THE IMPACT OF MICROFINANCE BANKS ON EMPLOYMENT GENERATION IN

NIGERIA (A case study of Unyogba Microfinance Bank plc)

BY
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(08034883821 08188988835)

TABLE OF CONTENT
CHAPTER ONE: INTRODUCTION
1.1 BACKGROUND OF THE STUDY
1.2 STATEMENT OF THE PROBLEM
1.3 PURPOSE OF THE STUDY
1.4 RESEARCH QUESTION
1.5 RESEARCH HYPOTHESIS
1.6 SIGNIFICANCE OF THE STUDY
1.7 LIMITATIONS OF THE STUDY
1.8 SCOPE OF THE STUDY
1.9 DEFINITION OF TERMS


CHAPTER TWO: Literature Review
2.1 OVERVIEW OF MICROFINANCE BANKS IN NIGERIA
2.2 THE ROLE OF MICROFINANCE BANKS IN PROMOTING GROWTH & DEVELOPMENT
VIS--VIS ENTREPRENEURSHIP AND JOB CREATION

2.3 CHALLENGES OF MICROFINANCE BANKING IN NIGERIA

2.4 THE WAY FORWARD FOR EFFECTIVE & RESULT ORIENTED MICROFINANCE
BANKING IN NIGERIA

2.5 THE ROLE OF CENTRAL BANK IN STABILIZING MICROFINANCE BANKING

REFERENCES

CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
It would be observed that, despite the presumed developments in the Nigerian
economy, the country is still largely being regarded as a developing country (Onyema,
2006). More so, its industrial growth is not quite impressive.

Before the emergence of formal microfinance institutions, informal microfinance
activities flourished all over the country. Traditionally, microfinance in Nigeria entails
traditional informal practices such as local money lending, rotating credit and savings
practices, credit from friends and relatives, government owned institutional
arrangements, poverty reduction programmes etc (Lemo, 2006). The Central Bank of
Nigeria Survey in 2001 indicated that the operations of former microfinance institutions
in Nigeria are relatively new, as most of them never registered after 1981.

Before now, commercial banks traditionally lend to medium and large enterprises which
are judged to be credit-worthy. They avoided doing business with the poor and their
micro enterprises because the associated cost and risks are considered to be relatively
high (Anyanwu, 2004).

The Federal and State governments have recognized that for sustainable growth and
development, the financial empowerment of the rural areas is vital, being the repository
of the predominantly poor in society and in particular the SMEs. If this growth strategy
is adopted and the latent entrepreneurial capabilities of this large segment of the
people is sufficiently stimulated and sustained, then positive multipliers will be felt
throughout the economy. To give effect to these aspirations various policies have been
instituted over time by the Federal Government to improve rural enterprise production
capabilities. (Olaitan 2006)

In view of this, the impact of micro finance bank in economic growth and development
of Nigeria started showcasing itself. With the initiative of microfinance, rural areas are
opportune to grow and develop as loan and fund are easily given to rural farmers and
entrepreneur. Jobs opportunities were created since there is avenue for lending and
investing.
1.2 STATEMENT OF THE PROBLEM
There are so many problems and challenges that hinder the functionality of the
microfinance bank in carrying out their role of creating employment thus
stimulating economic growth and development. These problems include:
- poor attitude of Nigerians towards MFBs
- insufficient support from the regulators and government
- There are communication gaps and inadequate awareness among the masses.
- Undue competition rather than cooperation from the mega banks, and undue
malpractice/Sharp practices by microfinance bank operation.

The researcher will find possible ways of solving or making better the conditions for the
operation of MFBs in creating employment and self sustenance.
1.3 PURPOSE OF THE STUDY
The mains objectives of this research work are to investigate the impact of micro
finance bank on employment generation in Nigeria.

Other objectives are as fellows
i. it will explicate in detail ways in which micro finance banks can contribute in
developing rural areas and improving the life of the poor people.
ii. It will investigate the ways microfinance bank can contribute in building
entrepreneurship within the country.

1.4 RESEARCH QUESTIONS
The following are the research questions formulated to guide this research work.
(1) What impact does microfinance banks play in creating employment in
Nigeria?
(2) What ways can microfinance banks contribute in rural development and
improving the lives of the poor?
(3) What ways can microfinance banks contribute in building entrepreneurs
within the country?

1.5 RESEARCH HYPOTHESIS
It is quite evidential that the major ways in which microfinance bank can help in
creating employment is through the encouragement of entrepreneurial
development.
The essence of microfinance bank is to enable the poor individual to be able to obtain
loan and be able to manage their enterprise thus creating and sustaining employment.
To this effect, the following hypothesis will be tested, thus.
Hypothesis I
H
0
: Micro finance bank is irrelevant to the economic development and growth
of Nigeria since the number of entrepreneurs that uses their services is low
H
i
: Micro finance bank is relevant to the economic development and growth
of Nigeria since the number of entrepreneurs that uses their services is low

Hypothesis II
H
0
: Microfinance institution do not contribute to entrepreneurial productivity
H
1
: Micro finance institutions do contribute to entrepreneurial productivity.

Hypothesis III
H
o
: Microfinance banks do not play a significant role in employment generation.
H
1
: Microfinance banks do play significant role in employment generation.
1.6 SIGNIFICANCE OF THE STUDY
This study is essentially significant in that it is directed towards evaluating the
impact and role that micro finance banks have on the creation of jobs and
employment thus stimulating economic growth and development of Nigeria,
especially the rural areas which is a criteria aimed at measuring economic standard.

Owing to the fact that the researcher has aimed at pinpointing the ways in which
micro finance bank can help in the creation of employment, the findings of this
research work will be of great help to most developing countries who may wish to
toe the part of Nigeria in MFB development.

It will also serve as a reference point for future researchers who in one way or the
other will try to unveil the role and impact of micro finance bank to economic
development and the creation of employment.

1.7 LIMITATIONS OF THE STUDY
During the course of this research, a lot of obstacles were encountered.

(1) Thus, the uncooperative attitude of most people working in the library and other
offices where the researcher needed to get materials posed great problem to
the researcher. Some of the staffs do not feel safe letting us have access to
some materials while others will charge me more than double cost of
Photostating before I can get what I wanted.

(2) Financial constraint is another limitation to this work which is as a result of high
cost of transportation fare to the areas of study to gather data, combined with
the cost of materials to carry this work to conclusive end.

(3) It also took great strength to convince the respondents that their responses to
the questions in the questionnaire will be treated with great confidentiality and
are purely academic.


1.8 SCOPE OF THE STUDY
The scope of the study is subjected around the frame work of microfinance bank in
Nigeria vis--vis its contribution to the creation of employment, economic growth
and development. For accuracy and coherency, the research work will take as a
case study of the Unyogba Microfinance Bank plc to enable precision and
distinctiveness.

1.9 DEFINITION OF TERMS
(1) IMPACT: According to the advanced oxford learners dictionary, impact
is the powerful effect that something has one somebody or something.

(2) MICROFINANCE BANK: According to the Nigerian Banking Act, 1969 (as
amended Bank amendment act 1979), Microfinance banks are institutions constructed
as a company licensed to carry on the business of providing microfinance services such
as collection of savings, loans provision, insurance money transfer services and other
non financial services that are needed by the poor. The clients of microfinance banks
are typically self employed low income entrepreneurs in both urban and rural areas,
they include traders, subsistence farmers, street vendors, motorcycle riders and
blacksmith etc.

(3) ECONOMIC GROWTH AND DEVELOPMENT:
This term has generated a lot of controversies over the years. Some economics see
it as political and structural change while others are of the opinion that it relates
the progress in the basic human needs over time. Another school of thought
defines it as growth accomplished by changes i.e. change in structure of the
economic in the countrys social structure and its political structure.
Others have tended to make basic human needs approach, an approach which defined
economic development in terms of progress toward reducing the incidence of poverty,
unemployment and income inequalities and for those whose living standards have not
been rising. This approach also seeks ways and means of improving their conditions,

(4) NIGERIA: A nation in the African continent and located in the western part of
Africa. it was colonized by the British and got its independent in 1960.
(5) EMPLOYMENT: is a relationship between two parties, usually based on a
contract, one being the employer and the other being the employee.
(6) JOB CREATION: According to Cambridge Advanced Learner's Dictionary, Job
creation is the process of providing new jobs, especially for people who are
unemployed.

REFERENCE
2 Lemo, T (2006) Transforming the Nigerian economy through microfinance initiative
national workshop on empowerment through microfinance, p.1, Calabar Nigeria.
3 Onyema M. E (2006), Transformation of the Nigeria economy through the
microfinance initiatives operators and entrepreneurs perspectives pp. 1-5 Abuja
Nigeria
4 Anyanwu C. M, 2004, Microfinance institution in Nigeria, policy practice and
potentials paper presented at the G24 workshop on constraint in growth in sub
Sharan African, November, 2004, p-4, Pretoria south Africa.
5 Olaitian M. A (2006) Finance for small and medium scale enterprises in Nigeria
Journal of international farm management Vol. 3 No 2 January
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