ABSTRACT
The study on the roles of micro finance institutions (MFI)
in Kaduna metropolis, base on a survey of five MFIs Yamans's sampling technique
was used to determine the sample size in this research work. Primary data was
gathered through the administration of questionnaires. In testing the various
hypotheses, the chi-square method was used. The findings indicated that there
is inadequate knowledge on the part of small scale entrepreneurs on improved
lending conditions of MFIs, clients' apathy and the number of beneficiaries
seems to be small. The recommendation given in the study include: information
dissemination and Involvement of clients, proper documentation of records to
meet the diverse loan requirements of clients and proper documentation of
records by the Kaduna state ministry of commerce and Industry.
TABLE OF CONTENT
Title page
TABLE OF CONTENT
ABSTRACT
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
1.2 STATEMENT OF THE PROBLEM
1.3 RESEARCH QUESTIONS
1.4 HYPOTHESES OF THE STUDY
1.5 OBJECTIVE5 OF THE STUDY
1.6 SIGNIFICANCE OF THE STUDY
1.7 SCOPE AND LIMITATIONS OF
THE STUDY
CHAPTER TWO
LITERATURE REVIEW
2.1 INTRODUCTION
2.2 THE CONCEPT OF MICROFINANCE
2.3 THE IMPORTANCE OF MICROFINANCE
2.4 OVERVIEW OF MICROFINANCE ACTIVITIES IN NIGERIA
2.5 PARTICIPATING INSTITUTIONS IN MICROFINANCE ACTIVITIES IN
NIGERIA
2.5.3 NON-GOVEIINMENTAL
ORGANIZATION
2.5.4 PUBLIC SECTOR POVERTY ALLEVIATION AGENCIES
2.5.5 SPECIAL MICROFINANCE SCHEMES
2.5.5.1 Donor Agencies
2.6 MICROFMANCE MODELS
2.6.1 The Informal Model
2.6.1.2 Non Government
Organizations (NGO)
2.6.1.3 ESUSU:
2.6.2 The Formal Model
2.6.2.1 The Linkage Model
2.6.2.2 Donor Model
2.7 THE MICROFINANCE POLICY
2.8 THE ROLE OF SMALL SCALE BUSINESS
2.9 CHALLENGES OF MICROFINANCE
2.10 A BRIEF ACCOUNT OF KADUNA, THE AREA UNDER STUDY
2.11 SOME REVIEW OF RELATED WORK ON MICROFINANCE INSTITUTION IN
NIGERIA
CHAPTER THREE
RESEARCH METHODOLOGY
3.0 INTRODUCTION
3.1 RESEARCH DESIGN
3.2 POPULATION OF THE STUDY
3.3 SAMPLE SIZE AND SAMPLING TECHNIQUES
3.4 SOURCES OF DATA
3.5 METHODS OF DATA ANALYSIS
CHAPTER FOUR
DATA PRESENTATION AND
ANALYSIS
4.0 INTRODUCTION
4.1 DATA PRESENTATION AND
ANALYSIS
4.2 TEST OF HYPOTHESES
HYPOTHESIS
HYPOTHESIS II
HYPOTHESIS III
HYPOTHESIS IV
4.3 DISCUSSION OF FINDINGS
CHAPTER FIVE
SUMMARY, CONCLUSION AND
RECOMMENDATION
5.0 INTRODUCTION
5.1 SUMMARY
5.2 CONCLUSION
5.3 RECOMMENDATIONS
BIBILOGRAPHY
APPENDIX
CHAPTER
ONE
INTRODUCTION
1.1 Background to
the Study
Studies on industrial development countries have shown that
small and medium enterprises constitute a fundamental part of the industrial
sector and play an active role and bring development to these countries. Over
the year, the Nigeria economy has been dominated by large industries which are
mostly multinational. This is obviously due to the government policies which
encouraged and emphasized the development of these large industries at the at
the expense of the small scale industries. Eventually, the Nigerian government
recognized the development of small scale industrial as an imperative
prerequisite for sustaining a well balanced industrial sector. Faust (2000)
submits that four basic interrelated inputs are required to give impetus to
their development. They included;
i.
Favorable government policies and
incentives
ii.
Technical assistance
iii.
Managerial assistance
iv.
Finance assistance
Due to the uncertainties, the lower rate of return, the
expense of administration and the mediocre expense of previous government
lending programs, Faust added, financial assistance for the small entrepreneur
has been lacking from both government and commercial source.
Consequently this heralded the institution dedicated to
assisting small enterprises, the poor and households who have access to
financial services. Institutions offering microfinance institutions are
designed financial institutions dedicated to assisting small enterprises, the
poor and households who have
The
formal/traditional micro finance institution include: the Self help Groups
(SHGS), or the rotating saving and Credit Associations (ROSCAs), and
cooperative societies, while the formal/modern Microfinance institutions
include universal banks, community Banks (Micro-MFIs), non-Government Organizations
Microfinance Institutions (NGO-MFIs), public sector poverty alleviation
agencies, special microfinance schemes and Donor Agencies. (Iganiga, 2008).
The central Bank of
Nigeria survey (2001) indicated that the operations of formal microfinance
institutions in Nigeria are relatively new, as most of them were registered
after 1981. They operate in both urban to rural areas, the roles played by
these institutions are diverse according to the scope of their operations which
vary from social to economic roles, in other words, from financial
intermediation to technical and managerial assistance.
According to Anyawu
(2004), the bulk of credit beneficiaries were women, as most of the
microfinance institutions began as NGO that had the promotion of female welfare
as the basis for their establishment. Apart from the general belief that women
are marginalized in terms of economic opportunities and should therefore have
separate promotional agenda, the MFIs are of the view that women perform better
than men in managing meager resources and promoting micro enterprises.
Over the years,
microfinance has emerged as an effective strategy for poverty reduction. Across
developing countries, micro, small and medium enterprises are tuning to
microfinance institutions (MFIS) for an array of financial services.
Microfinance is acknowledged as one of the prime strategies to achieve the
millennium development goals (Ehigiamusoe, 2005).
However,
institutions and programs put input in place for this purpose, (micro
financing) by government and individuals and group of individuals have at best
recorded limited successes in securing wide access to sustainable micro credit
as a critical instrument for growth and poverty reduction. It could be observed
One can say that the micro finance institutions have been
performing below capacity over the years but with the additional liquidity
provided by the recent banks Iganiga (2008) added, it is expected that the
micro finance policy objectives would be realized which will move the Nigerian
economy .to the attainment of the millennium development goals. This
study is aimed at
examining the roles of microfinance institutions in financing small seals
businesses.
1.2 STATEMENT
OF THE PROBLEM
A number of small scale businesses lack access to financial
services from micro finance institutions, either for credit or savings, which
further fuels the vicious cycle of poverty. Lack of access to micro finance
institutions hinders small businesses to engage in new business ventures. Small
scale business, industrialists have frequently faced discrimination from
lending institutions since they are perceived to be less credit worthy. The
challenge of microfinance institutions on the other hand, is how to efficiently
improve lending practices and at the same time cover their operating cost so as
to survive in the long run (Anyawu, 2004).
1.3 RESEARCH
QUESTIONS
In other to fulfill
the objectives of the study, the researcher attempt to answer the following
questions.
i.
To what extent have the micro
finance institutions supported the operations of small scale business?
ii.
To what extent have small scale businesses
benefited from the credit scheme designed for them?
iii.
Are the small scale businesses
making good use of their advances?
Will
this loan given by microfinance institutions improve the general performance of
the small scale business?
1.4 HYPOTHESES
OF THE STUDY
A hypothesis is a preposition that is stated in a testable
form and predicts a particular relationship between two or more variables. By
―test‖ we mean either to confirm it or to prove it wrong (Baily, 1987). The
hypotheses in this case are:
Hypothesis I
HO = microfinance Institutions do not support the operations
of small scale businesses in Kaduna metropolis.
Hypothesis II
HO = small scale businesses have not benefited from the
credit scheme designed for them by microfinance institutions Kaduna metropolis.
Hypothesis III
HO = small scale businesses are not making good use of their
advances from microfinance institutions in Kaduna metropolis.
Hypothesis IV
HO =
the loan given
out by microfinance
institutions in Kaduna
has not improved
the genera:
performance of the
small scale businesses in Kaduna state.
1.5 OBJECTIVE5
OF THE STUDY
The general objective is to examine the role of microfinance
institutions in finance small scale businesses in Kaduna metropolis. Apart from
the general objective, the research work also aimed at the following
objectives:
i.
To find out extent to which micro
finance institutions have supported the small scale business?
ii.
To find out the extent to which the small
scale businesses benefited from the credit scheme designed for them by micro
finance institutions.
iii.
To find out if the small scale
business are making good use of their advances.
iv.
To find out if the loan given by
microfinance institutions have improved the general performance of small scale
business
1.6 SIGNIFICANCE
OF THE STUDY
The relevance of the roles played by modern microfinance
institutions cannot be overlooked. When the objectives of this study are
achieved it will go a long way to create awareness among small and medium
entrepreneurs about the existence of MFIs as well as correct the perceptions of
small and medium entrepreneurs that have unfounded reservations about the
operations of the modem MFIs.
The study may provide solutions to the challenges faced by
modern MFIs in services delivery and provide a platform for the improvement of
their services which the state economy undoubtedly needs to attain the
millennium development goals.
The research may help entrepreneurs and managers understand
the major role of microfinance institutions in financing small scale businesses
as well as how to benefit from the loans given to them by these institutions.
It will also serve as a guide or reference to scholars and writers who need to
know more about microfinance role in financing small scale businesses.
1.7 SCOPE
AND LIMITATIONS OF THE STUDY
The study attempts to find out the role of microfinance
institutions in financing small scale businesses and will be limited to Kaduna
metropolis. The small scale businesses that are covered are; hair dressing
industry and agricultural industry.
In the process of carryout this research, some constraints
are identified and these include; the unwillingness of the microfinance banks
to release relevant information (facts and figures) of individual amounts of
small scale businesses.
Another major constraint is the secret nature of some of the
small scale businesses in Kaduna metropolis, in the sense that they operate
without the necessary permit and registration formalities required for their
legal existence. This in turn, tends to create suspicion from the board of
internal revenue.
Time and finance has constrained on the researcher to
perform a more thorough research. This is due to the internship program running
simultaneously as at the time the research work was done and under a time
frame.
The need to define
some of the key terms that were frequently used in this study cannot be over
looked.
i.
Microfinance
institutions (MFIs): are designated financial institutions dedicated to
assisting small enterprises, the poor, and the households who have no access to
the more institutionalizes financial systems, in mobilizing savings, and
obtaining access to financial services. (Elahi et al 2004).
ii.
Micro
finance: is defined as the provisions of very small loans (micro - credit) to
the poor, to help them engage in new productive business activities and/or to
grow/expand existing ones. (Kimotho, 2005).
iii.
Small medium
enterprises: this is an outline which requires small amount of capital and has
some reasonable number of employees. (Anderson 1998).
iv.
Microcredit
is broadly recognized as the practice of offering small, collateral - free
loans to members of cooperation's who otherwise would not have access to the
capital necessary to begin small businesses (Hossain, 2002).
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