MICRO-FINANCE AND ECONOMIC EMPOWERMENT OF WOMEN IN LAGOS STATE NIGERIA

ABSTRACT

This study examines the impact of microfinance on economic, financial and social empowerment of women micro entrepreneurs in Ikeja, Lagos State. A sample of 50 women micro entrepreneurs were selected in Ikeja some of which include traders, hairdressers, fashion designers, fish farmers and boutique owners. Survey method was employed to obtain a picture of the population. Research data was collected using a 24 item questionnaire in order to measure the empowerment of women micro entrepreneurs and access to capital from microfinance banks. Reliability and validity of the instrument was tested to ensure the instrument has face and content validity. Data collected were analyzed using descriptive and inferential statistics. Research questions were tested using frequency counts and percentages while the hypotheses were tested using correlation coefficient, analysis of variance and regression analysis. The result of my analysis showed that; there are more women micro entrepreneurs between the ages of 18-45, 68% of the respondents were married, half of the population engaged in trading, 24% were hairdressers and fashion designers constituted 8%. The finding shows that women micro entrepreneurs can be economically empowered and there is an existing appreciable level of economic empowerment; 14% of respondents have purchased lands, 4% were able to build houses, 68% are sponsoring their children's education. It was proved that loan facilities, trainings and monitoring through microfinance can improve women's business capacity in various ways like buying more goods, buying in bulks, increasing stocks and buying more work tools. There is a positive relationship between the access to capital through Microfinance and the empowerment of women micro entrepreneurs, there is a significant difference in access to capital based on business types. Age and marital status of women combined gave 4% variation in economic empowerment of respondents. Based on these findings we recommend that Women Micro entrepreneurs should embrace the services of microfinance and seek information about the product/service that will help in empowering them and should use the resources appropriately. Microfinance banks should ensure they increase their efforts/strategies to reach all women micro entrepreneurs, develop packages suitable for each type of business and personality. More adequate follow up and training/monitoring should be provided for women micro entrepreneurs and microfinance should create a warm and welcoming environment in their offices to win the women and also use friendly approaches.

Basically, non-parametric statistical tests and analysis were called out.  For clarity purpose results of data analysis were presented using statistical table percentages, charts and chi-square. Of the 100 questionnaire administered, 82 were retrieved duly completed.  These were analyzed to elicit answers to the research questions.  The questionnaires retrieved represented 71.6% retrieval rate.

TABLE OF CONTENTS

CONTENT

Front Page                                                                                                     i

Title Page                                                                                                       ii

Certification                                                                                                   iii

Dedication                                                                                                      iv

Acknowledgement                                                                                        v

Abstract                                                                                                         vii

Content                                                                                                          ix

CHAPTER ONE: INTRODUCTION

1.1       Background of the Study                                                                 1

1.1.1   Differences between Microfinance and Microcredit                    2

1.1.2   Gender Difference                                                                             5

1.1.3   The Nigerian Microfinance                                                   7

1.2       Statement of Problem                                                                      16

1.2.1   Purpose of study                                                                               16

1.2.2   Objectives of Study                                                               16

1.2.3   Significance of Study                                                                        17

1.2.4   Scope of Study                                                                                  17

1.3       Research Questions & Hypothesis                                      18

CHAPTER TWO: LITERATURE REVIEW

2.1       Microfinance                                                                         19

2.1.1   The History of Microfinance                                                            20

2.2       Providers And Models of Microfinance Inventions                      22

2.2.1   Rotating Savings and Credit Associations                          23

2.2.2   The Grameen Solidarity Group Model                                           24

2.2.3   Village Banking Models                                                                    24

2.3       Microfinance and Its Impact on Development                              25

2.3.1   The Impact of Microfinance on Poverty                                         29

2.3.2   Empowering Women                                                                        29

2.3.3   Reaching the Poor                                                                             33

2.4       Financial Sustainability versus Serving the Poor              34

2.5       Women Empowerment As Development Vehicle                         38

2.5.1   UNFPA                                                                                                40

2.5.2   CGAP                                                                                      40

2.5.3   Fostering Financial Stability                                                            41

2.5.4   Microfinance in Tanzania                                                                 45

2.5.5   Microfinance in US                                                                           45

CHAPTER THREE: RESEARCH METHOD

3.0       Introduction                                                                          56

3.1       Methodologies Used In Other Empirical Studies on

Microfinance                                                                         60

3.2       Data Analysis: Qualitative and Quantitative Analysis                  64

3.3       Impact assessment of Microfinance                                               67

3.4       Methodology Used for this Research study                                  69

CHAPTER FOUR: DISCUSSION OF FINDINGS/SIMPLIFICATION

4.1       Descriptive Analysis of Variables                                                    73

4.2       Research Questions                                                              76

4.3       Testing Of Hypotheses                                                                     78

4.4       Summary of Results                                                             82

CHAPTER FIVE: SUMMARY, RECOMMENDATIONS AND CONCLUSION

5.1       Summary                                                                                           84

5.2       Conclusion                                                                                         90

5.3       Recommendation & Suggestion                                                     91

References                                                                                         94

Appendix                                                                                101

CHAPTER ONE

INTRODUCTION

1.1      Background of the Study

Microfinance refers to the provision of financial services to low-income clients, including the self-employed. The term also refers to the practice of sustainably delivering those services. More broadly, it refers to a movement that envisions "a world in which as many poor and near-poor households as possible have permanent access to an appropriate range of high quality financial services, including not just credit but also savings, insurance, and fund transfers". Microfinance encompasses any financial service used by poor people, including those they access to in the informal economy, such as loans from a village moneylender. In practice however, the term is usually only used to refer to institutions and enterprises whose goals include both profitability and reducing the poverty of their clients.

Micro financial services are needed everywhere, including the developed world. However, in developed economies intense competition within the financial sector, combined with a diverse mix of different types of financial institutions with different missions, ensures that most people have access to some financial services. Efforts to transfer microfinance innovations such as solidarity lending from developing countries to developed ones have met with little success.

Microfinance can also be distinguished from charity. It is better to provide grants to families who are destitute, or so poor they are unlikely to be able to generate the cash flow required to repay a loan. This situation can occur for example, in war zone or microfinance means providing very poor families with very small loans (microcredit) to help them engage in productive activities or grow their tiny businesses. Over time, microfinance has come to include a broader range of services (credit, savings, insurance, etc.) as we have come to realize that the poor and the very poor who lack access to traditional formal financial institutions require a variety of financial products.

1.1.1    DIFFERENCES BETWEEN MICROFINANCE AND MICROCREDIT

Microcredit came to prominence in the 1980s, although early experiments date back 30 years in Bangladesh, Brazil and a few other countries. The important difference of microcredit was that it avoided the pitfalls of an earlier generation of targeted development lending, by insisting on repayment, by charging interest rates that could cover the costs of credit delivery, and by focusing on client groups whose alternative source of credit was the informal sector. Emphasis shifted from rapid disbursement of subsidized loans to prop up targeted sectors towards the building up of local, sustainable institutions to serve the poor. Microcredit has largely been a private (non-profit) sector initiative that avoided becoming overtly political, and as a consequence, has outperformed virtually all other forms of development lending.

Traditionally, microfinance was focused on providing a very standardized credit product. The poor, just like anyone else, need a diverse range of financial instruments to be able to build assets, stabilize consumption and protect themselves against risks. Thus, we see a broadening of the concept of microfinance--our current challenge is to find efficient and reliable ways of providing a richer menu of microfinance products after a natural disaster.

Microfinance refers to loans, savings, insurance, transfer services and other financial products targeted at low-income clients. Microcredit refers to a small loan to a client made by a bank or other institution. Microcredit can be offered, often without collateral, to an individual or through group lending.

Microcredit is the extension of very small loans (microloans) to the unemployed, to poor entrepreneurs and to others living in poverty who are not considered bankable. These individuals lack collateral, steady employment and a verifiable credit history and therefore cannot meet even the most minimal qualifications to gain access to traditional credit. Microcredit is a part of microfinance, which is the provision of a wider range of financial services to the very poor.

Microcredit is a financial innovation which originated in Bangladesh where it has successfully enabled extremely impoverished people to engage in self-employment projects that allow them to generate an income and, in many cases, begin to build wealth and exit poverty. Due to the success of microcredit, many in the traditional banking industry have begun to realize that these microcredit borrowers should more correctly be categorized as pre­-bankable; thus, microcredit is increasingly gaining credibility in the mainstream finance industry and many traditional large finance organizations are contemplating microcredit projects as a source of future growth. Although almost everyone in larger development organizations discounted the likelihood of success of microcredit when it was begun in its modern incarnation as pilot projects with ACCION and Muhammad Yunus in the mid- 1970s, the United Nations declared 2005 the International Year of Microcredit.

ENTREPRENEUR

An entrepreneur is a person who has possession over a new company, enterprise, or venture, and assumes significant accountability for the inherent risks and the outcome. The term is a loanword from French and was first defined by the Irish economist Richard Cantillon. A female entrepreneur is sometimes known as an entrepreneuse. However, with the word "entrepreneuse" being the French feminine form of entrepreneur, its usage in English in delineating sexes detracts from the meaning of the word "entrepreneur". Entrepreneur in English is a term applied to the type of personality who is willing to take upon herself or himself a new venture or enterprise and accepts full responsibility for the outcome.

MICRO-ENTREPRENEUR

Micro entrepreneurs are the owners of small businesses that have fewer than five employees. Examples of micro entrepreneurs are owners of bakeries, beauty parlours, child care facilities, repair shops, arts and crafts shops, painting businesses, contracting businesses, family-owned shops, auto body shops, small-scale restaurants, and small-inventory trading businesses.

1.1.2  GENDER DIFFERENCE

This is a distinction of biological and/or physiological characteristics typically associated with either males or females of a species in general. In the study of humans, socio-political issues arise in classifying whether a sex difference results from the biology of gender. This article focuses on quantitative differences which are based on a gradient and involve different averages. For example, men are taller than women on average, but an individual woman may be taller than an individual man.

INTERGENERA TIONAL GENDER GAPS

The differences in the work patterns of men and women, and the 'invisibility' of work that is not included in national accounts, lead to lower entitlements to women than to men. Women's lower access to resources and the lack of attention to gender in macroeconomic policy adds to the inequity, which, in turn, perpetuates gender gaps. For example, when girls reach adolescence they are typically expected to spend more time in household activities, while boys spend more time on farm or wage work. By the time girls and boys become adults, females generally work longer hours than males, have less experience in the labour force, earn less income and have less leisure, recreation or rest time.

This has implications for investments in the next generation. If parents view daughters as less likely to take paid work or earn market wages, they may be less inclined to invest in their education, women's fastest route out of poverty.

WOMEN AND ECONOMIC EMPOWERMENT

Pioneering microfinance institutions (MFls) have already recognized that the twin goals of empowering women and developing poor communities are closely connected. The Nobel Prize-winning Grameen Bank, for example, gives around 96 percent of its micro-loans to women, while the UN estimates that around 76 percent of all microfinance clients globally are women.

"There are two different ways to look at this: one is that microfinance is good for women; the other is that women are good for microfinance," says Susy Cheston of Opportunity International, a US-based organization that gives around 86 percent of its micro-credit loans to women. "There are lots of different reasons that people lend to women. For some, it's about having customers that are very credit-worthy and bring better value to the institution

WOMEN EMPOWERMENT AS DEVELOPMENT VEHICLE

Wise business or household investments can increase a woman's status in communities where women otherwise seldom assume the role of owner, employer or decision-maker. Financial empowerment has, in many cases, helped women acquire more self-esteem, more respect within their families, and has even linked to decreases in domestic violence. Empowered women also have a positive impact on their communities, and are considered to be more responsive to the long-term needs of their households than men.

WOMEN'S WORK AND ECONOMIC EMPOWERMENT

In subsistence economies, women spend much of the day performing tasks to maintain the household, such as carrying water and collecting fuel wood. In many countries women are also responsible for agricultural production and market work. Often they take on paid work or entrepreneurial enterprises as well. Unpaid domestic work - from food preparation to caregiving - directly affects the health and overall wellbeing and quality of life of children and other household members. The need for women's unpaid labour often increases with economic shocks, such as those associated with the HIV/AIDS pandemic or economic restructuring. Yet women's voices and lived experiences - whether as workers (paid and unpaid), citizens, or consumers ­are still largely missing from debates on finance and development. Poor women do more unpaid work, work longer hours and may accept degrading working conditions during times of crisis, just to ensure that their families survive.

1.1.3  THE NIGERIAN MICROFINANCE

There have been different operators in the Microfinance Industry in Nigeria; NGO- MFI, Community Banks, Microfinance Banks, Development Financial Institutions, Informal Financial Institutions/Cooperative Societies. There are numerous financial and semi- financial institutions during the past centuries. Nigerian Government used different means to boost financial services for the MSME market, despite modest success during the 1960s and the 1970s another initiative was launched, thus we have the introduction of the community bank, Community banks were licensed in 1992 and supervised by the CBN, who also made some changes in the community bank regulatory framework. In 2000 Community bank were recognised not be functional and achieving it purpose. Therefore in 2005 the new Microfinance policy was implemented, it replaces the Community bank scheme and it requires that; all Community Banks would have transformed to Microfinance banks by 31^st Dec 2007.

NGO-MFI

§  1st NGO to provide Microcredit was registered from the early 1980's

§  Few operators have reached a considerable scale: COWAN, FADU, LAPO and DEC

§  Loan portfolio are insignificants in absolute value

§  Low average loan amount i.e., provide loan to the poorest

§  Enable to develop the MSME customers on a long term

§  Most NGOs provide loan to women

§  Grameen based group lending methodology

Community Banks

§  In Jan 2007, 750 Community Banks were listed & located in rural areas

§  All Community Banks were transformed in MFB by 31/1212007

§  In Jan 2007,300 were transformed and 100 in process

§  Not all of them will fulfil capital requirements of: -

N 20 million/branch for a unit license

N 1 billion for a state license

§  In the year 2003, 57% of the Community Bank's portfolio were in arrears.

§  A large part of lending activity is for salary individuals

Microfinance Banks

§  Introduced at the end of 2005

§  In Jan 2007,37 fully licensed MFBs of which 15 are in Lagos

§  In general most MFBs have more deposit than lending clients

§  MFBs are still experimenting both: Individual and group models

Microfinance Banks: Products ranges and conditions

Loans

The MFI use the Grameen model of small groups of 10 in contrast to NGO large group

Payback- 30 - 90 days maturity (which vary a times), payment can be made daily or weekly

Credit Collateral used by Microfinance Banks

Due to low degree of registered fixed assets of the target, MFB use alternative sources; Chattel, Inventory, Postdated cheques, shares and Guarantor

Debt Recovery Agent

There are times when Microfinance banks have to engage the services of agents to recover loans from customers who are unwilling to pay and these agents charge the bank a certain percentage of the loan.

In Lagos State the Governor has inaugurated Board of Trustees for the State Micro Finance Institutions, this was done on Monday 12th May 2008 with the aim of building a new Lagos, creating jobs, encourage entrepreneurial mentality, reduce poverty level and raise the standard of living of the people. The board is to provide corporate governance and manage the Lagos State Microfinance fund, attract people oriented development projects, implement and coordinate Microfinance programme.

1.1.4 Table showing some of the Microfinance banks in Nigeria, products, customer service package.

Key

K= Thousand

P.A = per annum

N5 per Mille = N5 per N1000

1.2      STATEMENT OF PROBLEM

Is Microfinance a means to economically empower women Micro- entrepreneur? Most women Micro- entrepreneur are still living below the poverty level and does not even earn enough to feed and take care of themselves and their family, This study is to actually look for way forward  in helping Women Micro-entrepreneur, in making them become stable financially, improve their businesses and expand and also be viable. The study is show if Micro finance can achieve this or if it has already made a success out of the Women- Micro-entrepreneur.

1.2.1  PURPOSE OF STUDY

It has shown from studies that the purpose of Microfinance is to alleviate the suffering of the poor and the less privileged ones, and overtime there has been an imbalance in the financial capability of Women versus men in most countries and even Nigeria is not left out, This study is designed to determine how or if Microfinance has actually helped empowered Women economically i.e. has contributed to the financial/monetary (growth) achievement and status i.e. social status of women & if Women are actually benefiting from the new Microfinance Revolution in Lagos.

1.2.2 OBJECTIVES OF STUDY

To find out the following:

1.     What services/products Microfinance Offers?

2.     How accessible the products/services are to women micro entrepreneurs

3.     The impact Microfinance has made in empowering women micro entrepreneurs.

4.     The various business types of the women micro entrepreneurs

5.     The level of awareness of women micro entrepreneurs about the services of MFI

6.     The incomes, business capacity and how they are doing economically

7.     If they have easy access to loan and if there is a difference in accessibility based on age, business type and marital status.

1.2.3  SIGNIFICANCE OF STUDY

This study is to help discover if there is need for more work to be done to economically empower women, though a lot of programmes have been put in place by the government in the public sector and still majority are not benefiting from it, so coupled with the private sector initiative of Micro financing individuals who are interested and ready to be empowered, there should be a positive result or progression. Also in the course of this study awareness is being made about the existence of Microfinance and the general services being rendered; insurance, microcredit, deposit etc and women are re­oriented about the fact that Microfinance is real and out to help them while meeting their objectives of profit as well (i.e. everybody is out to take advantage of them or their ignorance.

1.2.4  SCOPE OF STUDY

The study covers Lagos state and is narrowed down to Ikeja LGA of Lagos. The Women Micro-entrepreneur being considered are Traders, Hairdressers and Fashion Designers. These are people with small capital base. Microfinance banks are mostly located in Ikeja so the population of people in Ikeja are aware of the existence and services of Microfinance Bank unlike in other part of Lagos State. Ikeja is wide part of Lagos State which is inhabited by various social classes of people; low class, middle class, high class etc.

1.3     RESEARCH QUESTIONS

1.               Can Women Micro entrepreneur be economically empowered

2.               Will Microfinance improve women's business capacity

HYPOTHESIS 1.

H₁        There is a relationship between the access to capital through Microfinance and the empowerment of women micro entrepreneurs.

H_o         There is no relationship between the access to capital through Microfinance and the empowerment of women micro entrepreneurs.

HYPOTHESIS 2

H₁          There is difference in access to capital on the basis of business type.

H_o         There is no difference in access to capital on the basis of business type.

HYPOTHESIS 3

H₁          There is a combined contribution of age and marital status to the empowerment of women micro entrepreneurs.

H_o         There is no combined contribution of age and marital status to the empowerment of women micro entrepreneurs.