Microfinance banks are banks that provide banking or financial services
other than services provided by commercial banks targeted at people living in
the rural dwellers. Microfinance banks have able to improve the banking habit
of the rural dwellers I,e the degree at which the rural dwellers make use of
banking service or patronize banks. In view of even economic development,
microfinance banks have played a great role by providing banking and financial
services to peasant low income earners, rural dwellers, and small scale
TABLE OF CONTENT
Title page i
1.1 Background of the study
1.2 Statement of the problem
1.3 objective of the study
1.4 Statement of hypothesis
1.5 Scope of the study
1.6 Limitation of the study
1.7 Significance of the study
1.8 Organization of the study
1.9 Definition of terms.
2.1 Historical background of micro finance
2.2 Objectives of Micro-Finance Banks in Nigeria
2.3 Operation of Micro-Finance Banks in Nigeria
2.4 Problems of Micro-Finance Banks in Nigeria
2.5 The impact of Micro-Finance Banks in
Development in Nigeria.
3.0 Research methodology
3.1 Restatement of hypothesis
3.2 Research Design
3.3 Description of the study population
3.4 Sample design and procedure
3.5 Sample size
3.6 Data collection instrument
3.7 Method of data collection
3.8 Method of data analysis
4.0 Data analysis and interpretation
4.1 Area of study brief history of ospoly
micro finance bank limited branch
4.2 Presentation and analysis of data
according to hypothesis
4.3 Interpretation of findings / results
5.0 Summary, Conclusion, Recommendation and
Micro finance has evolved as an economic development approach intended to
benefit low income women and men. The term refers to the provision of financial
services to low – income earners, including the self – employed. Financial services
generally include savings and credit; however, some microfinance organizations
also provide insurance and payment service. In addition to financial
intermediation, many MFIs provide social intermediation services such as group
formation, development of self confidence, and training in financial literacy
and management capabilities among members of a group. Thus the definition of
microfinance often includes both financial intermediation and social intermediation.
Microfinance is not simply banking, it is a development tool.
Micro finance activities usually involve:
Small loans, typically for working capital.
Informal appraisal of borrowers and investments.
Collateral substitutes, such as group guarantees or
Access to repeat and longer loans, based on repayment performance
Streamlined loan disbursement and monitoring
Secure savings products
Although some MFIs provide enterprise development services, such as
skills training and health care, these are not generally included in the definition
of micro finance.
MFIs can be non governmental organizations (NGOs) savings and loan cooperation’s,
credit unions, government banks, commercial banks, or non bank financial institutions.
Micro finance clients are typically self employed low income entrepreneurs in
both urban and rural areas. Clients are often traders, street vendors, small
farmers, service providers (hairdressers, rickshaw drivers) and artisans and small
procedures, such as blacksmiths and seamstress. Usually their activities
provide a stable source of income (often from more than one activity). Although
they are poor, they are generally not considered to be the poorest of the poor”.
Money lenders and relating savings and credit associations are informal
microfinance providers and important sources of financial intermediation.
OF THE STUDY
Microfinance in the 1980s as a response to doubts and research findings
about state delivery of subsidized credit to poor farmers. In the 1970s government
agencies were the predominant methods of providing productive credit to those
with no previous access to credit facilities people who had lien forced to pay
usurious interest rates or were subject to ransacking behaviour. Governments and
international donors assumed that the poor required cheap credit and saw this
as a way of promoting agricultural production by small landholders. In addition
to providing subsidized agricultural credit, donors set up credit unions
inspired by the Raiffeisen model developed in Germany in 1864. The focus of these
cooperative financial institutions was mostly on savings mobilization in rural
areas in a attempt to “teach poor farmers how to save”.
Beginning in the mid 1980s the subsidized targeted credit model supported
by many donors was the object of steady criticism, because most programs accumulated
to continue operating. It became more and more evident that market based solutions
were required. This led to new approach that considered microfinance as an
integral part of the overall financial system. Emphasis shifted from the rapid
disbursement of subsidized loans to target populations toward the building up
of local, sustainable institutions to serve the poor.
At the same time, local NGOs began to look for a more long – term
approach than the unsustainable income generation approaches to community development.
In Asia Dr.
Mohammed Yunus of Sangladsh led the way with a pilot group lending scheme for
kindles people. This later became the Grameen Bank, which now serves more than
24 million clients (94 percent of them women) and is a model for many countries.
In Latin America ACCION international supported the development of solidarity group
lending to urban vendors, and foundation Carvajal developed a successful credit
and training system for individual micro entrepreneurs.
Changes were also occurring in the formal financial sector. Bank Rakyat Indonesia, a
owned, rural bank, moved away from providing subsidized credit and took an
institutional approach that operated on market principles. In particular, Bank Rakyat
developed a transparent set of incentives for its borrowers (small farmers) and
staff, rewarding on – time loan repayment and relying on voluntary savings
mobilization as a sense of funds.
Since the 1980s the field of microfinance has grown substantially. Donors
actually support and encourage micro – finance activities substantial out reach
and financial services only, whereas as the 1980s and mush of the 1980s were characterized
by an integrated package of credit and training which required subsides. Most
recently micro finance NGOs. (Including PRODEM / Bancosol in Boliva, k – Rep in
Kenya, and ADEKMI/Banco ADENI in the Dominican Republic) have begin
transforming into formal financial institutions that recognize the need to provide
savings services to their clients and to access market funding services, rather
than rely on donor funds. This recognition of the current “Financial systems” approaches
to microfinance. This approach is characterized by the following beliefs:
subsidized credit undermines development
Poor people can play interest rates high enough to
cover transaction costs and the consequences of the imperfect information
markets in which lenders operate.
The goal of sustainability (cost recovery and
eventually profit) is the key not only to institutional permanence in lending.
But also to making the lending institution more focused and efficient.
Because loan sizes to poor are small, MFIs must achieve
sufficient scale if they are to become sustainable.
Measurable enterprise growth, as well as impacts on
poverty, cannot be demonstrated easily or accurately outreach and repayment
rates can be proxies for impact. One of the main assumptions in the above view
is that many poor people activity want productive credit and that they can absorb
and use it. But as the field of micro finance has evolved, research has increasingly
found that in many situation poor people want secure savings facilities and
consumption loans just as much as productive credit and in some cases instead
of productive credit. MFIs are beginning to respond to these demands by proving
voluntary savings services and other types of loans.
OF THE PROBLEM
The major problem necessitating the study operated from the Central Bank
laws, regulation, supervision and central placed over the activities of micro
finance banks are:
These relive the micro finance and every micro finance bank
is excepted with respect to their proper books of account and it must be submitted
to the National Board not later than 28 days.
Another problem can be seen its books and affairs
because it is a fully fledged banks, it books and affairs are subject to continuous
examinations by Central Bank working through natural board for micro finance banks.
Equally, not later than for months after end of its
financial year, each micro finance bank must submit to the National Board and
exhibit prominently to the view of all members of the micro finance banks
balance sheet and profit and loss account.
The objective of this study is to critically examine the impact of micro
– finance banks in rural development in Nigeria, in order to pose the
strengthen of the micro finance bank capital base, increase their branch
network both locally and offshore.
The study further gave the micro finance banks to invest in state of the
art information technology and working capital i.e (having adequate working and
sufficient liquidity to meet its immediate and foreseeable obligation and funding
is no relationship between microfinance Banks service and the rural
is relationship between microfinance Banks service and the rural
bank does not enhance the development of the rural areas.
bank enhance the development of the rural areas.
banking does not enhance the development of banking habit of rural areas.
banking enhances the development of banking habit of rural areas.
OF THE STUDY
This research is centered on the impact of microfinance banks in rural development
Osun state polytechnic microfinance banks is used as a case study for the
purpose of the research work.
OF THE STUDY
In the course of this research work the researcher encounter a lot of
problem, which have all contributed enormously to the quality of the
information that found and used in the study.
The following limitation are considered as the major constraints to this research
work i.e non availability of sufficient past work on the study particularly
textbook on the impact of Microfinance Bank in rural Development in Nigeria.
The availability of such past work will contribute to the quality and quantity
of the information that will be deriving to work on the subject.
Finally, time and financial constraints also hindered the research
covering more number of micro-finance banks in Nigeria
OF THE STUDY
The study has revealed the important and the impact of microfinance banks
on the rural areas. Most especially the contribution of Osun state polytechnic
microfinance banks on the development of the banking habits of people in its
The result of the study will be useful to the following:
Government: The result will be useful to the three
tiers of government as well as the three arms of government in formulating
their respective policies as touching the monetary and economic policies.
Communities: local communities (towns and villages)
will fund the result of the project useful in the area of determination and
creation of small scale community based employment opportunities for the rural
Individuals and corporate bodies: This set of people
will find the result of the project useful in the area of mobilization of
credit for smooth ruining of their businesses in the case of corporate bodies
and in the area of building savings for self actualization.
OF THE STUDY
Chapter one of this project deals on the round of the study, statement of
the problem, objective of the study, statement of hypothesis, scope of the
study, limitation of the study, significance of the study and definition of the
Chapter two talk about review of related literature, historical
background of micro-finance Banks, objectives of micro-finance Banks in Nigeria,
operation of Microfinance Banks in Nigeria, problems of Micro-finance
Banks in Nigeria,
the impact of Micro-finance Banks in Nigeria Development in Nigeria.
Chapter three reveals restatement of hypothesis, Research design, Description
of the study population, Sample design and procedure, Data collection instrument,
Method of data collection and method of data analysis.
Chapter four focus on area of study brief history of ospoly Micro-finance
Bank limited, presentation and analysis of data according to hypothesis and
interpretation of findings / results.
Chapter five expiations much on summary, conclusion, recommendation,
references and appendix
to Joanna Ledgerwood (2000) in his book AN INSTITUTIONAL PERSPECTIVE MICRO-FINANCE
as a financial institution establishment to cater for the savings and credit
needs of small scale producers throughout the country.
to Joanna Ledgerwood (1999) in his book AN INSTITUTIONAL AND FINANCIAL PERSPECTIVE
MINIMUM capital requirements are set for all organizations entering the
financial sector. This means that financial organizations wanting to formalize
must have a minimum amount of capital to support their activities (stated as a
currency amount rather than as a percentage of assets).
O.A Ajayi (2005) in his book STRATEGIC MANAGEMENT capital refers to the amount
of equity an institution holds.
O.A Ajayi (2005) in his book STRATEGIC MANAGEMENT capital adequacy as a
situation were adjusted is sufficient to absorb all losses as fixed assets of the bank leaving a
comfortable surplus for the current operation and future expansion.
Ledgewood (2002) in his book AN INSTITUTIONAL AND FINANCIAL PERSPECTIVE liquidity
requirements: refers to the amount of available cash (or near cash) relate to
the MTIs demand for cash.
Ledgerwood (2000) in his book AN INSTITUTIONAL AND FINANCIAL PERSPECTIVE ASSET
quality: represents the role to earnings derived from made by the organization.
O. Omotoso (2007) in his book INVESTMENT ANALYSIS portfolio: as a combination
or collection of investments, through the diversifying of holdings and owning
of several stocks instead of owning a single stock.