Microfinance and Poverty Alleviation

Microfinance and Poverty Alleviation.

ABSTRACT

Poverty has such an adverse effect that those under it remain trapped in a vicious circle because access to basic necessities of life is lacking or inadequate. The antipoverty programmes of the federal government were targeted at the rural and urban poor with emphasis on women and unemployed youth.

The intervention took the form of the provision of basic infrastructures to facilitate rural development as well as the provision of credit facilities to improve the lot of the underprivileged by encouraging micro-enterprises in the cities and training programmes for the unemployed youths.

This was done because it was realized that Structural Adjustment policies did not achieve steady economic growth and poverty has become more acute as evident among the rural and urban dwellers.

The objective of this study was to examine the impact of microfinance banks on poverty alleviation using the Ahmadu Bello University microfinance bank as a case study. Both primary and secondary data were collected and used. Also, descriptive statistics were used.

The results showed that microfinance banks enhanced rural and urban development; there was improved savings mobilization which improved credit facilities which in turn improved a lot of the rural and urban dwellers by the larger output from micro-enterprises.

Data were analyzed by the use of simple percentages and Chi-square statistics. It was found that microfinance banks contributed to poverty reduction.

It was concluded that  Ahmadu  Bello  University Microfinance Bank charges high-interest rates because of its incapacity to mobilize its funds from the local community but rather borrowing from other banks; thus this has continued to undermine the contribution of microfinance banks to poverty reduction. More study on the design, effects and effectiveness of these antipoverty banks are needed.

TABLE OF CONTENT

Title Page– i

Declaration– ii

Certification—- iii

Dedication— iv

Acknowledgement– v

Abstract– vi

Contents— vii

List of Tables- viii

List of figures—- xii

• Chapter One: GENERAL INTRODUCTION
• Background of the study————- 1
• Statement of the problem—— 5
• Objectives of the study——– 7
• Research Question/Hypothesis——– 7
• Justification /significance of the study——– 9
• Organization of the study— 9
• Limitation 9
• Chapter Two: LITERATURE REVIEW
• Definitions of key terms——- 11
  • Microfinance—- 12
  • Microfinance Banks—— 12
  • Credit/ Loan—- 12
  • Micro-credit——- 12
• Theoretical Literature Review——- 13
  • Empirical Literature—— 19
  • Local Government Areas—— 26
  • Established Poverty Line: Poorest of the poor– 29
  • Established Poverty Line: Horizontal Results—- 30
• Theoretical Framework——- 34
• Goals of Microfinance Banks—— 36
• Brief History of Microfinance—- 37
• Review Of Some Microfinance Banks—- 38
  • The Shore Bank——– 38
  • The Grameen Bank—- 38
  • The Bangladesh Rural Advancement Committee (BRAC)– 39
  • An Overview of the Characteristics and Policy of  Microfinance Institutions in Nigeria— 40
• Community Banks——– 42
• Chapter Three: RESEARCH METHODOLOGY
• History Of The Study Area– 50
• Source of Data Collection——- 51
• Instrument of Data Collection— 51
• Sampling Method (Techniques)—- 52
• Sample Size— 52
• Statistical Techniques—— 52
  • The Chi-square (X²) Test— 52
• Variables on Which Data Were Collected—- 53
• Descriptive Statistics——- 54
• Interest Rate Regime—– 54

4.0 Chapter Four: DATA PRESENTATION AND ANALYSIS

• Introduction——- 55
• Brief History Of A.B.U. Microfinance Bank And Its Activities———– 55
• Socio-Demographic Profile Of The Respondents—-57
• Individual Savings And Income——– 59
• Condition Of Loan———- 62
• Health And Medical Services—– 63
• Summary Of Findings——– 64

Chapter Five: SUMMARY, CONCLUSION AND RECOMMENDATION

• Summary—– 66
• Conclusion—— 67
• Recommendations— 68

Appendices——- 70

References—— 79

INTRODUCTION

1.1 Background of the Study

Poverty is defined in many ways by a number of rural and urban characteristics. It is strongly influenced by education, age, the nature of employment and level of income among others.

The level of income has been used to construct the poverty line. This is the value of income necessary to purchase the minimum standard of nutrition and other necessities of life.

In Nigeria, the poverty line (at 1985 prices) of N395 per person per month and the extreme poverty line of N198 per person per month are used to designate the poor and extremely poor respectively (World Bank Report, 1996).

In Nigeria, those without education account for most of the poor. According to the World Bank Report, about 79% of the urban extreme poor and 95% of the rural poor had only primary education or less.

Poverty has such an eroding effect that those under the poverty line remain trapped in a  vicious circle of poverty. In such a situation, access to basic necessities of life eludes them and it takes the intervention of the government in most cases for them to be rescued from their plight.

In response to their plight and as part of its social responsibility, the government undertakes poverty alleviation programmes targeted at this group.

BIBLIOGRAPHY

Ahmadu Bello University, Microfinance Bank 2009.
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