The Role of Microfinance Bank on the Economic Growth of Nigeria
Chapter One
AIMS AND OBJECTIVES
The mains objectives of this research work are to investigate the role of micro finance bank in economic growth and development of Nigeria.
Other objectives are to fellows
CHAPTER TWO
LITERATURE REVIEW
OVERVIEW OF MICROFINANCE BANKS IN NIGERIA
Currently microfinance banks are of two forms, as all licensed community banks in Nigeria that met CBN guidelines have been transformed to Microfinance Bank. The two forms of microfinance Banks (MFBs) are; (i) Microfinance Banks (MFBs) licensed to operate as a unit. These are hitherto community banks licensed to operate branches and/or cash centres subject to meeting the prescribed prudential requirements and availability of free funds for opening branches/cash centres. The minimum paid-up capital for this category of banks is N20 million for each branch. The branching should be gradual within a local council before it spreads to other local councils and state. (ii) Micro-Finance Banks licensed to operate in a state. These are MFBs licensed to operate in all parts of the state at once without recourse to gradual coverage (spread) as in unit MFBs. Branches are opened subject to meeting the prescribed prudential requirements and availability of free funds. The minimum paid-up capital for this category of banks is Ni billion. About 600 Community Banks have migrated to Microfinance Banks by January 1 st, 2008 and there are several others that have been licensed to operate. (CBN, 2008)
ROLE OF MICROFINANCE BANKS IN PROMOTING• ECONOMIC GROWTH VIS-A-VIS ENTREPRENEURSHIP DEVELOPMENT
CREDIT DELIVERY
This is perhaps one of the most important roles of Microfinance banks, as the loans extended are used to expand existing businesses and in some cases to start new ones. According to CBN (2008) microfinance loans granted to clients is increasing from 2007 to date and most of it goes to financing microenterprises in rural areas. Ketu, (2008) observed that microfinance banks have disbursed more than N800 million micro credits to over 13,000 farmers across the country to empower their productive capacities. As such it is expected that agricultural output will increase with the increase in funding. The entrepreneurial capacity of the farmers will thus improve.
BOOSTING SMALL SCALE ENTERPRISES/AGRICULTURE
About 60 percent of poor people in the country live in the rural areas and 80 percent of them are farmers and artisans (NBS, 2005). Microfinance banks have therefore been the main sources of funding to these less disadvantaged groups. Rural people are empowered through microfinance loans and services, and hence small scale agricultural practice and microenterprise is developed. Governments go into co-operatives to partner with the microfinance banks to raise bulk loans to be disbursed to the beneficiaries, in so doing the banks are increasing and sustaining the number of people going into small businesses.
EMPLOYMENT GENERATION
Agriculture and microenterprises contributes immensely to job creation, and are of particular interest to all Microfinance Bank in rural areas. Microfinance banks have so far engaged in extending credits and other services to many rural enterprise and hence generating employment and promoting entrepreneurship. The promotion of employment in rural areas by microfinance banks covers the following areas; blacksmithing, gold-smiting, watch repairing, bicycle repairing, basket weaving, barbing, palm wine tapping, cloth weaving, dyeing, food selling, carpentry, brick-laying, pot- making, leather works and drumming. Even though found in urban areas, these industries are more prominent in the rural areas. It has, therefore, been acknowledged that the rural setting is an arena of many industries, which could be developed to contribute significantly to the national economy, just as rural people are more frequently self-employed than urban people (Ketu, 2008).
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CHAPTER THREE
RESEARCH METHODOLOGY
The term methodology is a system of explicit rules and procedures in which claims to knowledge are evaluated (Ojo, 2003)
Therefore, this s
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