THE IMPACT OF MICRO-FINANCE IN STIMULATING BANKING HABIT RURAL DWELLERS

CHAPTER ONE

INTRODUCTION                          

1.1 Background of the study

Micro-finance is often considered one of the most effective and flexible strategies in the fight against global poverty. It is sustainable and can be implemented on the massive scale necessary to respond to the urgent needs of those living far below average. Micro-finance seeks to combat poverty, especially in developing countries, through the use of small loans and community- based resources. The World Bank and several NGOs across the world are conducting innovative experiments to bring Micro-finance into the mainstream. One of the pioneers in the field is Grameen Bank of Bangladesh.

In the development paradigm, micro-finance has evolved as a need-based policy and programme to cater for the so far neglected target groups (women, poor, rural, deprived, etc). Its evolution to based on the concern of all developing countries for empowerment of the poor and alleviation of poverty. Development organizations and policy makers have included access to credit for poor people as a major aspect of many poverty alleviation programmes.

Micro-finance programmes have in the recent past become one of the more promising ways to use scarce development funds to achieve the objectives of poverty alleviation. Furthermore, certain micro-finance programmes have gained prominence in the development field and beyond. The basic idea of micro-finance is simple: if poor people are provided access to financial services, including credit, they may very well be able to start or expand a micro-enterprise that will allow them to break out of poverty.

There are many features to this seemingly simple proposition which are quite attractive to the potential target group members, government policy makers, and development practitioners. For the target group members, the most obvious benefit is that micro-finance programmes may actually succeed in enabling them to increase their income levels. Furthermore, the poor are able to access financial services which previously were exclusively available

 to the upper and middle income population. Finally, the access to credit and the opportunity to begin or to expand a micro-enterprise may be empowering to the poor, especially in comparison to other development initiatives which often treat these specific target group members as recipients.

For development practitioners, the success of micro-finance programmes is encouraging. Too often in the past, costly large scale development initiatives have failed to achieve any sustainable benefit, especially after funds have dried up.

Thus, micro-finance has become one of the most effective interventions for economic empowerment of the poor.                 

1.2 Statement of the problem

The impact of microfinance in stimulating banking habit rural dwellers. Despite the great impact on the rural dwellers which has changed the environment for better place of living, it still has some inherent problems.

Other problems, include difficulty in obtaining credit, foreign exchange, inadequate  trained man power, technological and managerial know-how, marketing of their product, inadequate financial record of account, under capitalization etc

13. Hypothesis of the Study

The following hypothesis was put to test in the study

H1: There is relationship between banking habits and the impact of Micro-finance.

Ho: There is no relationship between banking habits and the impact of Micro-Finance.

Ho: There is no relationship between the saving ability of rural dwellers and banking habits.

H1: There is relationship between the saving ability of rural dwellers and banking habits.

1.4 Purpose of Study

It is the aim of this study to find out the impact that micro-finance played in stimulating and gearing up the habit of banking, particularly among rural dwellers. However, in pursuance of this study, micro-finance department of the OSPOLY Micro Finance Bank Limited Iree,Osun state  would be used as the case study.

In addition to the above, efforts would be made to trace the origin, structure, importance and impact of micro-finance. The method of financing the society through micro-finance would be looked into. The study will fully make recommendation about the ways of improving the status of the rural dwellers.

1.5. Scope of the Study

The scope of this study will cover the following areas:

(a) The importance of micro-finance

(b) The developmental process and impact of micro-finance on rural dwellers

(c) Sources of finance

(d) Method of data collection and determination of sample size

(e) The real problems of micro-finance and ways of overcoming those problems

(f) The prospects of micro-finance.

1.6. Limitations of the Study

One of the major problems encountered in the course of carrying out this research work is financial constraint. This financial constraint coupled with inadequate time due to the school work has finally made me to conclude on suing just a case study which is the department of Ospoly Micro Finance Bank Limited Iree, Osun state.

Visiting the web-site and some other book materials coupled with traveling up and down has made this project money –consuming.

Another major problem faced in the course of this study, which also delayed the project for some time is that some questions were designed and distributed among the clients but these questions were not answered. This may be attributed to the high level of illiteracy or probably uncared attitude of the clients. Those ones that were actually answered were submitted very late, that is, the questionnaires got back to me very late.

These, however, are the major limitations of the study, others are still bearable ad therefore does not need to be mentioned.

1.7 The significant of the study

The significant of the study is to find out the impact of micro finance in stimulating banking habit rural dwellers.

The study is done to improve the standard of living in rural dwellers by providing.       

1. Employment
2. Unity
3. Self responsibility etc

This is done through the establishment of Micro-finance bank.

1.8. Definition of Terms

SAVINGS: This can be defined as that portion of a person’s income that is not spent but kept or reserved for future purpose.

PROGRAMMES: These are planned or arranged avenues to impact knowledge, share experiences and materials which will help not only to understand success and failure but also to provide guidelines to people.

FIANCIAL SERVICES: these are assistance services rendered to people in order to increase their way of life e.g. Credit facilities.

SOFT LOANS: This is a small amount of money given out to the poor and less privileged people to carry out business and repay back in bits within a year.

POVERTY: This could be referred to as a state of lack. It is a situation whereby a person’s income is far below the effort engaged.

INSTITUTIONS: This could be said to be an establishment that offers advice, counseling and other services which will increase people’s level of reasoning.

RURAL AREAS: This is an underdeveloped area mostly occupied by the less privileged and the poor.