 2010 and 2018, from 30.3% to 26.2% on the other hand, the proportion of non-poor was much higher in the country in 1980 (72.8%) compared to 1992 (57.3%). It drop significantly in 1996 to 34.4% falling further in 2010 to 31% and then increase back to 69.0%in 2018. The proportion of total income spent by the core poor and moderate poor was approximately 75% and 73% respectively. While the non-poor spent about 53% of their total income on food (CBN 2005).
In the light of the above, the proportion of Nigerians living in poverty is increasing every year and as a nation is obviously backwards. The problem is, microfinance banks inspite of its laudable objectives and concepts, in depths studies and recommendations and manner of policies and programs initiated by various government (including directors of food, poverty eradication program, better life programme, roads, rural infrastructures, family support program e.t.c. to reduce poverty in Nigeria, have not succeed since poverty is still on increase, is it that the poorest of the poor shy away from micro-credits and why? Do they requires in strategy for credit delivery? This study, therefore, undertakes to examine the impact of micro-finance banking on poverty alleviation.
1.3 OBJECTIVE OF THE STUDY
The objective of this study is to examine the impact of microfinance banks on poverty alleviation in Nigeria. Other specific objective includes.
1. To examine whether loan and advances of MFB impacts significantly on poverty level in Nigeria.
2. To find out if the growth in deposits of microfinance banks have significant impact on poverty level.
1.4 RESEARCH QUESTIONS
Based on the issues raised in the background of the study, problem statement and objectives of this study seeks to find answers to the following research questions:
1. What are the impact of microfinance banks loan and advance on poverty level?
2. Has microfinance banks deposits any significance on poverty level?
1.5 RESEARCH HYPOTHESIS
Ho1: there is no significance relationship between microfinance bank loans and advances and poverty level in Nigeria.
Ho2: there is a significance relationship between microfinance banks deposit and poverty level in Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
This study will be relevant to the following:
The Government: The study will assist the government in making policy that border on micro financing. Effective and operational microfinance policy will contribute to the sustenance of the economy.
The Microfinance Institutions: microfinance has moved from the realm of charity to commercialization. The study will assist the microfinance institutions market their services more efficiently, effectively and above all sustainably.
Microfinance Clients: the study will show how the poor will be pulled up above the poverty line with life wire of microfinance credit and other financial services.
NGOs: the NGOs will be encouraged to move out from donor funded organization to equity funded. To be a going-concern, they will should be sustainable. This study will help them achieve the identifying measures to scale up to microfinance banks.
CBN: As financial regulator, the study will provide more insight into the problems of microfinance institutions. It will enable it offer structured and regular workshops for microfinance providers especially the microfinance banks. It will help the CBN beam its searchlight on the operation of these microfinance banks to avoid loss of depositors funds.
The target poor: this study will help and establish the need to empower the poor which has been estimated to be in the increase through the operation of microfinance banks as a strategy for poverty reduction.
Future researchers on the subject matter will find a reservoir of literature bank from this for further improvement.
1.7 SCOPE AND LIMITATION OF THE STUDY
This study is important and relevant to the extent that it explores the natures of micro-financial services available in microfinance banks. The study shall equally illuminate the derivable benefits from micro-financial services as well as act as guide to scholars and commentators whose basic interest is in microfinance banks in Nigeria.
This study is limited to the impact of microfinance banks on poverty alleviation in Nigeria.
However, certain limitations were encountered in the process of undertaking this study which include:
Fund: fund available is not enough to execute this work.
Time: time expected to complete this work or study is too short, that affected a better analysis of the issues being studied.
1.8 ORGANIZATION OF THE STUDY
This study is orderly to suit the objective of the study. Thus, it starts with chapter one with the background of the study, the problems in the study, the reasons why the study is carried out, the importance and challenges encountered, and finally the definition of terms. In chapter two we are confronted with areas in the study that are related to the study chapter three is method employed in collecting data used in the study. Chapter four is about how the data collected are presented and analyzed. Finally, chapter five talks about the summary, conclusion and recommendations made for the study.
1.9 DEFINITION OF TERMS
Micro-Credit: this is the provision of small amount of loans to the poor that enables them to open or expand an existing income-generating activity, and thus supposedly begin their escape from poverty.
Micro-Savings: setting aside, periodically, small amount of money and depositing it with an institution for safe-keeping.
Micro-Insurance: contributing small amount of premium towards the cover of an insurable interest.
Micro-Finance: usually conceived of as the provision of small units of financial services to low income clients who are usually excluded from formal financial system.
Poverty: this is a condition in which a person is deprived of or lacks the essentials for a minimum standard of well-beings. A state of being without, often associated with needs, hardship and lack of resources across a wide range of circumstances. Two types and identifiable viz; absolute poverty and relative poverty.
Employment: engagement of or creation of labour for a source of livelihood. It could be self engagement or offering of services to an enterprises in exchanges of wages or salaries.
Microfinance Bank Investment: the regulatory and supervisory framework for microfinance banks in Nigeria requires all micro finance banks to maintain not less than 5% of their deposit liabilities in treasury bills (TBs).
Empowerment: enhancement uplifement, enablement to attain a higher status, usually social and economic. Empowerment corresponds to processes by which vulnerable individuals are endowed with power.
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