examines the role of Microfinance bank in the development of small scale
enterprise using Afemai Microfinance Bank as a Case Study. The main objective
of this study is to ascertain if microfinance bank provide for the needs of the
people and also to examine if microfinance bank help in the provision of soft
loan to assist the small scale investors. The small scale entrepreneurs in
rural areas lack the necessary financial services, especially credit from the
commercial banks. It was discovered from the study that microfinance bank
assists in the development of small scale. The study concluded that the proportion
of overdraft granted over the period is much higher than that of loans granted.
This result from the fact that granting of overdraft facilities is more
profitable to the bank. The study however recommends amongst others that the
bank should avoid making strengthful demand on perspective borrowers in terms
of types and numbers of form to be completed, high collateral securities and
other protocols, as these hider economic developments.
TABLE OF CONTENTS
Title Page i
Table of Contents vi
Chapter One: Introduction 1
to the Study 1
of Problem 3
of the Study 4
of Hypothesis (es) 4
of the Study 5
of the Study 6
of the Study 6
of Terms 7
Chapter Two: Review of Related Literature 11
2.2 What is Microfinance? 12
2.3 Concept of Small-Scale Business 13
of Microfinance Activities in Nigeria
2.5 Need for Micro-Finance Banking in Small Scale
2.6 The Role of Micro-Finance Banking 20
2.7 Sources of Micro-Finance Fund 24
2.8 Problems of Micro-Finance Bank 26
2.9 Implication for Development Strategies 28
2.10 Micro Finance Products and Services for Small
Scale Development 32
Relationship between Microfinance Bank and Commercial Bank 36
2.12 The Rural Entrepreneur’s and their Demand for
Financial Services 38
Chapter Three: Research Method and Design 39
of Population of the Study 40
of Data Collection 41
of Data Presentation 42
of Data Analysis 42
Chapter Four: Data Presentation, Analysis and
Chapter Five: Summary of Findings, Conclusion and
5.1 Introduction 78
of Findings 78
Appendix I 84
Appendix II 85
1.1 Background to the Study
The ideal of micro-finance
banking become necessary due to the inability of the conventional banking
schemes to mobilize the dormant funds in rural area and channel them into needy
factor. Besides, small business and the rural farmers needed to inculcate
banking culture. Their idle funds needed to be mobilized for onward lending to the
productive sector hence the need for microfinance banks arose.
Much effort have been made
in the past by successive government to involve rural dwellers in Nigeria in
modern banking practice the extend credit to them in terms that are easily
attainable earlier on, in obedience to the Central Bank directive the
commercial banks opened braches in many communities.
In spite of opening of
such branches, it was not possible to make banking attractive to Rural
dwellers. This was because banking operations even in the rural braches have
continued to be complex, cumbersome and too complicated for the level of
education and enlightenment at the rural people participation therefore, was
not just possible.
In Nigeria, according to
Ezike (2001), the main objective of rural banking is to effectively mobilize
saving in the rural area and bring credit close and within the reach of the
long-credit starved farmer.
However, like the previous
schemes, aimed at small business in the rural/urban area, the rural banking
scheme has failed to accomplish its set objectives of providing for the rural
people in particular. Against the background, this study is designed to x – ray
the role of microfinance banking (Afemai Microfinance Bank) in the
socio-economic development of Nigeria with a focus on Small Scale Enterprises
in Edo State.
1.2 Statement of Problem
The banking industry is
quite a risky business and a lot of fears are being exercised in establishing
bank branches in rural areas because of inadequate security and fear incurring
losses in the course of their operations.
There is a problem
associated with the non-provision of loans to small scale businessmen/women.
The problem of rural-urban drift lack of employment opportunities,
inaccessibility of infrastructure, road, electricity, potable water, telephone
services, among other which for a long time have been denied the rural
1.3 Research Questions
1. Does microfinance bank provide for the needs of the people?
2. Does microfinance bank assist in the development of small scale?
3. Is microfinance bank a base for development of the rural
4. Does microfinance bank help in the provision of soft loan to
assist the small scale investors?
1.4 Objectives of the Study
following are the main objectives of this study;
if microfinance bank provide for the needs of the people.
if microfinance bank assist in the development of small scale.
if microfinance bank is a base for development of the rural infrastructure?
To examine if
microfinance bank help in the provision of soft loan to assist the small scale
1.5 Statement of Hypotheses
In doing this study, the researcher
has adopted the following hypothesis designed to accomplish the objective of
Ho: Microfinance bank does not provide for the needs of the people.
HI: Microfinance banks provides for the needs of the people.
Ho: Microfinance bank does not assist in the development of small scale.
HI: Microfinance bank assists in the development
of small scale.
Ho: Microfinance bank is not a base for development of the rural
HI: Microfinance bank is a base for the development of the rural
Ho: Microfinance bank does not help in the provision of soft loan to assist
the small scale investors.
HI: Microfinance banks help in the provision of soft loan to assist the
small scale investors.
1.6 Significance of the Study
service has become relevant instruments for the socio-economic development of
our rural areas. Rural Micro-finance banks occupy a pride of place like the
economic activities of the rural people.
Significantly, this study
will contribute to the existing literature for information and reference.
Also, it will enable
management of banks know the problems of rural banking and hence be able to
take effective decision about them.
The study will also serve
as a source of information for those who will embark on a similar research.
1.7 Scope of the Study
This study is limited to
the services of the microfinance bank in Nigeria with a focus on Afemai
Microfinance Bank. A time frame of 5 years (2010 – 2014) was used in executing
the survey with a sample size of 30 for effective result.
1.8 Limitations of the Study
framework is this study is limited due to time constraints and the financial
involvement in carrying out a detailed and thorough extensive work on the
impact of microfinance banking in rural development.
the greatest limitation of this work stemmed from the limited available
secondary data at the researcher’s disposal.
and low literacy level among the Nigerian public, as well as suspicious among
them greatly limited my data gathering especially during random sample
interview carried out. This low awareness and lack of orientation limited this
was the dearth of data in this field, as the library could not supply all data
needed, and even most of the books catalogued were not in the shelf, and even
if found there irrelevant and pertinent pages have been torn out, and of course
most of the books were outdated.
1.9 Definition of Terms
In this research, the
researcher made use of some technical but related terms for case of
understanding and application the following functional definition have been
Finance Bank: Bank is seen
as self sustaining finance institution, owned and managed by a community for
the purpose providing credit banking and other financial services to its member
largely on they basis self recognition and credit works.
Deposit: Money kept in a bank not to be withdrawn without
notices on which interest is payable.
Credit: A payment made to somebody on trust on the ground that such money will
be repaid as at when due.
DFRRI: The Directorate of Food, Road and Rural Infrastructure.
Rate: This can be defined as the rate at which the commercial banks lend money
to the public.
Savings: An amount or a sum of money deposited in the bank on which interest is
payable which also can be written by depositor at will.
CBN: Central banks of Nigerian.
Risk: The risk borne by a lender
that interest rate an economy will raise causing a fall in capital value of the
Statement: It is
financial information which shows the cash inflow and out of an enterprise in a
give accounting year or a reporting period but include inflow rising for change
in cash as a result of the purchasing and liquidation of cash equivalent.
Cash Flow Techniques: This is use to ensure comparability of cash flow
accruing at different times.
Bank: That part of organization risk that arise from using
capital, partly finance by capital financial risk together with business risk
made up total risk.
Risk: This is the rate of
interest pardon the nominal value of retained securities, unless the securities
have a market value capital to their nominal value the actual yield will not
equal to coupon rate.
Doubtful Debt: Portion of loan and advance granted by banks
that are considered uncollected because they are not operating to schedule.
Management: The whole system of credit control, which aims at
ensuring good quality loan asset for bank at all times.
Balance: This is the customer is total habit less value of any
security held which recoverable and the accumulated interest charges from the
time the account was classified or in bad debt category.
Risk: That part of business
organization risk which arises from it commercial activities business risk
together with financial risk makes up total risk.
The extent to which variation in the value of one
variable are associated with variation in that of another variable. For example
it is generally true that the return from any particular asset are corrected
with return from the generally.
Annuity: A series of constant cash flows receivable for a
specified number of years.
Equity: The risk
bearing portion of the long-term capital of a business organization for a
company it is the share capital and reserve.