An Assessment Of The Impact Of Microfinance Programme On Socioeconomic Well-Being And Business Growth Of Micro Entrepreneurs In Nigeria: A Case Study Of Cowries Microfinance Bank
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Date
2016-02
Authors
Olubukola Olateju, Adijat
Journal Title
Journal ISSN
Volume Title
Publisher
Universiti Sains Malaysia
Abstract
Nigeria as a developing country has been facing high rates of poverty over the years.
Given this, the government has embarked on many policies and programmes meant to
ameliorate the situation. However, most of these policies and programmes have failed due to
corruption, bureaucratic bottlenecks, inconsistency in policies, and lack of effective
monitoring and evaluation. Hence, the government has realised the need to embark on propoor
policies such as Micro-Finance Bank (MFB) programme with focus on the well-being
of the poor, enhance entrepreneurship development, so that employment can be generated,
and thereby bring about socio-economic development. The government, through the Central
Bank of Nigeria (CBN) has encouraged MFB to lend to Micro, Small and Medium
Enterprises (MSMEs) with more emphasis on Microenterprises (MEs). The objectives of this
study are to: (1) investigate the factors that determine the participation of MEs in MFB
programmes in Nigeria; (2) assess the impact of MFB programmes on socio-economic wellbeing
of MEs in Nigeria, (3) assess the impact of MFB programs on the business growth of
MEs in Nigeria; and (4) investigate the problems and challenges faced by MEs in expanding
their businesses in Nigeria. Quantitative data (through questionnaire) and qualitative data
[through Interview and Focus Group Discussions (FGDs)] were used to answer these
objectives. A sample of 550 MEs; comprising 250 participants of MFB programmes and 300
non-participants of MFB programmes, were selected through a simple random sampling
technique. The sample was further disaggregated into poor MEs (305) and non-poor MEs
(245). The Tobit regression and Propensity Score Matching (PSM) methods were used to
analyse the data. The findings from the Tobit regression indicate that all the variables used
in measuring the determinants of participation in MFB programmes have the expected signs and are significant for the full sample and poor sample, except for the variable age, which is
insignificant for both samples. However, for the non-poor sample, only four of the variables
were significant, and these variables are age, years of education, membership of a political
party, and income while other variables were insignificant. The finding from the PSM for the
first part of Objective Two indicates that the impact of participation in MFB programmes on
economic well-being is greater for participant MEs compared to the non-participant ones for
the entire samples. The results for the second part of Objective Two indicate that the impact
of participation in MFB programmes on social well-being is greater for poor participant MEs
compared to the non-participant ones, while for the full sample, the effect is positive but
insignificant for participants in the programme. However, for the non-poor MEs, the effect
of the programme on the social well-being of the participants in the programme is negative
and insignificant. Our results for the Objective Three indicate that participation in MFB
programmes has a positive and significant impact in enhancing the business growth of poor
participant MEs, while for the non-poor participant MEs and for the full sample, the effect is
negative and significant, and for participant MEs, it is positive and insignificant. The result
of the Objective Four of the study indicates that the major factors that hinder business
growth of MEs in Nigeria are: inadequate capital that often arise from small loan,
inflexibility of the repayment system, lack of basic infrastructure and facilities especially
electricity and road networks, inconsistent and unfriendly policies of the CBN. Based on
these findings the study makes the following recommendations for the MFBs and the
government: (1) the MFBs should target the poor MEs, female and middle educated groups
when giving out loans. The loan amount should be increased and the repayment terms should
be made flexible; and (2) the government should ensure that the policies of CBN are
consistent and friendly, and must provide adequate infrastructure and facilities, such as
efficient electricity supply and good road networks to support the activities of both MFBs
and the MEs.
Description
Keywords
Socio-economic development