This study is based on the development of microfinance
bank in Nigeria (a case study of Octopus Microfinance Bank).
It is to examine the impact of financial industry to the
Collection of data was made through the use of
questionnaire and personal interview of some workers in the bank. The
statistical methods employed in the analysis were the use of percentages and
Findings show that credit has been recognized as an
essential tool for promoting small and micro enterprises.
Rural transformation is all about seeking transformation
to bring about improvement in the living condition of the farmer, the artisan,
the tenants and the landless within the simple and rustic economies of the
countryside and urban slum. Based on these findings, it was therefore
recommended that a national policy framework of microfinance should be prepared
by the development finance department of the Central Bank of Nigeria.
It should be subjected to stakeholders review so as to
enhance provision of diversified microfinance services and land term.
TABLE OF CONTENTS
Table of content
1.1 Definition of microfinance
1.3 Overview of microfinance banks in Nigeria
1.4 Brief history about the people of Oto-Awori and Ijanikin
1.5 Purpose of the study
1 .6 Method of research and research questions
1.7 Problem of the study
1.8 Definition of basic terms
2.0 Literature review
2.1 Role of microfinance banks in promoting entrepreneurship in
2.2 Financial requirement
2.2.2 Management requirement
2.3 Certification process
2.4 The history of microfinance
2.4. Examples of recent innovations in financial services for the
2.5 Importance of microfinance banks
2.5.1 Government view of microfinance sector
2.6 Problems of microfinance banks
3.1 Chapter Outline
3.2 Review of research questions/hypothesis
3.3 Research design
3.4 Characteristics of the study population
3.5 Sampling procedure and design
3.6 Data collection instrument
3.7 Administration of the data collection instrument
3.8 Limitation of the methodology 52
Data presentation and analysis
4.0 Introduction of chapter
4.1 Socio-demographic analysis
4.2 Research question
Summary, conclusion and
5.1 Restatement of research questions
5.2 Restatement of hypothesis
5.3 Summary of findings
Microfinance refers to the entire flexible structures and
processes by which financial services are delivered to micro entrepreneurs as
well as the poor and low income population on a sustainable basis. It
recognized poor and micro entrepreneurs who are excluded or denied access to
financial services on account of their inability to provide tangible assets as
collateral for credit facilities (Jamil, 2008).
Microfinance can be seen as a supply of loans, savings and
other financial services to the poor. It is the practice of delivering those
services in a sustainable manner so that poor households will have access to
financial services so that they can build sustainable microenterprise. While
microenterprise is a business that is independently owned and operated by its
owners and does not meet certain standards of size which in most cases operated
as informal business.
Credits to microenterprises are assuming importance in
rural areas in response to the need of the less privileged entrepreneurs with
limited capital base. In Nigeria, access to formal credit is a major problem
facing the small and medium scale entrepreneurs due to the prevalence of some
factors such as delays in loan disbursement on the part of the financial
institutions and payment defaults on the part of the beneficiaries (Olajide, 1980).
The aim of microfinance is not only to extend credits to
beneficiaries but to promote entrepreneurship and boost rural financial markets
that will provide sustainable access to financial services by creating a relationship
between those with financial resources and those who need them.
Microfinance banking is about providing financial service to economically active
poor who are traditionally not served by conventional banks in Nigeria.
The formal financial system provides services to about 35% of the economically active population while the remaining
65% are not getting access to bank funding.
In an attempt to solve the above problems and in order to
empower economically active poor, reduce the level of poverty in the world and
to assist the micro small and medium scale industries, the microfinance bank
Microfinance banks perform similar functions like
commercial banks except for the size of their transactions.
The population of Nigeria and the size of the target
customers/markets of microfinance banks, it cannot be over emphasized that the
potentials of microfinance bank is huge and the profitability of the business
is enormous (Solad Consulting Nigeria, Nov. 2008).
1.1 DEFINITION OF MICROFINANCE
Microfinance unless otherwise stated shall be constructed
to mean any company licensed to carry on the financial services such as
savings, loans, domestic fund transfers and other forms of services that economically active poor, micro enterprises and small and medium
scale enterprises need to conduct or expand their business as defined by
guidelines issued by CBN in exercise of powers conferred on it by the
provisions of Section 28 sub-section (l)(b) of the CBN Act 24 of 1991 (as amended)
and in pursuance of the provisions of section 56 - 60 of the Bofin Act 25 of
1991 (as amended).
An entrepreneur is a person of very high aptitude who
pioneers change, organizes production and takes the risks associated with the production
process. Entrepreneur can also be viewed as a person that wants to work for
himself; it is sometimes synonymous with self-employment. Entrepreneurship
therefore by implication is the act of being an entrepreneur, it involves all
the activities and function undertaken by an entrepreneur. Entrepreneurship is
believed to provide and important avenue for individuals to advance up the
income ladder. For some, it may provide a better route than paid employment,
while for others, who may be disadvantaged when
pursuing paid employment, it may provide the only route. Entrepreneurs are
charged with the responsibility of innovating new products, better production
method, creation of markets and managing the production process. They are in a
nutshell engaged in wealth creation. Financing therefore is needed by
entrepreneurs to enable them carry out their function effectively.
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)
(i) Microfinance Banks 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
million for each branch. The branching
should be gradual within a local council before it spreads to other local
councils and state.
(ii) Microfinance Banks license 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 m 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 WI billion.
About 600 Community Banks have migrated to Microfinance banks by January 1st,
2008 and there are several others that have been licensed to operate. (CBN,
1.4 BRIEF HISTORY ABOUT THE
PEOPLE OF AWORI OTO AND IJANIKIN
The people of Awori migrated from Ile-Ife where their
father Oduduwa was king.
The name Awori was derived from "Awowatirin", an
exclamation which emanated from "Ogunfunmire", a great hunter.
Ogunfunmire left Ife in search of greener pasture as a
hunter. After several consultation from the god of divination (Ifa), it was
revealed that he was to embark on a journey. He was given a white dish and was
told to place it on the river as he travels on, anywhere it sinks should be
considered as a place for settlement.
Ogunfunmire heeded to the advice and embarked on the
journey and did was he was told, when the dish sank, he exclaimed
"Awowatinrin" meaning "our dish has sank", this spot was at
The people of Awori are scattered all over Lagos and Ogun
States. They are also located at Oto and Ijanikin which are the researcher's
area of concentration. These two communities, have things in common that is,
cultural, social and political inclination. Their major occupations are basket
weaving, mat weaving, fishing, coconut
plantation, etc. Their dialect is Awori. They have separate royal heads.
1.5 PURPOSE OF THE STUDY
The microfinance bank will be looked as a concept donating
an arrangement of mobilizing idle funds available to the active poor community
and channeling of funds for investment and development. Also, it aims at
evaluating microfinance bank in the area of financial resource mobilization and
provision of credit facilities of the rural dwellers. It shall critically
appraise the impact of rural banking on rural saving.
1.6 METHOD OF RESEARCH AND RESEARCH
The method of research is based on personal interview and
questionnaire. It is assumed that this research would provide answers to the
(i) What are the effects of the development of
microfinance banks in Nigeria?
(ii) Does the development of microfinance banks in
Nigeria have any influence on the macro-economic variables?
(iii) Does the activity of microfinance bank in
Nigeria have any significant effect on the citizenry?
(i) Ho: There is no relationship between the
development of microfinance bank and macroeconomic variables.
H1: There is relationship between the development of
microfinance bank and macro-economic variables.
(ii) Ho: There is no significant effect of
microfinance banks activity on the citizenry.
H1: There is significant effect of microfinance bank
activities and the citizenry
(iii) Ho: There is no relationship between the development of microfinance
and economic growth and development.
H1: There is relationship between the development of
microfinance banks and economic growth and development.
1.8 PROBLEM OF THE STUDY
Microfinance Banks (MFB) cannot engage in the following
electronic fund transfer
into leasing, renting and sales/purchases of any kind with its director,
officers, employees or persons who either individually or in concord with their
family members own 5% of the equity of the
MFB without the prior approval in writing of the Central Bank of Nigeria.
(Solad Consulting Nig.)
OF BASIC TERMS
Some technical terms that will be used in the process of
this study will be defined and clearly explained to eliminate misinterpretation
and misunderstanding of research objectives. They are as follows:
This is an organisation that provides various financial
services such as: keeping or landing money.
banking: Can be seen as the business of
accepting money deposits and giving out advances as well as performing other
services to customers in rural areas.
bank: They are retail bankers that
mobilize deposit on saving terms. Current account withdrawable by cheque and
extend credit facilities to its needy.
This is a money set aside, used to run a business or to
carry out a project.
It is seen as rendering financial services to the
economically active poor in form of loans
to enable them start income generating activities or expand their little
business which include: saving, payment transfer, micro leasing and micro
An act of working together in order to achieve a particular
facilities: Basic services that is needed
or necessary In a community or organisation.