Abstract
This project
is aimed at determining the problems and prospect of microfinance banking in
Nigeria taking Uchi Microfinance Bank, Auchi as a focal point. Its basic
objective is to know the problems and prospects of setting up a bank in rural
areas and also to know how the microfinance bank can mobilize savings from
rural dwellers. The major problem of the microfinance bank is shortage of funds
and inability to honour sight cheques. The work conducted also used
questionnaire to gather data from respondents to elicit their response on the
problems and prospects of Uchi Microfinance Bank, Auchi. In conclusion,
Microfinance Banks are set up to serve the rural farmers, businessmen and women
engaged in various trades and also they are not expected to have branches in
the same place. The directors and managers of microfinance bank should show
were exemplary leadership which in turn will in still much confidence in the
microfinance banking system.
TABLE OF CONTENTS
Title
Page i
Certification
ii
Dedication
iii
Acknowledgements
iv
Abstract
vi
Table
of Contents vii
Chapter One:
Introduction 1
1.1
Background to the Study 1
1.2
Statement of the Problems 2
1.3
Objectives of the Study 3
1.4
Significance of the Study 4
1.5
Scope and Limitation of the Study 5
1.6
Definition of Terms 5
Chapter
Two: Review of Related
Literature 8
2.1
Introduction 8
2.2
Functions of Microfinance Bank 11
2.3
Objectives of Microfinance Bank 13
2.4
Management Structure for Microfinance
Banks in Nigeria 14
2.5
Banking Relationship between
Microfinance
Bank and Commercial Bank of Nigeria 19
2.6
The Role of Central Bank of Nigeria 20
2.7
Problems and Prospects of Uchi
Microfinance Bank 21
2.8
Summary 26
Chapter
Three: Research Method and Design 29
3.1
Introduction 29
3.2
Research Design 31
3.3
Sampling Selection Procedure 31
3.4
Questionnaire Design 32
3.5
Data Collection Method and Analysis 32
3.6
Summary 33
Chapter
Four: Data Presentation, Analysis
and
Interpretation 34
4.1 Introduction 34
4.2 Data Presentation 34
4.3 Data Analysis 41
4.4 Hypothesis Testing 45
4.5 Summary of Findings 47
Chapter
Five: Summary of Findings, Conclusion
and
Recommendations 49
5.1
Summary 49
5.2
Conclusion 50
5.3
Recommendations 51
References 54
Appendix 55
Questionnaire
56
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The search for the establishment of Uchi
Community Bank now known as the Uchi Microfinance Bank started in February 1993
through which the Otaru-in-Council and other important dignitaries in Auchi.
After much work have been the
requirement of the National Board of Community Banks were meet and the bank was
to be established with an initial capital of N2,000,000 only. On the 1st
June, 1995 and it was later converted to Microfinance Bank in the name of Auchi
Microfinance Bank Ltd, Auchi in December, 2008.
The bank was established for the sole
purpose of bringing banks to the grassroot level and for the rural dwellers to
be able to meet up with certain duties that should be carried out in terms of
business.
The Microfinance Bank Auchi provides
money for the rural dwellers for agricultural practice and also for commerce
and industry or trading business in Auchi from time immemorial they have been
engaged in some form of informal but viable and functional local credit
mobilization system. These system serve their purpose very well various names
given to these informal credit scheme are “adashi isusu, drift collection etc.
This system of saving could not help
them in terms of giving out credit loans, safe keeping of valuables and given
advice to customers on investment matters. All these brought about the
establishment of Uchi Microfinance Bank, Auchi so as to bring banking system to
the rural dwellers. And they operate various account such as savings, current
and fixed deposit account.
1.2 Statement of Problems
i.
Are Microfinance Banks meeting the
credit need of rural dwellers?
ii.
Are they sufficiently capitalized?
iii.
What are the difficulties normally
encountered by rural dwellers when they ask for facility?
iv.
Are Microfinance Banks impacting the
economy of their host community?
v.
What are the constraint of Microfinance
Bank in the performance of their duties?
1.3 Objectives of the Study
The objective of this study is to know
the following:
i.
Know the problem and prospect of setting
up a bank in rural areas.
ii.
Know how rural banking have been able to
meet the need of the people through their lending policies to finance project
such as agriculture, small scale industries etc.
iii.
Know how the role of rural banking is
playing in the achievement of economic development of the country.
iv.
Know how the Microfinance Bank can
mobilize saving from rural dwellers.
1.4 Significance of the Study
This study will serve as a means of
appraising the Microfinance Banking scheme in order to determine if the aims
and objectives of the setting up the Microfinance Bank are met or not. This
work will serve as a means of creating the much needed awareness of the
intention of establishing a rural bank through their function. This work will
serve as a remainder to other financial institution of the need to extend their
activities to the rural areas rather than concentrating only in urban centres.
To enhance the researcher’s knowledge
about the problem facing Microfinance Banks in Nigeria.
1.5 Scope and Limitation of the Study
This study is limited to Microfinance
Banks with special reference to Auchi Microfinance Bank. This study is intended
to examine the problem and prospect of Auchi Microfinance Bank. The bank is
located at No. 40 Otaru Road, Opposite Universal Store, Auchi, Edo State.
As usual the most research works of
these nature problem encountered include bureaucratic bottlenecks,
unwillingness of bank official to grant me audience, unwillingness of the bank
manager to divulge certain information which are personal to the bank. Also in
adequate textbook, journals on the subject “Microfinance Banking” as a problem.
1.6 Statement of Hypothesis
Ho: Uchi Microfinance Bank
cannot meet the credit needs of its customers.
Hi: Uchi Microfinance Bank
meet the credit needs of its customers.
1.7 Definition of Terms
It is important to express some of the
term used in the work in a more simplified manner to avoid ambiguity and ease
understanding.
Advance
A general name used for all types of
credit facilities provided by the bank to its customers.
Cheque
Section 73 of the Bill of Exchange Act
1882 defines a cheque as a bill of exchange draw on a banker payable on demand.
Microfinance
Bank
This is a financial institution
established to cater for the saving and credit need of smalls scale producer,
bankers, farmers etc throughout the country.
Bank
Distress
This is a phenomena which involves poor
liquidity, poor earning and gross inability to meet payment and maturity
obligation of deposit when hey fall due.
Drawee
This is a party authorized to payout the
money (banker).
Loan
A loan is an advance given to a customer
faced repayment period and interest rate are specified at the beginning.
Payee
This is the party to whom money should
be paid.
Rural
Bank
As the name implies is a bank carrying
out its activities in the rural areas.
Rural
Dwellers
Group of persons staying in the rural
areas.
Collateral
It is an item of tangible nature which
the bank may as for on which the borrower will obtain.
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