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line (Felix and Adamu, 2007). However, the formal financial system provides services to
about 35% of the economically active of Nigeria's 140 million people, while the
remaining 65% are excluded from access to financial services (CBN, 2007).
Considering the rate of coverage by microfinance institutions in relation to the number
of people requiring credit services, the number of beneficiaries is insignificant. It is
against this backdrop that the Central Bank of Nigeria lamented on poor participation of
the targeted economically active poor in microfinance particularly in Northern states of
the federation.(Matias, 2008).
STATEMENT OF PROBLEM
As the issue of poverty continued to be a recurring problem particularly in developing
countries, there is increasing debate among governments and scholars as to the
effectiveness of successive methodologies/ strategies being employed towards
addressing poverty. One of the strategies which since early 70's being popularized as a
result of its successes in most countries around the globe, is the participation in and
provision of microcredit. Microfinance is increasingly used as a grass-root instrument
for alleviating poverty and improving the poor's access to financial services (Grameen
Bank, 2005). Moreover, microcredit is a "proven way to help families move out of
poverty ( Microcredit summit, 2005).
Besides empirical evidences emerging from different studies indicating the positive
effects of participation in microcredit towards poverty alleviation, there are however,
other studies that indicates negative effects of participation in microcredit in up-lifting
the living standards of participants.
In a study carried out in Bangladesh, using a sample drawn from 29 randomly selected
districts that have microcredit programs in operation for at least three (3) years,
findings of the study revealed that participation in microcredit programs improves the
ability of members to withstand aggregate shocks that cause seasonal consumption
changes (Menon, 2006). Similarly, in another study conducted in India to assess the
impact of participation in microcredit using household as unit of analysis, also
concluded that the group based microcredit impacted the client household positively in
the increase of income assets position, savings and literacy and in the reduction of
migration (Panda, 2009)
Microfinance institutions suffer from weak management structures and high overhead
costs or otherwise are poorly run, are heavily subsidized or undercapitalized, operate
from a social service rather than business perspectives, suffer from high default rates, or
fail to target the poor. Thus, a large number of microcredit institutions have failed to live
up to their promise of "including the excluded" (Woller and Woodworth, 2001). While
The choice of beneficiaries in Northern Nigeria is particularly informed by the fact that
previous have indicated poor participation in microcredit in the North and more
importantly, it is the region among the three regions of the federation that recorded
higher incidence of poverty.
RESEARCH QUESTIONS