This study examines the assessment of microfinance
bank towards achieving economic development in Nigeria, a case study of Afemai
Microfinance Bank, Uzairue, Edo State. The study adopted a survey method
(questionnaire and oral interview) as instruments for collecting
data/information for the research. A simple arithmetic percentage method was
used to test the strength and weakness of the research instrument, while
chi-square statistical method was also used to establish the relationship
between the variables tested. Significantly, the study reestablished that there
`is a positive relationship between the microfinance bank and economic
development of Edo State. The study concluded that microfinance bank should be
empowered to contribute more positively towards the economic development of Edo
Title Page i
Table of Contents v
1.1 Background to the Study 1
1.2 Statement of the Problem 4
1.3 Research Questions 5
1.4 Objectives of the Study 6
1.5 Statement of Hypothesis 6
1.6 Significance of the Study 8
1.7 Scope of the Study 8
1.8 Limitations of the Study 9
1.9 Definition of Terms 10
LITERATURE REVIEW 14
2.1 Concept of Microfinance Banks 14
2.2 Brief History and Organizational Structure of
Afenmai Microfinance Bank 14
2.3 Organization Chart of the Bank 15
2.4 Transformation of Community Banks into
Microfinance Bank 17
2.5 Rationale for the Transformation of Community
Banks into Microfinance Banks 19
2.6 Promotion of Savings Mobilization 21
2.7 Financing Extension Services 23
2.8 Promotion of Rural Activities 25
2.9 Inculcating of Disciplined Banking Habits in
Rural Areas 29
2.10 Sources of Funding for Microfinance Banks 30
2.11 Problems associated with Microfinance Banks 33
RESEARCH METHODOLOGY 40
3.1 Research Design 40
3.2 Population of the Study 40
3.3 Sampling Procedure and Sample Size 41
3.4 Data Collection 41
3.5 Data Analysis Technique 43
PRESENTATION AND ANALYSIS
OF DATA 44
4.1 Introduction 44
4.2 Presentation of Data 44
4.3 Analysis of Data 48
4.4 Hypothesis Testing 48
SUMMARY OF FINDINGS,
5.1 Summary of Findings 58
5.2 Conclusion 58
5.3 Recommendations 59
BACKGROUND TO THE STUDY
It is know fact that
banks help to accelerate the growth and development of a developed and
developing economy. Consequently, finance becomes an important ingredient in
the economic development of a nation and communities alike. Thus, the relevance
of microfinance banks (formerly known as community bank) in promoting economic,
programmes has become very basic and appreciated. In fact, the banks have the
ability to mobilize funds in response to the dynamics of the societal
requirements for growth and development. Therefore, there is the need for a
proper functioning of microfinance banks as the pre-supposes a partial
fulfillment of the requirement for development.
There is no gain saying
the fact that at every stage of the state (Edo) effort towards economic
development and advancement, the microfinance banks are called upon to assist
in their capacities in response to this call, they provide available services
in the areas of financing enterprises through small, medium and long term
lending without prohibitive collaterals, in addition they equally provide
veritable advisory function to assist various individuals engaged in business
It is worthwhile to
mention here that the microfinance banks perform advisory services to our rural
dweller on one proper utilization of soft loans granted especially in trading
and agricultural production since the fundamental objective of the banks is to
bring development close to the people (grass root development).
Edo State which is the
focus of the study was created out of the former Bendel State in 1991 as
contained in (Edo State Investment Guide). It is surrounded by Kwara State in the
North, Benue State in the East, Ondo in the West and Delta State in the South.
The State has eighteen (18) local government areas with corresponding
To state the obvious,
funding has been a limiting factor as most of these organizations and
enterprises are grossly underfunded. Even the government is almost unable to
provide the needed funds to obliterate them from their financial predicament.
The microfinance banks
tend to fill this yawing financial gap faced by the industries, organizations
and other enterprises within the state. Often times, it is painful to note that
the microfinance banks demand collaterals that most of the entrepreneurs are
unable to provide apart from poor financial base of the ailing banks. This is
in addition to the mismanagement of the resources of the banks by the
unwholesome practices of the directors. Most painful is the inexperience
investors are often considered on the priority list of the beneficiaries of the
banks. These problems tend to mitigate the economic development of most of the
micro finance banks, include Afenmai microfinance bank which is the focus of
Again, this study is
mainly designed to explore the roles of microfinance bank in the economic
development of Edo State, with a focus on Afenmai microfinance bank, Uzairue,
Etsako West Local Government Area, Edo State.
1.2 STATEMENT OF THE PROBLEM
The relevance of
microfinance towards achieving the economic development of Edo State cannot be
overemphasized until the advent of the microfinance banks in Edo State, on
rural dwellers had no access to modern banking facilities; hence they mostly
saved their money in pots, holes underneath their mats and rugs. Furthermore,
most of the bank lacked standard capital base to sufficiently meet the demand
of their customers. It is also disgusting to know that the capital assets of
the majority of the banks were and are still being mismanagement by the
unscrupulous board chairman and directors. These problems are further compound
by the recognition and support given to the bank by financial authorities; Central
Bank of Nigeria (CBN), the Mortgage Bank of Nigeria Deposit Insurance
Corporation (NDIC) and NICON. The resultant effect is that most of the banks
are thus unable to accomplish the fundamental objective of providing
credits/loan facilities to their customers. These constitute the statement for
Anchored on these
problems, the researcher would want to examine the relevance which the
microfinance bank play in the following specific areas.
soft loans by small scale industries
Safe custody of
soft loan for agricultural production
usage of loans granted to the rural dwellers
facilities and bad debts
1.3 RESEARCH QUESTIONS
The following are the
research question of this project.
What is the
relationship between microfinance banks and small business enterprises in
What are the
challenges of microfinance bank in Nigeria?
What are the
effects of lack of financial support on small business?
microfinance institution be responsive to small business enterprises demands?
OBJECTIVES OF THE STUDY
The main objective of
this study is to ascertain the extent to which microfinance banks in Edo State
contributed towards the economic development of state. This study is however
limited to the Afenmia Microfinance Bank,
Uzairue, Etsako West Local Government Area
of Edo State.
Other related objective
of the study are:
To bring to
light areas where microfinance banks in Edo State have not been alive to their
function or responsibilities.
To ascertain the
problems confronting microfinance bank in the execution of their functions.
suggestions on how microfinance banks can improve their services.
STATEMENT OF HYPOTHESIS
In order to carryout an
in-depth study and to actualize the objective of this research work, the
following hypotheses stated in null formal have been adopted.
H0: Microfinance banks are not agents for economic
H1: Microfinance banks are agents for economic
H0: Soft loans and advances to rural community by
microfinance banks are not sources of funds for grass-root development.
H1: Soft loans and advances to rural community by
microfinance banks are sources of funds for grass-root development.
H0: Services like revenue collection rendered by the
microfinance banks are not the source of obstacles to the banks.
H1: Services like revenue collection rendered by the
microfinance banks are the source of obstacles to the banks.
SIGNIFICANCE OF THE STUDY
If economic development
is a continuous process which we assume it to be, then it is essential that we
identify and evaluate factors relating to such development. Therefore, this
study is significant in all its ramifications as a basis for economic growth and
Most significantly, the
understanding of the relevant of microfinance banks in Edo State is not only
useful for the reconstruction of Edo State, but also other state in the country
and the world at large.
Significantly too, the
study will be a basis for further studies in areas related to scope of this
research. Above all, it will be a reference source of information to
significantly contributed to the existing literature in the area of the study.
SCOPE OF THE STUDY
This study is limited
in scope for the period of 5 years from (2008 – 2012). The relevant of
microfinance banks towards the economic development of Edo State. The
researcher is developed, using library research and collecting data and
information using questionnaire and conducting oral interviews and discussions
with some of the bank officials.
LIMITATIONS OF THE STUDY
In the process of
carrying out this study, the researcher encountered some difficulties which
acted as obvious limitation to the research.
First, were the
problems of time and money which of course are the essential constraints to
students while in school. Therefore, these should be recognized as limitations
to the study.
Second was the
limitation of acceptance especially when dealing with supposedly suspicious
group of people like the banks officials and other business people in the
society. They often do not vive the desired cooperation needed. This
constituted a limitation to this study. It was almost impossible getting the
data needed from administrative files and bank transactions as regarded as
Third, was the problem
of getting the actual data information from the respondents (bank official and
customers) alike. No mater the manner questionnaire are framed and oral
interviews conducted, respondents to the as subject to individual bias and
selfish judgement. These also constituted limitations to this study.
In spite of the
pragmatic limitations encountered in the process of this study, the researcher
did here best to overcome them. Therefore, the authoritativeness and the
reliability of this study should not be under scored by its potential users.
DEFINITION OF TERMS
In carryout out this
study, the researcher made use of some technical but related terms. For ease of
understanding and application of these terms, the following functional
definitions have been given:
Economic Development: This should be regarded as a process and transforms
a stagnant society with low average real income into one in which income rises
more or less continuously as technology is embodied in accumulated capital. Yet
it can also be defined as mere growth;
while others of the opinion that it involves both growth and structural
From the foregoing
definitions of economic development, it can be rightly deduced that the general
problem encountered by the research in trying to evolve a concrete definition
is the representation of economic development as either one or a combination of
any of these factors.
transformation of the society
Therefore, in this
study, economic development should be taken to constitute and hence consist of
factors identified above.
is a depot that deals on monetary and other precious deposits for economic
transaction. It is of many types, but in this work, it means the microfinance
bank, selected, unless otherwise stated.
These are banks set up by Nigerians and government. In this study, the Afenmai
Microfinance Bank, Uzairue (focus of this study), Uchi Microfinance Bank,
Auchi, Ogida Microfinance Bank and Okogbo Microfinance Bank (both in Oredo
Local Government Area) are examples of the banks.
This includes all banking taking place in area distant from the urban centres.
This is the act of collecting savings (money) and other valuables from people
and facilitating their subsequent transactions. This is intended to promote
their living standards and enhancing their economic growth.
These are financial organization (banks) set up an expatriate or foreigners.
These banks/organizations since 1970 have been indigenized. A good example is
United Bank for Africa (UBA).
These are organizations owned by and operated for the benefit of those using
This simply refers to small loan made to low income individuals to sustain self
employment or to start up very small businesses.
This is the act of providing financial services to the poor who are
traditionally not served by the conventional financial institutions. It is the
provision of small loans (micro credit) to the poor, to help them engage in new
productive business activities.
Micro Finance Bank:
This is a financial institution licensed to provide credit banking and other
financial services to a designated “catchments area” or community.