MICRO FINANCE BANK AND ECONOMIC GROWTH IN NIGERIA
1.1 BACKGROUND OF THE study
Despite the alleged advancements in the Nigerian economy, it should be noted that the nation is still primarily considered as one that is in the development stage (Onyema, 2006). Its industrial growth is also not particularly noteworthy.
Before the establishment of professional microfinance organisations, the country was awash with informal microfinance activity. The traditional informal methods of microfinance in Nigeria include local money lending, revolving credit and savings,
borrowing from friends and family, government-owned institutional structures, poverty alleviation initiatives, etc. (Lemo, 2006). The operations of previous microfinance organisations in Nigeria are relatively recent, according to the Central Bank of Nigeria Survey from 2001, as the majority of them were never licenced after 1981.
Commercial banks have historically lent to medium-sized and big businesses that are deemed creditworthy. Due to the perceived high costs and dangers involved in doing business with the poor and their micro firms, they avoided doing so (Anyanwu, 2004).
The federal and state governments have acknowledged that, as the home of the majority of the poor in society and in particular the SMEs, rural areas must be financially empowered in order to experience sustainable growth and development.
Positive multipliers will be felt throughout the economy if this growth approach is embraced and the latent entrepreneurial talents of this significant portion of the population are suitably developed and sustained.
The Federal Government has implemented a number of programmes over time to increase the production capacity of rural enterprises in order to give life to these goals. (2006) Olaitan
In light of this, the contribution made by microfinance institutions to Nigeria's economic development and progress began to emerge.
Rural communities have the opportunity to expand and flourish thanks to the microfinance movement since rural farmers and business owners may readily obtain loans and funding. Since there is a lending and investing avenue, job opportunities have been developed.
STATEMENT OF THE PROBLEM
There are numerous issues and difficulties that prevent the microfinance bank from doing its crucial duty of enhancing economic growth in Nigeria.
These issues consist of Nigerians' negative attitude towards MFBs and the government's and regulators' insufficient support
There are problems with mass awareness and communication.
Mega banks' excessive competitiveness, rather than their cooperation, and the operation of microfinance banks' excessive malpractice/sharp practises.
In conducting the study, the researcher will look for potential solutions or ways to improve the circumstances around the operation of MFBs.
1.3 OBJECTIVES OF THE STUDY
The specific goals of this research project are to:
examine the relationship between Nigeria's economic growth and microfinance banks.
It will discuss the specific ways that microfinance institutions can help to improve the lives of the underprivileged and develop rural communities.
It will look into the ways microfinance institutions may help the nation foster entrepreneurship.
1.4 RESEARCH QUESTIONS
How much would Nigerians' negative attitudes towards microfinance institutions hinder the country's economic growth?
How far would inadequate support from the authorities and the government interfere with the efficient running of microfinance institutions
The promotion of entrepreneurial growth is clearly one of the main ways that microfinance institutions may aid in economic development.
The goal of a microfinance institution is to make it possible for low-income people to apply for loans and run their businesses.
In light of this, the following theory will be put to the test.
The low number of entrepreneurs that employ microfinance banks' services renders them irrelevant to Nigeria's economic growth and development, according to hypothesis I H0.
Ho: Microfinance banks are important for Nigeria's economic growth and development because few entrepreneurs employ their services.
Microfinance institutions do not increase entrepreneurial production, according to hypothesis II H0.
Ho: Microfinance organisations do boost the efficiency of the entrepreneurial sector.
1.6 SCOPE OF THE STUDY
The study's focus is on the framework of Nigeria's microfinance banks and how they relate to their contributions to economic development and progress.
1.7 SIGNIFICANCE OF THE STUDY
This study is important because it examines the influence and function that microfinance institutions have on Nigeria's economic growth and development, particularly in rural areas, which is a key indicator of economic standing.
The results of this research effort would be of great use to most developing countries that may aspire to join Nigeria in MFB growth because the researcher has tried to pinpoint the methods that micro finance banks might help in the revamping of the nation's economy.
It will also act as a resource for future scholars who, in one way or another, attempt to shed light on the contribution and effects of micro financing banks to economic development and growth.