Microfinance and public policy in Nigeria

by

Acknowledgement

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

DECLARATION

I, [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

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Abstract

This study takes a critical look at the recent micro finance policy and attempts by the Nigerian government to encourage private sector-led establishment of micro finance banks (MFBs) as a potent means of poverty alleviation. The objectives of the study are to examine the inherent strengths and limitations, and proffer solutions. The methodology adopted is a clarification of extant concepts, explication of rationale for the government's policy, and a brief review of the development of micro financing in Nigeria. It also involved a critical analysis of the dominant issues in the policy. The study identified vital constraints to the policy as including weak infrastructures and fraudulent persons in the process. Some of the recommendations to improve the success of micro financing to reduce poverty in Nigeria are more efforts at institutionalization of MFBs and financial liberalization. Others include the provision of adequate infrastructures such as functional roads and electricity especially in the rural areas.

Contents

ABSTRACTIV

Background of the study2

Research Aims and Objectives5

Research Question5

Significance of the Study5

Concept of Micro Finance6

Microfinance (Semi-Organized)10

Overview of Micro Financing Activities in Nigeria12

Reasons for Establishing Micro Finance Banks (MFBs)14

Low Capital Base14

Weak Corporate Governance15

Huge Potential Market15

Distinguishing Features16

Problems and Prospects for Micro Financing in Nigeria17

Challenges and Issues17

Experience in Micro-Financing to Other LDCs)31

Microfinance and public policy: Outreach, performance and efficiency39

Survey of MFI performance40

Measuring efficiency41

Uses and focus of subsidies43

Policy implications44

Microfinance Policy in Nigeria46

Quantitative Research49

Empirical Analysis of Operational Performance of Informal Schemes of Financing in Nigeria51

Empirical Research Findings54

TABLE 4 (APPENDIX) (COLUMN 1) SHOWS MFB'S RESPONSES TO THREE ISSUES OF55

Chapter 1: Introduction

The thesis of this paper is that a sustainable micro finance policy which is properly implemented, especially through micro finance banks, is a very potent instrument that can be combined with other initiatives for poverty alleviation to the benefit of the vast majority of Nigerians. The paper further explores the major policies of government in recent times aimed at enhancing micro financing in Nigeria.

This is with a view to identifying their inherent weaknesses and benefits, with a special focus on micro finance banks, and to suggest ameliorating measures. All this is to ensure that micro finance banks contribute their quota to the success of the Federal Government's national economic empowerment and development strategy (NEEDS), the state government's economic empowerment and development strategy (SEEDS) and local government's economic empowerment and development strategy (LEEDS). These strategies, which are development initiatives of government, are not explored further in this paper. They are however aimed at poverty alleviation and possibly eradication in Nigeria, and micro financing, with special reference to micro finance banks, is one important ...