THE IMPACTS OF MICRO FINANCE BANKS ON THE NIGERIAN ECONOMIC DEVELOPMENT OF NIGERIA. A RESEARCH PROJECT MATERIAL ON BANKING AND FINANCE
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Robust economic growth cannot be achieved without putting in place well focused programmes to reduce poverty through empowering the people and increasing their access to factors of production, especially credit. The latent capacity of poor for entrepreneurship would be significantly enhanced through the provision of micro-finance services to enable them engage in economic activities and be more self-reliant, increase employment opportunities, enhance household income, and create wealth thereby ensuring rapid and sustainable economic growth and development. Microfinance is about providing financial services to the poor who are traditionally not served by the conventional financial institution (Iweala, 2005).
The impact of microfinance banks in the economic growth and development of a state cannot be overemphasized. The concept of microfinance is not new. Savings and credit groups that have operated for centuries include the “susus” of Ghana, “chit funds” in India, “tandas” in Mexico, “arisan” in Indonesia, “Ajo” in Nigeria, “cheetu” in Sri Lanka, “tontines” in West Africa, and “pasanaku” in Bolivia, as well as numerous savings clubs and burial societies found all over the world (Bamisile, 2006). Formal credit and savings institutions for the poor have also been around for decades, providing customers who were traditionally neglected by Commercial banks as a way to obtain financial services through cooperatives and development finance institutions. According to Bamisile (2006), Microfinance is about providing financial services to the poor who are not served by the conventional formal financial institutions (e.g. commercial banks). It is about extending the frontiers of financial service provision. The provision of such financial services requires innovative delivery channels and methodologies. Bruno, Squire and Ravallion (1995) indicated that there are ample evidences that policies designed to foster economic growth significantly reduce poverty but that policies aimed significantly at economic development are important. For example, program that provide credit and build human capital try to eliminate the causes of poverty; it is therefore relative to the establishment of microfinance banks a strategy for Nigeria economic development.
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