Micro finance bank and economic growth in nigeria

Project Abstract

This research project investigates the relationship between microfinance banks and economic growth in Nigeria. The study aims to provide insights into the impact of microfinance institutions on the overall economic development of Nigeria. With the increasing importance of financial inclusion and access to credit for small businesses and low-income individuals, microfinance banks have gained prominence as a tool for poverty alleviation and economic empowerment. The research methodology involves a combination of quantitative analysis and qualitative assessments. Data from various sources, including the Central Bank of Nigeria and World Bank reports, will be utilized to analyze the growth of microfinance banks in Nigeria and their contribution to the economy. Additionally, interviews and surveys with key stakeholders in the microfinance sector will provide valuable perspectives on the challenges and opportunities faced by microfinance institutions in Nigeria. The theoretical framework for this study is based on the concept of financial inclusion and its role in economic development. By providing financial services to the unbanked and underserved populations, microfinance banks have the potential to stimulate entrepreneurship, job creation, and overall economic growth. The research will examine the extent to which microfinance banks in Nigeria have been successful in achieving these objectives and promoting sustainable development. The expected outcomes of this research project include a comprehensive assessment of the impact of microfinance banks on the Nigerian economy. The findings will contribute to the existing literature on microfinance and economic growth, particularly in the context of developing countries like Nigeria. Recommendations will be provided to policymakers, regulators, and practitioners in the microfinance sector to enhance the effectiveness of microfinance institutions in driving economic growth and poverty reduction in Nigeria. Overall, this research project seeks to shed light on the potential of microfinance banks as a catalyst for economic growth in Nigeria. By understanding the dynamics of microfinance operations and their implications for the broader economy, this study aims to inform strategies and policies that can maximize the positive impact of microfinance on sustainable development goals in Nigeria.

Project 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>