ROLE OF MICRO FINANCE BANKS IN THE ECONOMY DEVELOPMENT OF NIGERIA

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

Micro finance Bank (describe here as small scale financial services to claim that they are economically active various urban and rural areas) has been proven to be effective in fighting poverty by providing entrepreneurs with the necessary capital to start and expand their entrepreneurial activities.

Last year, successive government has put in place various policies in order to make things easier for the ordinary man on the street. Unfortunately, the struggle for survival has became more difficult and excruciating for the toiling masses. Indeed, the government’s concern for the intolerable poverty level, which is more than 54 percent – over 70 million out of 140 million Nigerian population, is encapsulated also in the recent statement by Prof. Chukwuma Soludo, while lamenting that the poverty level in Nigeria is not only getting to a crisis point but also becoming dynastic.

1. 1. STATEMENT OF THE PROBLEM

The research is means to widen the researcher knowledge about the topic in question and to serve a benefit to the people who wish to know about Micro finance bank in Nigeria. And also to serve as a basic of knowledge to other students who wish to carryout research on the same topic.

In Nigeria Micro finance Bank instructively, the researchers by statistics, (from the National Bureau of Statistics (NBS) in 2004) say that the 65 percent of Nigerians are served by the informal financial sector made by money leaders, friends, relatives and credit unions. There seriousness of the state government to the cause of poor in their meds would be gauged by their willingness to remit one percent of their annual budget to the micro – credit development fund, which return, qualities then to withdraw from the pool to empower their people. It is importance here to look at those factors responsible for the higher poverty incidence in the country, especially in northern Nigeria that in 2004 single member household had 12.6 percent poverty incidence, 2 – 4 members household 39.9 percent poverty incidence, 5 – 9 household 57.9 percent, 10 – 20 member households 73 percent and above 20 member household often have 90.7 percent poverty incidence.

In the areas of education, the NBS disclosed that households headed by those without education, agriculture and forestry had 67 percent poverty incidence while those who live in rural areas contributed 65 percent to poverty in 2004.

1. 1. THE OBJECTIVE OF THE STUDY

The aims and objectives of the study is to investigate into the roles played by Micro finance banks, which actually cannot be overemphasized in the development of Nigerian economy especially in the areas of poverty alleviation, which is an identified of moving our economy forward.

Micro finance bank carries out various functions, one, that is granting or provide financial services such as credit, savings, micro insurance, micro leasing and the basic aims of study are to examine the experience of payment services to the poor and low income clients. Economic activities in which the poor and low income clients engage in include farming micro and small enterprise where goods are produced, catering, trading, commerce and housing improvement services.

1. 1. RESEARCH QUESTIONS

1.       What is the role of micro finance banks in the economic development of Nigeria?

2.       How does micro finance bank affect small and medium businesses?

3.       What is the impact of micro finance banks on the economic development of Nigeria?

1. 1. RESEARCH HYPOTHESIS

H0: Micro finance banks plays significant role in the economic development of Nigeria.

H1: Micro finance banks does not play significant role in the economic development of Nigeria.

1.6     SIGNIFICANCE OF THE STUDY

The study is based on identifying, analyzing and reporting advises to Micro finance bank on how to apply their economic plant in terms of agriculture development and mobilization of savings at the local level has been an importance element for the community development around the world for a longtime. This depends on the role of the Micro finance bank which helps to exploit natural resources and poverty alleviation quantities, qualities of capital. It is a well known fact that the basic function of Micro finance bank is to eradicate poverty among the poor it also benefits on food security and child rent’s education. This research work is to intensively look in to the role of Micro finance bank developing the economy, or not? If they do, do they plan their role in developing the economy? While it is a known fact that no researches work that is exhaustive, it is hoped that at the end of this work, it would be proved that Micro finance bank plays a vital role in the development of our economy (Nigeria).

1.7     SCOPE AND LIMITATION OF THE STUDY

Due to this topic, our area of concentration will be mainly based on the role of Micro finance bank in the development of Nigeria economy.

In a research work of this nature, there are bound to be factors that act on the contrary. There militating against one’s effort. Time which no matter how abundant it was limited, this is one of the factors. The time allowed for research work of this nature is quite short, even though it gives room for supervisor’s day to day consultation.

However, the research work was carried out within Kaduna and some part of Nigeria; therefore, it was administered to a sample of population. This study should be interpreted with caution in the light of fact that a sample can hardly be same as population. The hesitant nature was also a limiting factors in carrying out this research work. The conclusion therefore are based on the readily information provided, but the limitation however does not render research work useless but allows it to used as a basis for decision making and as a basis for further research work.

1.8     DEFINITION OF TERMS

1. INTEREST RATE: - Thisis a percentage that expresses the relations between the interest for a particular period and the principal of a given loan.
2. BENEFICIARY: - The last in the series of individual or group who gain from a particular activities.
3. DISBURSEMENT: - This is the act of giving or paying out of funds.
4. POVERTY: - This is a situation or experience of being poor.
5. LOAN: - Leveling a sum of money by a lender to a borrower to be repaid with certain amount of interest.
6. SCHEME: - To device a plan specifically having certain motives in mind.
7. SECURITY: - This is what is put down as a guarantee by a borrower for the payment of loan.
8. TAX CLEARANCE: - This is a written testimony of having paid a compulsory contribution levied on persons, individual, and business Inland Revenue Development.