Microfinance has over the old ages been associated with eliminating poorness, and accordingly bettering the criterion of life of the less privileged members of a society, and rubbing on positively on the state ‘s economic system. This thesis aims at researching the impact microfinance has on economic growing, sing a specific instance of the Federal Republic of Nigeria. Due to the fact that this country of survey has non witnessed so much research in the yesteryear, this work seeks to come up with an attack where the different links between microfinance and economic growing can be discovered and studied. Since most societies, particularly the underdeveloped 1s normally experience the presence of two types of fiscal system, the formal and the informal one under which microfinance falls, this will besides be taken into consideration. The first hypothesis to be considered has to make with the micro degree and this examines the relationship between microfinance and the fiscal system. The Second hypothesis has to make with the macro degree and examines the relationship between the fiscal system and economic growing, while the 3rd one links the old two, by look intoing the relationship between microfinance and economic development.
Keywords: Microfinance ; Economic Growth ; Nigeria
Microfinance Institutions are fiscal administration licensed to supply micro-savings, micro-credit, and micro-insurance in an economic system. They operate in the informal sector of the fiscal system and are the major beginning of fund-provider for the medium, little and micro-enterprises.
The sub-prime or the hapless are an of import portion of our society, they need to feed, do usage of shelter, put on apparels, send their kids to school, make usage of wellness attention installations, yet in most instances they have been pine awaying and hardly lasting on less than a dollar per twenty-four hours which is regarded as the United Nation ‘s poorness line. Their plight sounds truly hapless, but even more awful when witnessed.
Although it looks so bad, yet this set of people does non truly want charity, what they want is to hold an entree to acquiring a occupation, anything legitimate that can bring them an income to run into their basic day-to-day demands. This is where micro-finance comes in.
The rudimentss of microfinance is the fact that the hapless can non entree a loan from a bank of any sensible commercial beginning, that is why Microfinance Institutions go out to the small towns, meet with the hapless who are encouraged to organize an association, they give them micro-credits and sometimes even give them preparations to assist them do the best usage of the loan accessed ( Mohammed and Hassan, 2008 ) .
The methodological analysis used by most micro-finance establishments to do loan is that they gather people into trust groups and fitting hebdomadal. These groups assume joint liability and joint warrant on loans extended to any member of the trust unit and this constantly helps in cut downing incidence of defaults and bad loans. Most Micro-Finance Institutions enjoy a high refund rate.
It should besides be noted that bulk of microfinance clients are adult females who besides make up a greater per centum of the universe ‘s hapless, and besides see a really high rate of unemployment ; and unhappily in most instances are responsible for supplying for and taking attention of their households.
Nigeria with a GDP-real growing rate of 5 % ( 2009 est. ) , remains a major participant in the African economic system but her population of about 149, 299,090 ( sourced from CIA-The universe fact book ) , which is the largest in Africa, has about half of it populating in poorness. However, since the debut of microfinance in the state, a positive tendency has been noticed both in the growing of the economic system and besides in the addition in figure of microfinance establishments.
The Central Bank of Nigeria is saddled with the duty of publishing banking licence and supervising of Bankss in the state, Micro-finance Institutions inclusive.
Microfinance, through its proviso of fiscal services to the hapless can act upon economic growing by promoting nest eggs, giving out loans for executable investings, proviso of free advisory services to new clients on how best to put, and besides to those with long standing relationship, on how to increase the fringy productiveness of capital ( Pagan and Umuersltci, 1993 ) .
A batch of surveies have been conducted on the relationship between fiscal development and economic growing. King and Levine ( 1993 ) quoted Schumpeter ( 1911 ) in support of the position that fiscal development leads to economic growing. In another of Schumpeter ‘s work in 1934, he pointed out that banking establishment through their proviso of financess for productive investings rhenium of great importance to economic growing. Greenwood and Jovanovic ( 1990 ) suggested that the relationship between fiscal development and economic growing is common, while Luintel and Khan, ( 1999 ) who are of a similar sentiment explains further that economic growing create fiscal development which in bends aids in prolonging the growing.
Qayyum et Al ( 2007 ) are of the sentiment that direct finance has a important positive relationship with economic growing. The handiness of financess to the hapless additions production and end product, this besides leads to an additions in the demand for more fiscal services ( micro-savings and micro-insurance ) , which positively affects fiscal development and sets the economic system on the way of growing ( khan, 2008 ) .It can so be said that handiness of financess leads enterprise, endeavor leads finance flow, finance flow leads fiscal development, while fiscal development leads economic growing. Gregorio and Guidotti ( 1995 ) besides argued that fiscal development leads to better economic growing, particularly when financess are expeditiously invested.
However, Kemal, et Al ( 2007 ) do non see finance ( micro-finance inclusive ) as an of import determiner of economic growing and Lucas ( 1988 ) even referred to it as overstressed, while Levine ( 2003 ) sees fiscal establishments as more harmful to a state ‘s economic growing. This led to a call for redefinition and the usage of appropriate step of appraisal of the relationship between fiscal development and economic growing in by Khan and Senhandji in 2003 and development of fiscal mediators by Bencivenga and Smith ( 1991 ) .
The chief aim of Microfinance is raise income, by promoting private sector activity through the proviso of micro-credit to micro and little graduated table enterprisers ( Beatriz and Jonathan, 2000 ) . In a survey conducted by Chua et Al, ( 2000 ) , they noticed that the impact of microfinance services on income and ingestion is dependent on the initial gift of the family and the length of clip they have been clients of the establishment. It is besides affected by how efficient they are in the direction of the sourced resource and besides the profitableness of the sector they invest in. Availability of Social comfortss and a cheaper beginning of factors of production besides influence income.
Harmonizing to Akanji ( 2002 ) , the hapless make consequence usage of the recognition installations and non merely are they willing to pay the high involvement rate on loan, they besides in no clip do adequate returns to run a nest eggs history with the MFI. It should besides be noted that the transition of the hapless who were once economic liabilities into net income doing micro-entrepreneurs have a positive impact on the fiscal system and accordingly begins the procedure of economic growing by conveying its full physical and human resources into productive usage ( Kamath, hypertext transfer protocol: //www.springerlink.com/index/p88748m728v02188.pdf ) .
Not many literature are available as respect the relationship between microfinance and economic growing, therefore the survey will rely much on theoretical model in order to understand the nexus between microfinance and economic growing. Both Primary and Secondary beginnings of informations will be used and Questionnaires will be sent out to hold a direct feedback from the donee of the strategy while old surveies and findings as respects the Nigerian economic system will besides be put into usage in order to find a theoretical association between Microfinance and Economic Growth.
It should be noted that the two chief variables in this thesis is Microfinance and economic development. The pick of Nigeria as a instance survey was borne out of the fact that the state has late had its microfinance ordinances tuned to enable it play its function in functioning its targeted market efficaciously. An addition in the growing of microfinance establishments in the state has besides made them better established and competitory, giving the erstwhile neglected micro-entrepreneurs a pick.
The relationship between fiscal system and economic growing will be foremost examined and in the 2nd portion, microfinance, alongside its associated theories will be explored to find their impact on economic development. The 3rd portion will be about analyzing the impact of theoretical macro-level consequence on the instance survey, which is Nigeria. Its consequence on the instance survey will assist in reshaping the theoretical model which will be the footing for decision.
The possible jobs envisaged in this research work is the handiness of informations from microfinance establishments in Nigeria as a big figure of them do non hold entree to the cyberspace and so make non post their information online. This brings about another job, which is the distance between my topographic point of survey and the location of the instance survey. The comparative scarceness of research on this country of survey besides creates a job of limited stuffs. However, I have devised solutions for each of the job. Most of my stuffs will be sourced from the Microfinance Unit of the Other-Financial -Institutions section of the Central Bank of Nigeria, as they have unhampered entree to records of every Microfinance Institution runing in Nigeria. Most of my stuffs will be sent online while I will do usage of a inexpensive and dependable messenger service for my questionnaires. Besides, the available stuffs online will be coupled with those sourced from the Central Bank of Nigeria Library and Data collected on the MFIs.
The chief resources needed are informations on Nigeria ‘s GDP, list of MFIs soon runing, records of loan expense by MFIs, records of entire sum set aside for Small and Medium Scale Enterprise by the state ‘s commercial Bankss, and questionnaires.
May 5, 2010
Sourcing of stuffs for reappraisal
June 4-10, 2010
Extensive reappraisal of literatures
July 11- 23, 2010
Submission of preliminary literature reappraisal to my supervisor
June 24, 2010
Making necessary corrections on literature reappraisal as suggested by Supervisor.
June 25- 27, 2010
Reading on Methodology
June 28- 30, 2010
Structuring of Theoretical models
July 1-8, 2010
Submission of proposed methodological analysis to supervisor
July 8, 2010
Making necessary corrections on methodological analysis as suggested by supervisor
July 9-11, 2010
July 12, 2010
Submission of questionnaire to supervisor
July 13, 2010
Making necessary accommodation to questionnaires before directing out.
July 14-16, 2010
Writing of debut, which is chapter one
July 17, -21, 2010
Submission of Chapter one-Introduction to supervisor
July 22, 2010
Making necessary corrections on Introduction as suggested by supervisor.
July 23-24, 2010
Collection of questionnaires and analysis of findings
July 25-August 1,2010
Submission of questionnaire findings to supervisor.
August 2, 2010
Making necessary corrections on questionnaire findings as suggested by supervisor.
Submission of Introduction, literature reappraisal, methodological analysis and findings to supervisor for re-check
August 9, 2010
Making necessary amendment suggested during the re-check
August 10-14, 2010
Writing the decision
August 15-17, 2010
Submission of decision to Supervisor
August 18, 2010
Making necessary amendments as suggested by Supervisor.
Revision of all bill of exchange chapters
August 22-25, 2010
Submission of bill of exchange Introduction, Literature reappraisal, Methodology and decision bill of exchanges to supervisor
August 26, 2010
Another self alteration of all bill of exchange chapters
August 27-30, 2010
Printing out all bill of exchanges and entry to Supervisor for concluding reappraisal and updating.
September 1, 2010
Making all necessary corrections to the concluding reappraisal
September 1-8, 2010
Printing and Binding
Final Printing and Binding
Submission at the PG office
September 13, 2010.
The end product, which is the decision of this thesis, is expected to assist the Government in its activities aimed at the state ‘s economic development. It will besides steer them in effectual channeling of resources aimed at poorness relief. MFI decision makers will besides profit from this work as it will assist them in doing determinations on how to enlarge their country of coverage and to besides enter higher returns through proviso of other services. Donor Agencies and International establishments will besides detect chances for assisting in the economic growing and authorising the hapless.
Last, this survey is expected to fly other surveies in this country and organize a footing on which other people discover more efficient and effectual ways of doing microfinance hold a permanent positive impact on economic growing.