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Chapter one


1.3 Background of the Study

The topic of sustainable development in third-world countries such as Nigeria has become a major concern for both the government and the corporate sector. The government’s significant investment in this platform over the years has delivered no noteworthy results.

Poverty is a trait of Nigerian homes and individuals. In recent years, it has become clear that the government’s ability to encourage development on its own has limitations.

Most of the conventional functions performed by governments in most countries, such as economic development, are becoming increasingly difficult to achieve.

Nigeria has its own administration, corruption, infrastructure decay, insecurity of life and property, an unstable macroeconomic framework, and uncertain fiscal policies under successive administrations (Fasug, 2006).

As a result, both the public and private sectors of the economy, as well as every component of the country’s population, are involved. On this basis, the government begins to pursue privatisation policy in order to allow the private sector to participate in the nation’s economic development, resulting in numerous government processes affecting the country’s economy.

One way to address development difficulties in poor nations is to foster entrepreneurial development. Nigeria had taken a bolder step by incorporating entrepreneur studies into the academic curriculum of its school system.

The belief behind such policies is that they will instill an entrepreneurial spirit in individuals, preparing them to create wealth through small businesses (Fasua, 2006).

A small-scale firm is critical to the development, a

Of a country’s economy, particularly those like Nigeria. Entrepreneurship is essential for national development, poverty eradication, and overall employment. It is the foundation of any nation’s industrialization.

Several studies have been conducted to assess the influence of microfinance on entrepreneurial development. Indeed, academic interest in the influence of microfinance on entrepreneurial development is demonstrated by the fact that some academic publications have dedicated special issues to studies proving this link.

According to Amin, Rai, and Topa (2003), the article focuses on microfinance’s potential to reach the poor and vulnerable. They target their writing in this manner due to worries that microfinance mainly serves persons who are marginally below or above the poverty line, while the truly poor and desperate are systematically excluded.

Thus, the topic of whether microfinance enhances or degrades entrepreneurial growth remains worthy of additional investigation, such as the one being conducted in this study.

1.4 Statement of the Problem

Microfinance helps countries around the world develop by providing loans to low-income earners. Copestake, Halotra, and Johnson (2001) examine the influence of microfinance on enterprises and individual well-being.

Copestake at all focus on company performance and household income to build a link between the availability of time, it appeared that microfinance does not finance the poor and business clients. The research proceeded to investigate the problems of this study, which are:

ü Inability to foster the growth of new business.

ü Inability to help current businesses grow or diversify their activities.

ü Low employment rate.

ü Failure to provide job and income possibilities through the establishment and expansion of microenterprises.

ü Failure to improve the production and income of vulnerable groups, particularly the poor.

ü High level of poverty

ü Economic dependency on other countries.


The central bank of Nigeria adopted microfinance as the primary source of funding for entrepreneurs in Nigeria due to its goal of promoting entrepreneurial development.

Despite this, financing is still viewed as a major impediment to business development in Nigeria. While the government and non-governmental organisations (NGOs) have engaged in a number of initiatives throughout the county. The precise aims of this study are:

i. Assess the significance of entrepreneurial activities for the long-term development of entrepreneurship in Nigeria.

ii. Investigate the effects of microfinance institutions on entrepreneurship.

iii. Investigate the difficulties of finance availability for the growth of entrepreneurship in Nigeria.

iv. Raise awareness of the relevance of microfinance institutions in entrepreneurial growth in Nigeria.


To attain the above-stated objectives, the following research questions are advanced.

A. Does microfinance promote entrepreneurial activities that lead to long-term growth in Nigeria?

B: Do entrepreneurs in Nigeria have access to finance to help them grow their small and medium-sized businesses?

C: What are microfinance’s chances for promoting entrepreneurship in Nigeria?

1.11 Research Hypothesis

v Does entrepreneurial development have any implications for Nigeria’s development? The following null hypotheses are proposed and investigated as the basis for this investigation.

There is no discernible difference between entrepreneurs who use microfinance and those who don’t.

There is no significant influence of microfinance institution activity on entrepreneurial output.

There is no significant influence of microfinance institutions’ efforts on entrepreneurial development.

1.12 Significance of the Study

Because of the importance of microfinance in entrepreneurial development, the Nigerian Central Bank adopted it as the primary source of funding for entrepreneurship in Nigeria.

The significance of this study is that:

i. Microfinance facilitates the supply of financial services to low-income, poor, and extremely poor self-employed individuals (Otero 2000).

ii. Microfinance has the potential to improve microenterprise best practices among small and medium-sized business owners.

iv. Microfinance helps to provide financial services to low-income clients, especially the self-employed.


The study will focus extensively on the impact of banks on the entrepreneurial development of small, medium, and large-scale firms, with a focus on small-scale enterprises and growth and development in Nigeria’s constrained economy.

The spread between parallel and legitimate microfinance banks will also be analysed in order to discover the elements and responsibilities behind the disparity. And how it has helped the country grow.

This study examines commercial places, sites, business environments, towns, and cities in various states, with a concentration on Lagos state.

1.14 Limitations of the Study

Limitation is defined as the potential weakness of the study, i.e., those related and difficult circumstances or obstacles that make you nervous while writing up the project.

The study’s weakness occurs as a result of specific factors faced at several levels of the exercise. These limitations include

1. FINANCIAL AND MATERIAL constraint: This constraint originates from limited funds to visit several microfinance banks in Lagos state in order to obtain critical information from our respondents.

2. The sample is small in comparison to the entire population. It should be noted that due to restricted resources at the researchers’ disposal, a larger sample size may not be feasible.

3. LACK OF CO-OPERATION FROM OUR RESPONDENTS: This constraint is caused by insufficient information from our respondents as a result of their lack of cooperation.

4. UNNECESSARY BOTTLEVENECK MATTERS: In order to get to the bank for the supplies, we had to go through procedures that were unnecessary, such as signing a document and walking from one counter to another; please, we are busy, and management does not want to see anyone. This becomes cumbersome.

1.15 Definition of Terms

Microfinance has evolved as an economic development strategy designed to benefit low-income men and women. The phrase refers to the provision of financial services, which typically includes savings and credit. However, some microfinance institutions also offer insurance and employment services.

ENTREPRENEUR: An entrepreneur is someone who owns a firm or organisation and controls and manages its operations and activities.

An entrepreneur can be described as a lone trader or sole proprietor of a business. He or she manages the day-to-day operations of the business.

LOAN: Loans are defined as long-term debits granted by a financial institution to a business client to be repaid with interest over a specified period of time using collateral as security.

According to Nzoha (1999), collateral is the property that a borrower is willing to pledge to banks as a supplementary source of payment in the event that the first source of payment (revenue and profit) runs out of security for bank lending.

In this context, security is a right or interest in property given to a creditor by a debtor so that if the debtor fails to pay when due, the creditor can compensate himself for the debt using the property changed.

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