ABSTRACT
The study assessed the effectiveness of Rural Finance Institution Building Programme (RUFIN) in Akwa Ibom State. The specific objectives were to: describe the socio-economic characteristics of participants in RUFIN programme, determine the level of participation of RUFIN participants; ascertain the level of empowerment of participants, identify agricultural and non-agricultural enterprises promoted by RUFIN, determine the level of performance of participants and examine constraints faced by the participants. Multi-stage sampling procedure involving purposive and random sampling techniques were employed to select 303 respondents from the three RUFIN pilot Local Government Areas of the State. Primary data were collected with the aid of structured questionnaire and analyzed using descriptive statistics such as frequency counts, percentages and mean scores, while Pearson product moment correlation analysis was used to test the null hypotheses at 5% significance level. The results revealed that the mean age of RUFIN participants was 42.9 years. More female VSG participants (56%) benefited from the programme than males (44%). The grand mean score of the responses of village saving groups (VSGs) on their level of participation was 2.77 while the grand mean score of the responses of Cooperative participants on their level of participation was 3.02. This implied that there was high level of participation of VSG and Cooperative participants in RUFIN in the study area. The grand mean score of the responses of VSGs on their level of empowerment was 2.62 while the grand mean score of the responses of Cooperative participants on their level of empowerment was 2.64. This implied that there was high level of empowerment of VSGs and Cooperatives in RUFIN activities. The result also showed that the respondents were given financial trainings in crop production (40.5%) and agro-processing (32.5%). The grand mean score of the responses of VSGs on their level of performance was 2.73 while the grand mean score of the responses of Cooperative participants on their level of performance was 2.92. This implied that there was high level of performance of VSGs and Cooperatives in RUFIN in the study area. Insufficient loans for business ( = 2.92) and high interest rate ( = 2.70) were recorded as major constraints faced by RUFIN beneficiaries. The result of the hypotheses testing revealed that for hypothesis one, there was a positive (r = 0.517) and significant (t = 5.374**) relationship between the level of participation of cooperative societies in RUFIN programme and their level of empowerment at 5% significance level. For hypothesis two, the result also showed a positive (r = 0.351) and significant (t = 6.098**) relationship between the level of participation of village saving groups in RUFIN programme and their level of empowerment at 5% significance level. The study concluded that there was high level of participation and empowerment of RUFIN participants in the study area. The study recommended among others the implementation of similar rural intervention programmes to grant more loans to participants; regular training of rural people to develop healthy saving culture and the establishment of functional socially inclusive financial institutions with single-digit interest rate.
TABLE
OF CONTENTS
Title
Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Table
of Contents vi
List
of Tables x
List
of Figures xi
Abstract xii
CHAPTER 1: INTRODUCTION
1.1 Background of the Study 1
1.2 Problem Statement 5
1.3 Research Questions 7
1.4 Objectives of the Study 8
1.5 Hypotheses of the study 8
1.6 Justification
for the Study 9
1.7 Scope
of the Study 9
1.8 Definition of Terms 10
CHAPTER 2:
LITERATURE REVIEW
2.1 Conceptual
Review 12
2.1.1 Overview
of Agricultural Development Programmes 12
2.1.2 Performance
of Rural Development Programmes in Nigeria 17
2.1.3 Rural
Finance Institution Building Programme (RUFIN)- Background
Information 20
2.1.4 Rural
Finance Institution Building Programme- Goals and objectives 21
2.1.5 Overview
of poverty and well-being 23
2.1.6 Poverty
alleviation 25
2.1.7 Historical
development of banking in Nigeria 26
2.1.8 Micro-financing 29
2.1.9 Concept
of Micro-finance 31
2.1.10 Micro financing and poverty alleviation 32
2.1.11 Roles of Micro-Finance Banks
in promoting entrepreneurship 33
2.1.12 Challenges facing Micro-finance Institutions 35
2.1.13 Concept
of programme assessment 36
2.1.14 Purpose of programme assessment 37
2.1.15 Types
of programme assessment 38
2.2
Empirical Studies 38
2.3
Review of Related Theories 47
2.3.1 The diffusion theory 47
2.3.2 Theory
of change 48
2.3.3 The
growth pole theory 49
2.3.4 Empowerment
theory 50
2.4 Theoretical
Framework 51
2.5 Conceptual Framework 53
CHAPTER 3: METHODOLOGY
3.1 Study Area 56
3.2 Population of the Study 57
3.3 Sample and Sampling Procedure 57
3.4 Method of Data Collection 60
3.5 Validity of Instrument 60
3.6 Test of Reliability of Instrument 60
3.7 Data Analysis 61
3.8 Hypotheses Testing 61
3.8.1 Model specification 61
3.9 Measurement
of Variables 63
CHAPTER 4: RESULTS AND
DISCUSSION
4.1 Socio-economic Characteristics of
Respondents 66
4.1.1 Age 66
4.1.2 Sex 67
4.1.3 Marital status 68
4.1.4 Level of education 69
4.1.5 Household size 70
4.1.6 Primary occupation 71
4.1.7 Monthly estimated income 71
4.2 Level
of Participation of VSGs and Cooperative Societies in RUFIN
Programme
74
4.3.1 Level of Empowerment of VSGs and Cooperative
Societies in RUFIN
Programme 76
4.3.2 Level of Empowerment of Microfinance banks
in RUFIN
Programme 79
4.4 Agricultural and
Non-Agricultural Enterprises Promoted under RUFIN 80
4.5.1 Level of
Performance of VSGs and Cooperative Societies in RUFIN
Programme 82
4.5.2 Level
of Performance of Microfinance banks in RUFIN Programme 85
4.6.1 Constraints
Faced By VSGs and Cooperative Societies in RUFIN
Programme 86
4.6.2 Constraints
Faced By Microfinance Banks in RUFIN Programme 88
4.7 Results of Hypotheses Test 89
4.7.1 Result of hypothesis 1 89
4.7.2 Result
of hypothesis 2 91
CHAPTER 5:
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary 93
5.2 Conclusion 95
5.3 Recommendations 96
References 97
Appendix i 102
Appendix ii 107
Appendix iii 110
LIST OF TABLES
Page
4.1 Socio-economic characteristics of
respondents 73
4.2 Distribution of respondents according to their level
of participation in RUFIN
Programme
75
4.3.1 Distribution of respondents according to their level
of empowerment by
RUFIN Programme 78
4.3.2 Empowerment
of Micro finance Banks by RUFIN 79
4.4 Distribution of respondents according to agricultural
and non-agricultural
Enterprises
promoted under RUFIN 81
4.5.1 Distribution of respondents according to their level
of performance in RUFIN
Programme 84
4.5.2 Level
of Performance of RUFIN-Mentored MFBs in RUFIN Programme 85
4.6.1 Distribution of respondents according to constraints
faced in RUFIN
Programme 87
4.6.2 Constraints
Faced by Micro-Finance Banks in RUFIN Programme 88
4.7.1 Correlation
result of relationship between the level of participation of cooperative
societies in RUFIN programme and their level of empowerment 90
4.7.2 Correlation
result of relationship between the level of participation of village
saving
groups in RUFIN programme and their level of empowerment 92
LIST
OF FIGURES
Page
1 Conceptual
framework on Effectiveness of Rural Finance Institution Building
Programme in Akwa
Ibom State 55
2 Sampling
Procedure showing the number of VSG, Cooperative and MFB
participants
59
CHAPTER
1
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Since
the turn of 1960s, the Nigerian government in its avowed determination to
better the lots of the citizenry, has evolved a number of strategies to improve
the social and economic well-being of the people, especially those living in
rural communities. Expectedly, the poor economic status and social welfare of
Nigerians has inexorably been attributed to the lack of income and food (Onwuka
and Udeh, 2015). As part of efforts to reverse the ugly development, several
agricultural intervention programmes aimed at turning around the economic fortunes
of the rural people have been implemented by different governments and
development agencies in Nigeria. The focal point has been on poverty reduction
through improvement of income, food security and general living conditions of
the poor rural households. However, in the past 25 years, the world has managed
to half the number of people living in extreme poverty (Oshinowo and Olayide,
2018).
Notable
agricultural programmes in Nigeria, as listed by the World Bank (2015),
include: Operation Feed the Nation (OFN), Green Revolution and Agricultural
Development Projects (ADPs). The Nigerian Agricultural and Co-operative Bank
(NACB), now known as Bank of Agriculture (BOA), was established in 1973 as a
key institution to address problems militating against agricultural development
and financing. The three major functions of this institution were to grant
loans for agricultural production to any State or institution for on-lending to
farmers, group of farmers or corporate body; grant direct loans to individual
farmers, co-operative societies or other bodies provided that it was satisfied
that the Scheme for which the loans were requested was were viable, and there
was adequate security to cover such loans; and do all such things as might have
been incidental or conducive to the attainment of these functions (Zuru, 2016)
.
Another
milestone in government’s determined effort geared towards agricultural
financing was the establishment of the Agricultural Credit Guarantee Scheme
(ACGS) in 1977 by the Central Bank of Nigeria. The primary aim of this Scheme
was to provide guarantee to Commercial Banks for the loans taken by farmers for
agricultural purposes. One of the components of the Scheme was the creation of
Agricultural Credit Guarantee Fund (ACGF) by the Federal Government and the
Central Bank of Nigeria. Under the Scheme, Commercial Banks were required to
channel a minimum proportion of their loan portfolio to the agricultural sector
and to deposit the shortfall with the Central Bank, which made such funds
available to Nigeria Agricultural and Co-operative Bank for its operations
(Stewart, 2012).
In
the 2018 National Budget, the Federal Government of Nigeria earmarked 203
billion Naira for agriculture and rural development. This was targeted at
programmes and projects aimed at scaling up efforts to improve the economy
(Buhari, 2018). The National Special Programme for Food Security (NSPFS) was
the first step towards achieving the Millennium Development Goals of reducing
by half the number of hungry people by 2015. The Federal Government of Nigeria,
in conjunction with the Federal Ministry of Agriculture and Rural Development,
launched the National Special Programme for Food Security (NSPFS) in 2002. The
goal of this programme was to improve national and household food security and
reduce rural poverty in a sustainable way with the ultimate objective of
contributing to better livelihoods for poor farmers on sustainable basis.
However, Nigeria appears to be currently experiencing the scourge of rising
poverty and the growing threat of food insecurity among its citizens. This
situation has been seen to be especially worse in the rural areas where
people’s livelihoods depend largely on small-scale agricultural output (Idiaye
and Omonona, 2014).
In
2010, the Federal Government of Nigeria, in conjunction with the Federal
Ministry of Agriculture and Rural Development (FMARD) and the International
Fund for Agricultural Development (IFAD), launched the Rural Finance
Institution Building Programme (RUFIN) in Nigeria. The Rural Finance
Institution Building Programme (RUFIN) was designed to develop rural economy
through enhancing the capacity of micro-finance institutions and non-formal
credit institutions such as Co-operative Society and Village Savings Groups
(VSGs) to provide cheap credit facilities to poor rural people, and to manage
such credits in a sustainable manner.
The
broad objective of the RUFIN was to develop and strengthen the rural micro
finance sub-sector of the economy, comprising the Micro-Finance Banks (MFBs)
and non-formal credit institutions such as Co-operative Societies and Village
Savings Groups (VSGs) so as to increase access of the rural population to
sustainable finance services; thereby expanding and improving agricultural
productivity. The expected outcome was poverty alleviation, especially among
poor rural women, youths and the physically-challenged, and bridging the
yawning gap of financial inclusion of the active poor. The specific objectives
of RUFIN were to bridge the existing gap in micro-finance delivery; strengthen
Rural Micro-Finance Institutions (RMFIs) to bring financial services to the poor;
develop target group member-based, poor RMFIs so as to promote effective
participation of the poor in rural financing; facilitate the participation of
rural people and their institutions in the micro-finance policy implementation;
and orient policies to service agricultural and non-agricultural sectors, and
strengthen Rural Finance Institutions (IFAD, 2013).
RUFIN
was implemented in 12 States of the Federation – Adamawa, Akwa Ibom, Anambra,
Bauchi, Benue, Edo, Imo, Katsina, Lagos, Nasarawa, Oyo and Zamfara,
representing two States from each of the six geo-political zones in Nigeria.
The total volume of external investments in the programme was US $32.5 million,
which ran for seven years. Out of this amount, Akwa Ibom State withdrew US $2.7
million (N405m), in addition to her own
counterpart fund contribution of twenty million naira (N20m). The programme commenced in 2010 with a pilot Local
Government Area in each participating State. In Akwa Ibom State, EssienUdim,
Onna and Itu were pilot Local Government Areas used as administrative centres
for the three senatorial districts of the State (IFAD, 2013).
As
explained earlier, RUFIN focused its attention on micro financing.
Micro-financing, according to Zuru (2017), is a poverty alleviation tool used
to provide micro credit and other financial services to low-income persons who
are usually excluded from the mainstream financial systems. The author
identified four distinctive features of micro-finance institutions, namely,
loan is disbursed without collateral; loan is offered to those people who live
below poverty line; terms and conditions offered to the poor are decided by
NGOs; and the provision of other financial services, including savings account
and insurance. The aim of micro-finance institution is not only to extend
credit to beneficiaries, but also 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.
RUFIN
was aimed at improving the economic status and standard of living of the rural
people through provision of loans to boost their agricultural production.
According to Onwuka and Udeh (2015), rural people with small-scale operation,
low productivity, low income and inability to purchase modern requisites, need
to be supplied with credit facilities to stimulate increased productivity. The
ultimate goal of the programme was to contribute to poverty reduction through
increase in income and general improvement in the living conditions of the
rural households, including women, youth and the physically-challenged.
1.2 PROBLEM
STATEMENT
The
International Fund for Agricultural Development reported in 2016 that an estimated
two billion working-age adults globally (38% of the world population) had no
access to services provided by formal financial institutions, while 62% of them
were unbanked (IFAD, 2016). Similarly, the World Bank in 2018 asserted that
about 1.7 billion rural people in the world have no financial account at the bank.
Even when they have accounts, many people find them of little value and they
are left unused. The result is that they have no savings for a child’s
education; they cannot access loans to buy seeds and fertilizers and they have
no insurance to protect them from medical or natural disasters (World Bank,
2018).
Generally,
traditional financial institutions in rural areas are not only few, but weak in
service provision. This is what Kirechev (2011) observed as limited supply of
financial services in rural areas. The National Bureau of Statistics reported
that 67.1% of inhabitants of Akwa Ibom State were living in poverty, while
32.9% were non-poor (NBS, 2017). The increasing pauperization in the State
renders the standard of living and quality of life unimpressive and unenviable
because of serious deprivation or lack of income necessary to attain
socially-acceptable standard of living. Existing rural finance institutions are
few with respect to the population they serve, and even more critical to the
rural economy is that they are very weak.
The
consequence of few, near non-existence and weak rural finance institutions is
anti-development. This is because the existing rural finance institutions
cannot provide adequate financial products and services to the people (Okon,
Etim and Offiong, 2012). This situation results in continued low household
income, poor health care uptake, poor nutrition, low or non-existence of
savings or utilization of formal finance institutions that could alleviate
poverty. It is against this background of poor state of the rural economy that
the Akwa Ibom State Government embraced the intervention of the International
Fund for Agricultural Development (IFAD) when the Rural Finance Institution
Building Programme (RUFIN) was launched in 2010.
Basically,
RUFIN was designed to develop the rural economy through enhancing the capacity
of micro-finance institutions to provide cheap credit facilities to poor rural
people and to manage such credit in a sustainable manner (IFAD, 2013). The
programme pursues the flow of funds into rural areas by influencing different
stakeholders, but without directly being involved in the credit delivery.
To
the knowledge of the researcher, little or no rural development study has been
conducted on the performance of the RUFIN in Akwa Ibom State almost a decade
after being launched. Available studies were either focused on Impact of
Micro-Credit Schemes on rural areas (Okon et
al., 2012) or Asset Structure and Profitability of Micro-Finance
Institutions (Ekpo and Mboho, 2017). In neighboring Cross River State, research
on Access and Utilization of Micro-lending among rural farmers was also
conducted (Okoronkwo, Joseph, Alobari and Ephari, 2014). Other research studies
identified were on Sustainability of Rural Finance (Kirechev, 2011); Effect of
Microfinance Institutions in Rural Households well-being in Oyo State. Furthermore,
in a study of IFAD/RUFIN supported programme, Oshinowo and Olayide (2018)
examined the strengths and working of the Rural Finance Institution Building
Programme (RUFIN) in Oyo State. Therefore, the research gap was to be filled by
carrying out a study on the effectiveness of Rural Finance Institution Building
Programme (RUFIN) in Akwa Ibom State.
Uchenna
and Onyeibo (2018) observed sub-optimal operations of some laudable empowerment
intervention programmes which in most cases did not meet expected programme
objectives. Could this assertion be applied to RUFIN? Every programme has
relative impact, but the level of the said impact is always a subject of
academic discourse. It is against this backdrop that this research was conducted
to assess the effectiveness of the Rural Finance Institution Building Programme
(RUFIN) in Akwa Ibom State.
1.3
RESEARCH QUESTIONS
The research sought to answer the
following questions:
i.
What are the
socio-economic characteristics of the participants in RUFIN programmes in Akwa Ibom
State?
ii.
What is the level of
participation of village savings groups and co-operative societies in RUFIN
programme in the study area?
iii.
What is the level of
empowerment of village savings groups, co-operative societies and Micro-Finance
Banks by RUFIN?
iv.
What are the agricultural
and non-agricultural enterprises promoted under RUFIN programme in the study
area?
v.
What is the level of
performance of village savings groups, co-operatives and Micro-Finance Banks
empowered by RUFIN?
vi.
What are the constraints
faced by participants in RUFIN programme?
1.4 OBJECTIVES
OF THE STUDY
The
broad objective of the study was to assess the effectiveness of Rural Finance
Institution programme in Akwa Ibom State, Nigeria. Specifically, the objectives
were to;
i.
describe the
socio-economic characteristics of participants in RUFIN programme in the study
area;
ii.
determine the level of
participation of VSGs and cooperative societies in RUFIN programme;
iii.
ascertain the level of
empowerment of participants by RUFIN programme;
iv.
identify agricultural and
non-agricultural enterprises promoted by RUFIN programme;
v.
determine the level of
performance of participants empowered by RUFIN and
vi.
examine constraints faced
by the participants in RUFIN programme.
1.5 HYPOTHESES
OF THE STUDY
The following null hypotheses guided
the study:
Ho1: There is no significant
relationship between the level of participation of cooperative societies
in RUFIN programme and their level of empowerment.
Ho2: There is no significant
relationship between the level of participation of village saving groups
in RUFIN programme and their level of empowerment.
1.6 JUSTIFICATION FOR THE
STUDY
The
research revealed the effectiveness of RUFIN programme in Akwa Ibom State.
Undoubtedly, the study revealed that the majority of the rural dwellers enjoyed
linkage to formal financial institutions, in addition to capacity building
through active participation in RUFIN programme. Apart from several trainings
given to participants, most of the beneficiaries enjoyed increased access to
micro finance bank loans through RUFIN programme.
The
study would certainly be of help to Financial Institutions like the Micro
Finance Banks to re-structure their interest rates and marketing strategies to
become much more relevant to rural development.
As one of the rare works
in recent times, researchers will develop interest to build on the existing one
or undertake similar research with a view to contributing to knowledge and
offering solutions to challenges confronting poverty alleviation programmes.
1.7 SCOPE
OF THE STUDY
The
study assessed the effectiveness of Rural Finance Institution Building
Programme comprising Micro-Finance Banks, village savings groups and
co-operatives societies empowered by RUFIN in Akwa Ibom State in three pilot
Local Government Areas of the State.
Accordingly,
data were obtained on the level of empowerment of MFBs, VSGs and Co-operative
societies in microfinance services delivery, level of participation,
agricultural and non-agricultural enterprises promoted by RUFIN, as well as
constraints faced by RUFIN in financial service delivery to MFBs, VSGs and
co-operative societies.
The
study focused on 9 RUFIN- mentored Micro-Finance Banks namely, Prudential,
Sapphire, Gufax, Uniuyo, Eduek, Brooks, Madelyne, Active Point and Palm Coast,
three (3) co-operative societies which are Akwa Ibom State Financial Prudential
Co-operatives, Usung Unwan Co-operatives and Nka Unwan Ntiat Co-operative
Society and 10 village savings groups in each of the three LGAs.
1.8 DEFINITION OF TERMS
The
section gives explanation of important terms as used in the study.
Programme Assessment is
the systematic and ongoing method of gathering, analyzing and using information
from various sources about the programme to measure the programme outcome in
order to ascertain it effectiveness (whether the programme has achieved its set
goal).
Effectiveness is
defined as the capability of producing the desired result or the ability to
produce the desired output. When something is deemed effective, it means it has
an intended or expected outcome, or producing a deep, vivid impression.
Micro-financing
is the provision of credit facilities/loans in small amount (under N500, 000) that are repaid within a short
period of time (0 – 2 years) for the economically-active poor to enable them
raise their income level and improve their standard of living.
Poverty is
defined as a condition of having insufficient income or resources to obtain
minimum standard of living. The level of income is an important indicator of
the degree of poverty.
Microcredit/loan
is a small amount of money (N5000 or
less) lent to the economically-active poor to help them start up or improve
upon their businesses in order to enable them improve their income level and
keep poverty at bay.
Poverty alleviation
is the substantial reduction in the number of households or individuals whose
income cannot provide the necessities of life such as food, clothing, shelter,
medical care and education.
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