CHAPTER ONE

INTRODUCTION

1.1     Background to the Study

The need to alleviate poverty and make Nigerians live decent lives has always been on the policy agenda of most Nigerian governments. However, the tendency of the well intentioned idea to faker in the implementation process is a cause for concern. Poverty means insufficiency of income and one can rightly assert that joblessness also inevitably leads to or is a principal cause of poverty. Indeed one of the objectives of this year’s budged is poverty alleviation but government needs to put its policies right before it can alleviate the scourge. It is pertinent to mention that Nigeria may not achieve the objective of poverty alleviation with the current contradictions in the society typified by inconsistent policies, alienation of the citizenry from the activities of the government and general apathy. Some of the south East Asian countries were able to reduce their level of poverty today due to consensus, transparency and enabling environment created by government. Thus, while Indonesia has been accelerating in economic growth, Nigeria has been accelerating in economic decline. Nigeria must as a matter of reasonableness put her domestic policies right first in her quest to alleviate poverty.

In Nigeria, micro-financing is not a new phenomenon as evidenced by such cultural economic activities as “Esusu”, “Adashi”, “Otataje”, etc, which were practiced to provide funds for producers in our rural and urban communities. What operates at present however is the effort of governments in Nigeria to modernize micro-financing in rural and urban communities to improve the productive capacity of the rural and urban poor, enhance their economic standing which alleviates the level of poverty and enhance economic growth and development in the economy? After failed trials in Directorate of Food, Road and Rural Infrastructure (DFRRI), Rural Banking by commercial Banks and even People’s Bank programme (1986), the government of the Federal Republic of Nigeria took the bull by the horns by enacting legislation for the establishment of community banks (now microfinance institutions). To complement government efforts, over the years, a lot of NGOs has formally been licensed to operate as micro finance institutions. Some existing NGO microfinance institutions were transformed and Universal Banks were encouraged to engage in microfinance services. Of recent, microfinance banks regulation and supervisory guidelines were inaugurated.

The dismal performance of the conventional finance sectors triggered the avocation of micro financing by policy makers, practitioners, and international organizations as a tool for economic growth. Since its emergence, the number of microfinance institutions around the world has proliferated at a fast pace after the 1970s. Today there are more than 7000 micro – lending organizations providing loans to more than 25 million poor individuals around the globe (Mohammed and Hasan, 2008). The Nigerian microfinance industry has come a long way. It boasts of the entire four well – known models in the industry. A CBN study (2001) identified 160 registered Microfinance Institutions (MFIs) in Nigeria with aggregate savings worth N99.4 million and outstanding credit of N649.6 million, indicating huge business transactions in the sector (Anyanwu, 2004). Specifically, as at the end of 2004, the microfinance intermediation activities of community banks shows a total mobilized deposits of N21.4 billion, asset base of N34.2 billion and loans and advances to the tune of N11.4 billion (CBN, 2005). Currently microfinance banks are of two forms, as all licensed community banks in Nigeria that met CBN guidelines have been transformed to Microfinance Bank. The two forms of microfinance Banks (MFBs) are; (i) Microfinance Banks (MFBs) licensed to operate as a unit. These are hitherto community banks licensed to operate branches and/or cash centres subject to meeting the prescribed prudential requirements and availability of free funds for opening branches/cash centres.

The importance of microfinance to entrepreneurial development made the Central Bank of Nigeria adopted it as the main source of financing entrepreneurship in Nigeria. Despite this, however, finance is still considered as one of the major hindrances to entrepreneurial development in Nigeria (Ubom, 2003). While government and Non-Government Organizations (NGOs) have been engaging a number of programs and policies to encourage entrepreneurship in the country, Nigeria is still on the list of the poorest countries in the world with unemployment level rising alarmingly, it is therefore the aim of this research to investigate the impact of microfinance banks on artisan’s development.

1.2     Statement of the Problem

Microfinance has been applied as a poverty eradication strategy. It has been used to provide low-income people with small grants, micro-credits and other microfinance services as an impetus to exploit their productivity and develop their business to help them improve their livelihoods (UNDP builds capacity to expand availability of micro-credit services 2005:38). Microfinance has had strong links with women in development for some time. This means that for a long time, microfinance was used as an intervention strategy to address the marginalized situation of artisans with the hope that when they access credit facilities, they would achieve socio-economic development and thereby contribute to the development of their communities. However, much as microfinance services have existed for a period of time, there is lack of information on the good practices and the exact magnitude of impact of the services on the artisans and how the loans are accessed and utilized in order to attain socio-economic development. The fact that poverty still exists amidst the attempts of provision of microfinance in creating room for exploring, this research will therefore examine how microfinance has helped develop artisan in Nigeria.

 1.3    Objective of the Study

The main objective of this study is to find out the impact of microfinance bank credit on community artisan development, specifically the study intends to:

1.     To find out the challenges artisans are faced with in accessing funds

2.     Analyze the impact of micro finance bank credit on development of artisan

3.     Find out the level to which artisans has benefited from micro finance banks

1.4     Research Question

1.     What are the challenges artisans are faced with in accessing funds?

2.     Is there any significant impact of micro finance bank credit on development of artisan?

3.     To what has level has artisans benefited from micro finance banks?

1.5     Research Hypothesis

Ho: there is no significant impact of micro finance bank credit on development of artisan

Hi: there is significant impact of micro finance bank credit on development of artisan

1.6     Significance of the Study

The study about the impact of microfinance development of artisans in a community, this research will be important to the academicians and researchers who can use it as a springboard for other researches/studies. The information will also be used in the information and resource centers of higher institutions of learning like universities that have microfinance as a course for their students as well as the resource centers in microfinance institutions and their umbrella organizations. It will therefore be an additional reference for the data banks in the microfinance industry.

1.7     Scope of the Study

This research work will be conducted in Abeokuta north LGA, the research will also cover concept and literatures on microfinance and artisans and establish a relationship between them.

1.8     Delimitation of the Study

Finance for the general research work will be a challenge during the course of study. Correspondents also might not be able to complete or willing to submit the questionnaires given to them.

However, it is believed that these constraints will be worked on by making the best use of the available materials and spending more than the necessary time in the research work. Therefore, it is strongly believed that despite these constraint, its effect on this research report will be minimal, thus, making the objective and significance of the study achievable.

1.9     Definition of Terms

Micro finance institution: an organization that offers financial services to low income populations. Almost all give loans to their members, and many offer insurance, deposit and other services.

Artisan: a worker in a skilled trade, especially one that involves making things by hand.