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INTRODUCTION
and functionaries to provide for the needs of their people. The notion is that government
could and should develop the communities including infrastructures, social amenities and
job opportunities.
Government is regarded as the only provider who has everything at its disposal. On
the contrary, government alone cannot do it, it needs to partner and collaborate with
that will meet the need, yearning and aspirations of the citizenry, therefore, other viable
ways and means must be identified for community development other than relying on
government alone.
One of the viable means and ways of helping the citizenry to meet their need,
yearning and aspirations is to empower them to cater for themselves and the government
means to facilitate an individual with what he needs to be able to live comfortably and
care of, the government will be relieved of her over – burden and be able to focus on
other sectors of improving the standards of life. An example of this is that the citizens if
empowered will be self employed and even be employers of labour and take care of
themselves and at the same time contribute to the growth and development of the
economy.
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There are different and several ways of human empowerment, one of them is
micro – finance banking system. Microfinance bank is a financial institution where small
scale enterprises are empowered to carry out their activities towards economic
loans, savings, payment services, money transfers, and insurance to the poor and low
income households and their micro-enterprises, who are excluded from the formal
financial systems (Tuan, 2006). Therefore, it is clear that microfinance banks contribute a
lot on human empowerment. It is the contributions that this study dwells on particularly
in Kano metropolis.
The study area of this research work is Kano metropolis of Kano State. Kano state
is a state that was created by Nigerian military regime of General Yakubu Gowon. The
first governor of Kano state is Police Commissioner Audu Bako, the state has 44 local
According to the 2006 population head - count the population of Kano state
people is more than 9 million that qualified the state as the state with the highest
population. Majority of the people of Kano state are Muslims and their tribe is Hausa and
the language they speak is also Hausa language. Most of Kano people are traders and that
neighbouring Jigawa, Katsina and Kaduna states of Nigeria. Kano has three weather
seasons namely rainy, dry and cold seasons. Kano soil is agriculturally fertile, that is why
most of the rural dwellers in the state are farmers. Sorghum, rice, wheat, maize, millet are
cultivated in the state. Irrigation farming, where crops like pepper, tomato, onion, and
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vegetables are cultivated, is also done in the state, especially in Kura and Garun Malam
Islamic education is prevalent in Kano city in particular and there are many
and the government as the basis of any meaningful economic development. And human
With this fact in view successive governments in Nigeria have initiated a number of
Programme (FEAP) and Better Life for Rural Women (Nuhu, 2007).
was noticed on the life of the citizens and human empowerment in general, especially
since the members of such communities have not been sufficiently integrated into such
programmes. To go another way round for once another effort, Kano State government
under the leadership of Malam Ibrahim Shekarau has introduced the idea of micro -
finance banking in 2008 with a view to develop the Kano community and get citizens
empowered. It is on this light that this study looks into the significance of micro - finance
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1. 3 Research Objectives
2. Examine the participation pattern of people in the micro –finance bank system in
Kano metropolis.
5. Identify the major factors affecting the microfinance banks activities and people’s
The research will be guided by the following questions with a view to finding
1. What are the major types and categories of micro – finance banks in Kano
metropolis?
Kano metropolis?
3. What are the strategies adopted by micro –finance banks in promoting human
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5. What are the major factors affecting the micro-finance banks activities and
Kano. The research could proffer recommendations for the government and development
economic development.
The research could serve as a useful document and a guide to community building
practitioners on Kano state and Nigeria at large. The research could, once again, serve as
a guide to micro - finance bank operators, especially when it comes to the case of Kano
limitations, Strengths and evolution of micro - finance banking system with regards to the
development program.
In the aspect of delimitation some other issues are observed in this research work,
which are equally essential in contributing to human empowerment. But those issues
have been avoided because of this research work is confined to the contributions of micro
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The contributions of conventional commercial banks in human empowerment, self – help
groups, Rotating Savings and Credit Associations (ROSCAS), savings collectors and co-
For the study to be better understood there is need to understand the operational
definition of terms used. The followings are the terms and their definitions:
common identity.
‘Micro - Finance Bank’ A financial institution where small scale enterprises are
development.
6
‘Empowerment’ Means to facilitate an individual with what he needs to be able to
7
CHAPTER TWO
Theory includes propositions or hypotheses that are problematic and not verified
familiar type of theory is that classified by content and generally associated with several
a larger community. Only thus can it have purposes of "acting on" a situation to change
the situation. Groups arise through the coming together of “like minded" individuals
within the community and their methods of operation are seriously affected by the overall
culture of the community. Conversely, whatever changes occur within the community
The fact that people belong to different groups for different purposes produces the
Structural - factionalism draw its inspiration primary from the ideas of Emile
Durkheim and Max Weber. Functionalism emphasizes the central role that agreement
This moral consensus creates equilibrium, the normal state of society. Durkheim was
concerned with the question of how societies maintain internal stability and survive
overtime. Durkheim proposes that such societies tend to be segmentary, being composed
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of equivalent parts that are held together by shared values, common symbols, or as his
nephew Mauss held, system of exchange. In modern complex societies members perform
very different tasks, meaning that a strong interdependence develops between them. Base
on the metaphor of an organism in which parts function together to sustain the whole,
Durkheim argued that complex societies are held together by organic solidarity. He
Brown, who following Auguste Comte believed that the social constituted a separate
"level" of reality distinct from both the biological and from inorganic matter.
level, with individuals merely being transient occupants of comparatively stable social
Durkheimian in task of explaining the apparent stability and internal cohesion of societies
which are necessary to ensure their continued existence overtime. Societies are seen as
coherent, bounded and fundamentally relational constructs, who function like organisms
with their various parts (social institutions) working together to maintain and produce
them. The various parts of society are assumed to work in an unconscious, quasi
-automatic fashion towards the maintenance of the overall social equilibrium. All social
and cultural in the sense of working together to achieve this state and are effectively
deemed to have a "life" of their own. They then primarily analyzed in terms of this
function they play. Individuals are significant not in and of themselves but in terms of
their status, their position in patterns of social relations, and their roles, the behavior (s)
9
associated with their status. The social structure is then the network of status connected
(Frazer; 2000:76 cited in Smith, 2001). As such it may well be used to bring together a
number of elements, for example, solidarity, commitment, mutuality and trust. It comes
close to the third of the ideals that were inscribed in many of the banners of the French
revolution - fraternity (the others, as you will most likely remember were liberty and
Fellowship is heaven and lack of fellowship is hell; fellowship is life and lack of
fellowship is death and the needs that ye do upon the earth, it is for fellowship's sake you
framework. It present a logical basis for and general guides to the use of open system of
the building of capacities and to improve the performance of and in community system
(Cook, 1994).
community systems and human behaviors to be considered relevant in and for this level
and type of social organization. It does not purport to give answers to the basic questions
of what, why, or how for every community system. It does provide a conceptual platform
10
or grounding for the building of community setting and time specific theory by which to
A growing body of research suggests that where trust and social networks flourish
individuals, firms, neighborhoods, and even nations prosper economically. Social capital
can help to mitigate the insidious affect of socio - economic disadvantage (Beem
A substantial body of empirical work on finance and growth assesses the impact
economically large, and whether certain components of the financial system e.g. banks
and stock markets, play a particularly important role in fostering growth at certain stages
management, pooling savings and casing exchange and how these influence resource
financial development and economic growth. Ever since, a large empirical literature has
emerged testing this hypothesis (see Levine, 1997 for survey). Two trends in this respect
have emerged in the literature. The first tests the relationship between economic growth
and financial development a single using either cross section or panel data techniques
(see et al, 2007 for survey). The second trend examined the hypothesis for a particular
country using time series data techniques as done by Murinde and Eng (1994) for
Singapore, Lyons and Murinde (1994) for Ghana, Odedokum (1998) for Nigeria, Gung
11
and Ford (1998) for Indonesia, Wood (1993) for Barbados and James and Warwick
Recent research (king and Levine, 1993 a and 1993 b) Demetriades and Hussain,
1996; Levine, 1997; Demiaguc Kunit and Maksimovic 1998, Beck et al, 2000, Beck and
Levine (2004).
Wachtel (2003) and Demetriades and Andrianova (2004), Wachtel (2000) and
Schumpeter (1912), Gurley and Shaw (1955), Goldsmith (1969) and Mckinnon (1973)
employed different econometric Methodologies and data sets to assess the role of the
financial sector in stimulating economic growth. The mounting empirical research, using
different statistical methods and data has produced remarkable results. First, results have
shown that countries with well – developed financial systems tend to grow faster
especially those with (i) large privately owned banks that channel credit to the private
sector and (ii) liquid stock exchanges. The level of banking development and stock
market liquidity exerts positive influence on economic growth. Second, well functioning
financial system case external financial constraints that obstruct firm and industrial
expansion. Thus, access to external capital is one channel through which financial
development matters for growth because it allows financially constrained firms to expand
(Levine, 2003). The endogenous growth literature has supported the fact that financial
development positively affects economic growth in the steady state (Greenwood and
Jovanovich, 1990). Bencivenga and Smith (1991), Roubini and Sala – Imarin (1992)
Pagano (1993) King and Levine (1993b), Berthemy and Varoudakis (1996), Green Wood
and Smith (1997). However, over the last two decades, literature has shown a growing
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body of new empirical approaches to treating the causality pattern based on time series
techniques: Gupta (1984), Jung (1986), Murende and Eng (1994), Demetriades and
Hussain (1997) and Kul and Khan (1999). In these studies, the focus is on long – run
relationship between financial sector development and real growth using frameworks of
Bivariate and Multivariate vector auto regressive (AVR) models for different country
samples. The outcome was that the causality pattern varies across countries given the
success of financial liberalization policies implemented in each country and the level of
The theoretical argument that supports the link between financial development
and growth is that a well developed financial system performs several critical functions to
and funding good business opportunities, mobilizes savings, enables the trading hedging
and diversification of risk and facilitates the exchange of goods and services. These
functions result in a more efficient allocation of resources, rapid and faster technological
progress, which in turn results in economic growth. An efficient financial system is one
of the foundations for building sustained economic growth and an open vibrant economic
system. In the early neoclassical growth literature, financial services played a passive role
and Mckninon (1973) were among authors who offered a contrary view. They proposed a
more active role for financial services in promoting growth. Ever since, substantial
volume of theoretical and empirical literature has emerged, analyzing the role of finance
in growth and development. The role of the financial system in economic growth,
13
especially the role of stock markets and banks has been extensively discussed in both
theoretical and empirical studies (see Levine (2003) for the survey of the literature). The
key findings of these studies are that countries with well developed financial institutions
tend to grow faster, particularly the size of the banking system and the liquidity of the
stock markets tend to have strong positive impact on economic growth (Beck and Levine,
2002; Beck et al, 1999, Arestis et al, 2001). Schumpeter (1912), in his own perspective of
the theoretical link between financial development and economic growth opines that the
services provided by financial intermediaries are the essential drivers for innovation and
growth. In the alternate, Robinson (1952), argues that finance does not exert a causal
higher demand for financial services. He further noted that, when an economy grows,
more financial institutions, financial products and services emerge in the markets in
response to higher demand for financial services. Literature in this area of study is
Schumpeter’s (1912) argument was later formalized by Mckinnon (1973) and Shaw
(1973) and popularized by Fry (1988) and Pagano (1993). The McKinnon-Shaw
system such as interest rate ceiling, district credit programs and high reserve requirement
may hinder financial deepening. This may in turn affect the quality and quantity of
investments and hence has a significant negative impact on economic growth. Therefore,
the Mckinnon Shaw financial repression paradigm implies that a poorly functioning
financial system may retard economic growth. The endogenous growth literature also
supports this argument that financial development has a positive impact on the steady
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state growth (see Bencivenga and Smith 1991; Bencivenga et al 1995, and Greenwood
The success of the financial system through out the world has been predicated on
the initiation of financial sector reforms such as the introduction of market – based
procedures for monetary control, the promotion of competition in the sector, and the
relaxation of restriction on capital flow. The aim of initiating these reforms is to create a
more efficient and stable system which will facilitate optimum performance in the
policies and successfully mobilizing capital and putting it to efficient use, which leads to
achieving higher rates of economic growth (Johnston and Sundararajan, 1999). Many
countries have experienced successful financial sector reforms which have been
system, while other countries have faced financial crisis and disruptions to economic
On the evolution of micro - finance banking system in Nigeria Nuhu (2007) has
this to say: in the face of the glaring inability of formal service(s) of finance to meet the
needs of these rural poor farmers, the informal sources took up the challenge. This is in
agricultural credit market. The NGOs are notable in the area of micro – finance, which is
a major anti poverty strategy being supported by several international organizations. The
practice of micro - finance in Nigeria is culturally rooted and dates back to several
centuries. The traditional micro - finance institutions provide access to credit for rural and
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urban low - income earners. They are mainly of the informal self–help groups (SHGs) or
rotating savings and credit associations (ROSCAS) types. Other providers of micro-
finance services include savings collectors and co—operative societies. The informal
financial institutions generally have limited outreach due primarily to paucity of loan able
funds.
The financial liberalization era of the SAP brought them into limelight. Several
NGOs are in operation now but notable among them are the Farmers Development Union
Adjustment Programme (SAP) in 1986 has tended to exacerbate the financial problems of
the rural communities. Loan able funds from government sources dwindled considerably.
The cost of borrowing enterprises multiplied several folds irrespective of the scale
operation.
government credit programmes and policies was targeted at the poor. Notable among
concessionary interest rate, and the Agricultural Credit Guarantee Scheme (ACGS).
Other institutional arrangements were the establishment of the Nigerian Agricultural and
Cooperative Bank Limited (NACB) the National Directorate of Employment (NDE) the
People’s Bank of Nigeria (PBN), the Community Banks (CBs) and the Family Economic
Advancement Programme (FEAP). In 2000 government merged the NACB with the PBN
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and FEAP to form the Nigerian Agricultural Co-operative and Rural Development Bank
Limited (NACRDB) to enhance the provision of finance to the agricultural sector. It also
development, prominently emerging in the 1970s (Robinson, 2001). From the 1950s to
the 1970s, the provision of financial services by donors of governments was mainly
subsidized rural credit programmes. These programmes often resulted in high loan rural
households (Robinson, 2001). The 1980s, Gramen Bank and Bank Yakyat Indonesia
began to provide small loans and saving services profitability on a large scale. They had
received no subsidies, but they could attain wide outreach to clients (Robinson, 2001).
Microcredit insisted on repayment, on charging relevant interest rates that could cover
credit provision costs and on focusing on the poor. Therefore, micro credit could provide
large – scale outreach profitably in the 1990s (Robinson, 2001). The provision, just credit
(micro credit), to the poor was not so effective that the provision of other financial
services (microfinance) as savings, insurance and pension met the demand of the poor.
The microcredit summit in 1997 again asserted the roles of MF in the field of
development. Furthermore, the objectives of the microcredit summit 2005 were to serve
175 million of the world’s poorest families, especially the women of those families, with
credit for the self employed and other financial and business services by the end of 2015.
In short, along with infrastructure construction and policies relating to serving the poor,
17
Robust economic growth cannot be achieved without putting in place well
their access to factors of production, especially credit. The latent capacity of the poor for
services to enable them engage in economic activities and be more self - reliant increase
distinguish microfinance from other formal financial products .These are (i) the smallness
of loans advanced and / or saving collected, the absence of assets based collateral, and
Kularatne (2009) says: the need for community development is widely recognized
but there is an inconsistency in the definition, usage and general understanding of what
community development represent The word community comes from the latin
tighter and more cohesive entity within the context of the larger society due to the
presence of a unity of will. He added that family and kinship were the perfect expression
of community but that other shared characteristics, such as place of belief could also
result in community.
concept that assumed different meanings depending on the contest in which it is used
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however; the concept of development generally, implies a positive change in specific
direction.
Later it was recognized not only economic development but also social, cultural and
community development means improving the quality of people lives and expanding
their ability to shape their own futures through improving their access to opportunities to
better themselves, (Soubbotina and Sheram, 2000, World Bank Cited in Kularatne, 2009).
According to Central Bank of Nigeria (CBN, 2005) micro finance bank has the
following characteristics:
1). Microfinance bank has a minimum paid - up capital shareholders funds of N20.0
million (to operate as a unit bank) and Nl.0 billion, (to operate in a state) respectively.
2). As a unit bank, microfinance bank operates within a local government area and not in
sophisticated banking services, such as forex business and in a state (if licensed to
3). Credit subject to a single obligor limit of 1% for an individual/ corporate entity and
5% for a group.
5). Access to public sector deposits is permitted for only micro – credit programmes on a
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7). Geographical coverage of microfinance bank (as a unit bank) is in rural and urban
areas, while that licensed to operate in a state must be in both rural and urban areas within
CBN (2005) listed the following operations for micro finance bank:
active poor in a timely and competitive manners that would enable them to
iv. Enhancing organized, systematic and focused participation of the poor in the
v. Provision of acquit able avenues for the administration of the micro - credit
recourse basis.
vi. Rendering payment services, such as salaries, gratuities and pensions for
their access to factors of production, especially credit. The latent capacity of the poor for
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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
about providing financial services to the poor who are traditionally not served by the
The baseline economic survey of small and medium industries (SMIs) in Nigeria
conducted in 2004 indicated that the 6,498 industries covered currently employ a little
over one million workers. Considering the fact that about 18.5 million (28% of the
available work force) Nigerians are unemployed, the employment objectives / role of the
SMIs is far from being reached. One of the hallmarks of the National Economic
Empowerment and Development Strategy (NEEDS) is the empowerment of the poor and
the private sector, through the provision of the needed financial services to enable them
engage in or expand their present scope of economic activities and generate employment
through additional channels which the microfinance bank framework would provide. It
would also assist the SMIs in rising their productive capacity and level of employment
government has in the past, initiated a series of publicly - financed micro / rural credit
programmes and policies targeted at the poor. Notable among such programmes were the
rural banking programme, sectoral allocation of credits, Concessionary Interest Rate and
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the Agricultural Credit Guarantee Scheme (ACGS). Other institutional arrangements
were the establishment of the Nigerian Agricultural and Co - operative Bank Limited
Insurance Corporation (NAIC), the Peoples Bank of Nigeria (PBN), the Community
Banks (CBs), and the Family Economic Advancement Programme (FEAP). In year 2000,
government merged the NACB with the PBN and (FEAP) to form the Nigerian
enhance the provision of finance to the agricultural sector. It also created the National
Nuhu (2007) mentions the followings as some of the strengths of micro finance
banks:-
3. Poverty reduction
7. Women empowerment
22
2.10.2 Limitations of Micro - Finance Banks
CBN (2005) has mentioned the following as limitations of micro finance banks:
1. Incompetent management
23
Summary and uniqueness of the study
this chapter, micro finance banking system and microfinance banks are very effective
tools for human empowerment especially when it comes to poverty eradication and up -
The effective use of micro - finance institutions has been described as the surest
Justin Bomda, micro finance institutions help the poor to have access to finances. "This
means that only micro - finance institutions have the capacity to create wealth among the
and their limitations should be caught and dealt with in order for the MFBs to work
study is unique of its kind, this is clear from the literature reviewed and the fact that
24
CHAPTER THREE
RESEARCH METHODOLOGY
a powerful weapon in the field aspect of research. It also shows the procedures that have
used when studying phenomena that influence the interactions of people as they pursue
their everyday life. Survey could also be seen as one which involves the assessment of
as:
The population of the study will comprise all the micro-finance banks in Kano
metropolis. The micro-finance banks are: (1) Grassroot Microfinance Bank (2)
Northbridge Micro-finance Bank and (3) Women Development Micro – finance Bank.
The population is comprised of 243 customers and 56 staff, making a total of 299.
25
3.3 Samples and Sampling Procedure
From the population mentioned above 40 respondents will be selected from each
of the banks, making a total of (120) respondent. Base on Morgan and Kreycie (2006)
sample size determination procedure, a population of (120) requires a sample size of (80).
Therefore, 65 will be customers of the banks, 40 males and 25 females. 15 will be staff of
the banks, 10 males and 5 females. This research work adopts random cluster sampling
assumption that, the researcher wants to discover and understand the contributions of
The following instruments will be used for data collection. The instruments are:
(1) researcher made questionnaire and an interview schedule. These will be developed by
empowerment. The researcher questionnaire will be in two types. Type ‘A’ will be for the
customers of the banks, while type ‘B’ will be for the staff of the banks. Both the types of
questionnaire will be categorized into two parts. Part (A) personal data and part (B) the
questions to be asked. (2) An interview schedule for the management staff of the banks
The research will use, the two main methods of obtaining data; primary and
secondary sources of data, the research will make extensive use of the various annual or
end of the year reports and other publications of the banks on study. The primary data
26
will be collected from interview and questionnaire administration. These will be used to
evaluate the response and attitude of the officials and customers of the bank and the
impact of the bank in developing their living standard as the community members, as to
The instruments to be used for data collection will be subjected to validity and
reliability test in order to ascertain their ability and consistency. The research supervisor
will examine the instrument for its usability and make all necessary corrections and
observation. This will make the validity and reliability on the consistency of the
instrument. To ensure the validity of the instrument, the instrument will be field-tested on
twenty respondents.
meant for and asking them to follow the instructions in filling the questionnaire. The
respondents will be asked to please, provide their true and honest response as this is
certainly related to the veracity of what will be inferred from their responses with regards
Once the data is gathered, it will be analyzed to give some meaning, such that it
could be understood and interpreted properly. Descriptive statistics i.e. simple percentage
and frequency count will be used. The use of this statistical tool is based on that the study
employs survey research design that is appropriate to the research problem. And the
design of the study normally dictates what statistical technique should be used. And by
27
using this appropriate tool the analysis of the findings will be more accurate during
interpretations.
28
REFERENCES
Cook, J.B (1994). Community Development Theory. Retrieved July 18, 2009 from
www.milextension
Daradara, J.B (2009). Modern Banking Management and National Development. A lead
Daradara, J.B. (2008). Microfinance as a Tool for Poverty Eradication. A paper presented
Nsom, K. (2005). Experts Say Micro – Finance is Anti – Poverty Drug. Retrieved June
Niger state.
29
Smith, M.K. (2001). Community. Retrieved on July 20, 2009 from
http://www.infed.org/community/community/htm
press.
Tuan, V.V (2006) Master Thesis in Rural Development: The Roles of Microfinance in
Poverty Reduction in the Mckong Delta: Case Study at Hoa An Commune, Phung
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A STUDY ON THE CONTRIBUTIONS OF MICRO-FINANCE BANKS ON
HUMAN EMPOWERMENT IN KANO METROPOLIS
KANO, NIGERIA
nuraibrahimmukhtar@yahoo.com
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TABLE OF CONTENT
CHAPTER ONE
Introduction
CHAPTER TWO
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2.10.2 Limitations of micro - finance banks - - - 23
CHAPTER THREE
RESEARCH METHODOLOGY
References - - - - - - - - 28
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34