THE ROLE OF MICROFINANCE IN POVERTY ALLEVIATION IN NIGERIA

CHAPTER ONE

 INTRODUCTION

1.1     INTRODUCTION

This chapter contains the background to the study followed by the statement of the problem, the objectives of the study, the significance of the study, the scope and limitations of the study and lastly, the scheme of chapters.

1.2     BACKGROUND TO THE STUDY

 Microfinance which is also referred to as Microcredit is the extension of loans to entrepreneurs whom are too poor to be qualified for the traditional bank loan especially in developing countries. It enables very people to engage inself-employmentproject that generate income.

 The concept of microfinance was developed by Muhammad Yunus, a U.S educated professor of Economics, who first got in the business of fighting poverty during the 1973 famine in his homeland of Bangladesh, one of the poorest countries in the world. Yunus discovered that small loans could make a significant difference in a poor person’s survival. His first loan consisted of 27 dollars from his own pocket, which he lent to a woman who made bamboo furniture, which she sold to support herself and her family. In 1976, Yunus founded the first microfinance bank called the Grameen Bank, which provides loan to the Bangladesh people. Since then it has issued more than a billion dollars in loan to some 2.4 million borrowers.  

 Today, microfinance has become afashionable word with the World Bank, and Non-Governmental Organisations(NGOs) and is the key word for getting funds from funding agencies. While some consider microfinance as a panacea for poverty and all the ills of the society, others consider it as the mobilisation of groups for organizing the unorganised for social change. In Nigeria, there are approximately 119 million people representing 70.2% of the current population of over 170 million who live below the poverty line and majority of these people are not having the basic amenities of life. The most affected are the women and children. (Google 2012)

 Thus, with the alarming rate ofpovertyin the country, the need to address this scourge is an urgent one. The government has come out with a number of schemes and programmes in a bid to alleviate poverty, prominent among them are the Nigerian Cooperative Bank (NACB),National Directorate of Employment (NDE), Nigerian Agricultural Cooperative Rural and Development Bank (NACRDB), Peoples Bank of Nigeria (PBN), National Poverty Eradication Program (NAPEP), Poverty Alleviation Program (PAP) etc. There are also Organisations like United Nations Development Program (UNDP), United Nations Children Education Fund (UNICEF), International Food Agricultural Development (IFAD) etc. Despite these schemes, little empirical work has been done to examine the extent to which they have led to improvement in the income and the standard of living of the masses.

 It is in this light, that the researcher wishes to examine the role of microfinance in the eradication of poverty in Nigeria with a special reference to the Nigerian Agricultural Cooperative Rural and Development Bank (NACRDB) Limited, Sokoto.

1.3     STATEMENT OF THE PROBLEM

 There is a strong argument in support of microfinance as an instrument of poverty alleviation. This has encouraged the Federal Government of Nigeria to establish the Nigerian Agricultural Cooperative Rural and Development Bank (NACRDB) with the purpose of providing microcredit to the poor. The problem of this research work is to examine the effects of the Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB) Microfinance on

poverty alleviation of the beneficiaries in Sokoto state.

 It is in view of this research problem that this research work set to ask the following questions;

a)     Does this microfinance increase the income of the beneficiaries?

b)    Does this microfinance increase the asset holding of the beneficiaries?

c)     Does this microfinance improve the standard of living of the

beneficiaries?

1.4     OBJECTIVES OF THE STUDY

The general objectives of this research work is to examine the importance of microfinance in poverty eradication, how it helps to empower the poor people to move out of poverty and gives the gives the positive contribution of microfinance  to the economy.

          The specific objectives of this study however, include the following;

a)     To examine the effects of microfinance on the income of the

beneficiaries.

b)    To examine the effect of microfinance on the asset accumulation of the beneficiaries.

c)     To examine the effect of microfinance on the standard of living of the beneficiaries.

1.5            SIGNIFICANCE OF THE STUDY

 This research work is expected to provide an insight in the use of microfinance as a means of poverty eradication. 

 It is also hoped that the findings of this research work will contribute in identifying how significant microfinance is to the poor people and also to explain some of the problems associated with this type of loan.

 We also hope that this research work will serve as an encouragement to the Government, other agencies (NGOs) and banks to extend more of this loan to the poor in an attempt to eradicate poverty in Nigeria.

          Hopefully, the findings of this study will pave way for future research work.

1.6            SCOPE AND LIMITATIONS OF THE STUDY

The study is restricted to the area of study, which is the role of microfinance in poverty alleviation in Nigeria and a particular reference to the

Nigerian Agricultural Cooperative Rural and Development (NACRDB) Sokoto

State.

 In carrying out this researchwork, the major limitations of this study include;

i.               Illiteracy and lack of cooperation from the beneficiaries of the loan.

ii.            The officials of the bank might not be willing to give some of the records.

iii.          Finance also serves as a problem iv.         Time constraint 

1.7     SCHEME OF CHAPTERS

This project is divided into five chapters, chapter one which is the introduction contains the  background to the study,  statement of the problem, objectives of the study, significance of the study, scope and limitations of the study and the scheme of  chapters.

 Chapter two contains the introduction, review of some literature works, the conceptual framework, types of microfinance model and the efforts of microfinance delivery to the poor and the effects of microfinance on poverty.

 Chapter three contains the introduction, the historical background of the study, the sample size, the sampling techniques, method of data collection and data analysis.

Chapter four contains the data presentation and analysis. while, the last chapter is the summary, conclusions and recommendations