MICRO FINANCE AS AN EFFECTIVE TOOL FOR POVERTY ALLEVIATION IN NIGERIA.
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MICRO FINANCE AS AN EFFECTIVE TOOL FOR POVERTY ALLEVIATION IN NIGERIA.
Chapter one
1.1 Introduction
Today, widespread poverty is one of humanity’s most pressing issues, and alleviating it is one of her top priorities. In recent years, microfinance has emerged as an essential tool for reducing poverty in developing countries.
Today, more than 700 microfinance institutions provide loans to over 25 million disadvantaged people worldwide, with women accounting for the vast majority.
However, these organisations confront significant obstacles, particularly in developing nations with a high poverty rate. Microfinance in Nigeria now serves less than 1 million people, despite the fact that 40 million people could benefit from it.
Furthermore, aggregate microcredit facilities in Nigeria account for approximately 0.2% of GDP and less than 1% of total credit in the country. Addressing this situation improperly would exacerbate the problem while slowing the country’s growth and development.
We discovered that microfinance institutions charge interest rates of up to 100% for lending while paying as little as 5% of savings. This exacerbates Nigeria’s already significant imbalances in wealth and income distribution.
Finally, Nigeria, as a country ranked thirty for quick development and economic growth, promotes the establishment and availability of microfinance institutions in order to enable these (people masses) who are regarded unbanked by commercial banks to join in economic activity. This encourages economic growth and progress.
1.2 Statement of Research Problems.
Poverty is a severe threat that most emerging or undeveloped nations/economies attempt to address. The importance of a concerted and organised effort in dealing with the situation cannot be overstated.
Remarkable multinational efforts have been made to combat high poverty rates in Nigeria, where the proportion of underprivileged people is very significant.
Because of the high percentage of poverty in the economy, our adolescents resort to illicit acts such as robbery and smuggling to meet their basic needs.
Furthermore, the inability of women to achieve their basic demands, such as proper health care, material, and financial needs, drove them to institutions (Aristo) in order to avoid being distinguished or segregated by inferiority complexes and to socialise with their friends or classmates.
As a result, parents’ failure to meet their children’s requirements drives them to hire maids, and their inability to meet or pay hospital bills forces them to rely on self-medication, which can be hazardous to their health and even lead to death.
It is against all of these scourges that the necessity for microfinance (MOHAMMED YUNUS) arises, allowing those who were previously judged unsuitable by commercial banks to participate actively in economic activity.
According to Mohammed Aliyu Dahiro and Hasa, Zubair (2008), existing microfinance in Nigeria serves less than 1 million of the 40 million persons who could benefit from the programme.
According to Nout Wellinki (2008), the word micro finance refers to the supply of financial services, most notably microloans, to the poor, and many people have taken advantage of its opportunities. Indeed, microfinance has been recognised as an effective technique of reaching out to the underprivileged.
To summarise, Microfinance banks were founded in response to these scourges (high poverty levels in Nigeria), and the goal of this project is to see how efficiently the establishment of Microfinance banks will assist alleviate poverty in Nigeria.
1.3 The aim and objectives of the study
This research work aims to:
i. Research the influence of microfinance banks on poverty alleviation.
ii. Identify the availability of financing facilities for poverty alleviation on small scale companies (SME’s).
iii. Assess the impact of small-scale firms on poverty alleviation.
1.4 RESEARCH QUESTIONS.
With the analysis of Microfinance Bank as an efficient tool for poverty eradication in Nigeria, the following questions arose and require careful evaluation and dependable solutions:
i. Does the institutional constraint on effective microfinance service delivery in Nigeria also apply to the Integrated Microfinance Bank (IMFB)?
ii. Does the Integrated Microfinance Bank (IMFB) have a good impact on eradicating poverty in Nigeria?
iii. Are there any recommendations for resolving or addressing the institutional barriers to efficient microfinance service delivery in Nigeria?
iv. Do microfinance banks harm Nigeria’s domestic capital formation?
v. Do the roles and responsibilities of stakeholders, such as the government and the Central Bank of Nigeria (CBN), help to support effective participation of microfinance institutions in promoting economic growth and development?
1. 5 Research Hypotheses
This study sought to evaluate the following hypothesis.
1. Ho: There is no significant association between microfinance banks and poverty alleviation.
H1: There is a strong association between poverty alleviation and microfinance banks.
2. Ho: There is no significant association between loan facilities and poverty reduction (SMEs).
H1: There is a strong association between credit facilities and poverty alleviation (SMEs).
3. Ho: Small and medium-sized enterprises (SMEs) have no positive effect on poverty reduction in Nigeria.
H1: Small and medium-sized enterprises have a good effect on poverty reduction in Nigeria.
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