Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
Assessing the Level of Awareness of Microcredit on Poverty
Alleviation in Nigeria
Ibrahim Adebisi
This paper examined the level of awareness by Nigerians of Microcredit as a tool for
alleviating poverty. To achieve this objective, questionnaires were administered among
the participants and non-participants of microfinance in South West geo-political zone
of Nigeria. Descriptive analysis was employed to depict the level of awareness. The
results indicated that out of 347 respondents, 325 are well aware of the existence of
micro credit facilities representing 93.7%. Of this figure, 205, representing 63.08%,
participated in Micro finance, while 143 out of the participants, representing 69.76%
escaped poverty.
Introduction
Background of the Study
Poverty is a general phenomenon that affects the physical, economic, social and
psychological conditions of man. It is like “an elephant which is easily recognised than
defined.” Adeyeye (2002).
A concise and universally accepted definition of poverty is elusive largely because it affects
many aspects of the human conditions, including physical, moral and psychological.
Different criteria have, therefore, been used to conceptualize poverty. Most analyses follow
the conventional view of poverty as a result of insufficient income for securing basic goods
and services. Others view poverty, in part, as a function of education, health, life
expectancy, child mortality among others. (Ajakaiye and Adeyeye, 2001).
Poverty can be generally defined as the inability to attain a certain predetermined minimum
level of consumption at which basic needs of a society or country are assumed to be
satisfied. The core concept of this general definition of poverty is the fact that to be poor is
defined by access to basic goods and services like food, shelter, healthcare and education.
The food concept in this definition goes beyond just food passé but also includes clean
water and sanitation services. (Kiiru, 2007).
Poverty in Nigeria, no doubt, has reached such an endemic dimension and has eaten so
deep into the fabric of our society. Poverty in Nigeria is widespread and deep. The country
progressively slipped from being one of the middle-income oil producing countries in the
late 1970’s and early 1980’s to one of the lowest income countries in the early 1990’s.
Nzekwu , (2006).
__________________________________________________________________
Ibrahim Adebisi, Department of Accountancy, Federal Polytechnic Ede, Nigeria
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Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
In an attempt to alleviate the devastating effect of object poverty syndrome that permeate
every nook and cranny of Nigerian society, both government and non-governmental
organisations have devised various ways and means of providing financial assistance to empower the
indigent individuals and small scale entrepreneur. The various sources of finance opened to the
indigent individuals and small scale enterprises can be group into both formal and informal sectors.
Statement of the Problem
The rising profile of poverty in Nigeria is assuming a worrisome dimension as empirical
studies have shown. Nigeria, a sub-Saharan African country, has at least half of its population living
in abject poverty. Nigeria has witnessed a monumental increase in the level of poverty. Looking at
the records from the Federal Office of Statistics, about 15 percent of the population was poor in
1960; the figure rose to 28 percent in 1980 and, by 1996, the incidence of poverty in Nigeria was 66
percent or 76.6 million people. That the UN Human Poverty Index, in 1999, placed Nigeria among
the 25 poorest nations in the world. It is amazing to note that various poverty alleviation strategies
have been adopted by successive governments in Nigeria, but their level of social impact leaves
much to be desired. Oshewolo (2010).
Table 1: Relative Poverty Headcount from 1980 – 2010.
It remains a paradox however, that despite the fact that the Nigerian economy is growing, the
proportion of Nigerians living in poverty is increasing every year, although it declined between 1985 and
1992, and between 1996 and 2004. Kale (2012)
Table 2: Incidence of Poverty by Zones using Different Measures
(%)
Kale (2012)
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Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
Table 3: Summary of Community Banks/Microfinance Banks‘ Activities (N Million)
Year
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Deposit Liabilities
639.6
2,188.2
3,216.7
2,834.6
2,076.3
3,181.9
4,454.2
5,102.8
7,689.4
3,294.0
9,699.2
18,075.0
21,407.0
28,723.4
34,088.8
33,088.3
58,481.3
72,750
76,483.7
Loans and Advances
135.8
654.5
1,220.6
1,129.8
1,400.2
1,618.8
2,526.8
2,631.0
3,666.6
1,314.0
4,310.9
9,954.8
11,353.8
14,647.4
16,498.6
16,450.8
42,024.4
55,818.9
54,348.6
Source: CBN Annual Reports 1998, 2001, 2003, 2007, 2010.
% Loans/ Deposits *
21.23
29.91
37.95
39.86
67.44
50.88
56.73
51.56
47.68
39.89
44.45
55.07
53.04
50.99
48.40
49.72
71.86
76.73
71.06
CBN Statistical Bulletin Vol. 17, Dec. 2006.
Fig. 1: Graph of Deposit Liabilities and Loans & Advances
90000
70000
60000
50000
Deposit Liabilities
Loans and Advances
40000
30000
20000
10000
0
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
Deposit Liablities and Loans & Advances
80000
Years
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Proceedings of 11th International Business and Social Science Research Conference
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Fig. 2: Graph of % Loans/Deposits
90
80
70
% Loans Access
60
50
40
30
20
10
Source: Author‘s work, 2013
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
0
Years
From the above table and graphs, it shows that the amount accessed from deposit liabilities in
form of loans and advances was far below 50%, however, there was a gradual development with
effect from 2002. The loan access also dropped below 50% between 2006 and 2007 before picking
up in 2008.
As a result of poor planning and lack of appropriate business knowledge among small and
medium enterprises (SMEs) operators, 75 percent of funds made for their development were still
dormant with the Bank of Industry (BoI); SMEs have not developed a bankable plan to enable them
access the fund meant for the development of the sector, which remain largely untapped. Umar
(2012).
It is ironical and unexplained that given the intensity of poverty ravaging the Nigerian society
and the government‘s efforts in providing succour for the poor through micro-credit facilities to
better their lot has yielded little or no result due to the poors‘ attitude to access the fund while they
still remain poor. In another dimension, why is it that the finance sector provides fund for the small
scale industrialists (the production sector) to borrow and the production sector that are in dire need
of fund to produce refuse to access the fund provided by the finance sector? Is it that the poor are
comfortable with their state of penury or they have constraints in accessing the fund?
It is the light of the above that this study is being carried out to find out why are the
production sector players not accessing the fund being provided by the finance sector. What can we
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Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
do to bridge the gap, that is, to enable the production sector players access the fund and consequently
alleviate their poverty.
Objective of the Study
The general objective of this study is to evaluate the extent to which the problem of abject
poverty syndrome ravaging Nigerian society has been solved through microcredit initiatives. The
specific objective of the study is to:
Investigate the level of awareness of existence of microcredit facilities;
Research Question
The study is aimed to provide answers to the following question:
What is the extent of awareness of the poor on microcredit facilities?
Significance of the Study
Rigorous empirical analysis in the issue of statistical impact of microfinance began in the
1990s Kiiru (2007).
Series of researches have been carried out on poverty alleviation by distinguished scholars
and economic and finance experts with different approaches on how to surmount the problem. The
studies so far are so provocative and beg for further researches. There are different schools of
thought on the relevance of microfinance as a poverty reduction policy.
Kiiru (2007) analysed the impact of microfinance on household income as well as measure
household vulnerability to poverty after access to microfinance. The study which is an experimental
case of Makueni district where participants in microfinance programmes and non-participant
households were studied over time indicated a positive and significant impact of microfinance on
household income. Also Rahman et al (2009), Khandker (2003), and Lu and Hasan (2011) are of the
view that micro-credit programmes are successful in bringing better position for borrowers‘ quality
of life in terms of increasing income, food consumption and living standard.
While appreciating the efforts of the above researchers on poverty reduction, there still exist
rooms for further researches on why the poor in the production sector failed to make maximum use
of microcredit facilities made available by the finance sector thereby living the poor in perpetual
poverty. Also, the issue of poverty reduction requires continuous efforts in so far as poverty remains
the lots of the citizenry. This paper therefore intends to make contribution in this area by examining
the extent of awareness by the poor of the existence of microcredit facilities for poverty alleviation.
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Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
REVIEW OF THEORIES AND MODELS
Individualism Theory
The Individualism theory of poverty is a large and multifaceted set of explanations that focus on
the individual as responsible for their poverty situation. Typically, politically conservative
theoreticians blame individuals in poverty for creating their own problems, and argue that with
harder work and better choices the poor could have avoided (and now can remedy) their problems.
Other variations of the individual theory of poverty ascribe poverty to lack of genetic qualities such
as intelligence that are not so easily reversed, Bradshaw (2005).
Cultural Theory of Poverty
The concepts of culture of poverty and social isolation provide frameworks that explain how
poverty is created and maintained in some neighbourhoods or among some groups. The cultural and
neighbourhood factors relate to the influence of people‘s residential environment that tends to shape
poverty or success. According to Sameti et al (2012), Oscar Lewis first coined the term culture of
poverty when he carried out a study on poverty in Mexico and Puerto Rico in 1961 and 1966. The
theory of culture of poverty is built on the assumption that both the poor and the rich have different
pattern of values, beliefs, and behavioural norms. This theory argues that the poor become poor
because they learn certain psychological behaviours associated with poverty.
Structural/System Theory
Larger economic and social structures have been found to account for poverty. Perspectives
regarding structural factors argue that capitalism creates conditions that promote poverty.
Irrespective of individual effort (hard work, skill); the structure of the United States economy
ensures that millions of people are poor. Specifically, the Davis and Moores‘ functionalist theory,
labour market theories, and the social exclusion perspective threw more light on the structural causes
of poverty. The functionalist theory of social stratification argues that poverty is a function of social,
economic and political setting of society in general, and the middle and Wealthy classes in
particular (Davis & Moores, 1945). On the basis of labour wages, functionalist theory accounts for
the causes of poverty among certain people and groups in society. Majid Sameti et al (2012).
This theory, that is Structural/System theory of poverty, is considered relevant to this
research work bearing in mind the poverty trend and intensity in Nigeria. This research work shall
therefore focus on the role of microfinance model in poverty alleviation.
According to Jegede, et al (2011), Microfinance pertain to the lending of small amount of
capital to poor entrepreneurs in order to create a mechanism to alleviate poverty by providing the
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Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
poor and destitute with resources that are available to the wealthy, alert at a small scale.
Microfinance bank is not just providing capital to the poor, but to also combat poverty at an
individual level, it also has a role at institutional level. It seeks to create institutions that deliver
financial services to the poor, who are continuously ignored by the formal banking sector.
Microfinance programs and institutions have become an increasingly important component
of strategies to reduce poverty or promote micro and small enterprise development. However,
knowledge about the achievements of such initiatives remains only partial and contested.(Hume
2000, Abbas et al 2012).
The Vicious Cycle of Poverty Model
According to Kiiru (2007), the following figure explains the general perception of the poor
emphasizing on the interlink to low productivity within the vicious cycle of poverty,
Figure 3: The poor are held up in a vicious cycle of poverty
The Role of Microfinance in Fighting Rural Poverty
Economists argue that to break the vicious cycle of poverty, there needs to be an outside force that
will intervene at some point of the cycle to improve demand for goods and services. This could be
done by injecting some liquidity that is believed to unleash the productivity of household labour.
Microfinance promises not only to break the vicious chain of poverty by injecting liquidity in to the
vicious chain, but also it promises to initiate a whole new cycle of virtuous spirals of self enforcing
economic empowerment that lead to increased household well-being. Figure two is illustrates the
microfinance promise.
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Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
Figure 4: Microfinance Promise
Such is the model that has promoted the microfinance institution and given it the ―polite and
respectable‖ image it currently enjoys. There are several assumptions that go with this model; first it
is assumed that poor people can become micro-entrepreneurs if only they were given a chance
through credit. In essence, this implies that the level of entrepreneurship and managerial skills
required is already given or can be easily acquired by the poor. The model further assumes that there
is a vibrant market for goods and services and that it is possible for micro-entrepreneurs to get linked
up to markets for their products. Lastly, some proponents of the model also assume that the fact that
the poor can repay at market interest rates or slightly above market rates is a good indication that
they are improving their financial status; and therefore it is a sign of good impact of microfinance.
Kiiru (2007)
Review of Empirical Works
According to Okpukpara et al (2010), the research work into ―Child Participation in
Economic and Schooling Activities in Nigeria; What Counts‖ was motivated by the increasing drop
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Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
out of children from schools and high incidence of child labourer. They defined child labour as the
participation of young children under the age of 15 years in labour force in order to earn a living or
to support household income.
In carrying out the research, Okpukpara et al used data taken from the National Survey on
Child Labour and Street Children in Nigeria conducted by the former Federal Office of Statistics
(FOS) now National Bureau of Statistics (NBS) in conjunction with International Labour
Organisation (ILO) which ended February, 2001.
In formulating econometric model to understand the factors that influence the probability of a
child‘s school attendance and working behaviour, the study used a univariate probit model to
estimate the household and individual determinants of children working or going to school. The
study among other things found that participation in school or work is dictated by region, sector,
child and household characteristics.
Okunmadewa et al (2010) research on ―Poverty and Inequality among Rural Households in
Nigeria‖ examined the effects and determinants of poverty in rural Nigeria. Their methodology and
analysis was hinged on (i) the definition of an indicator of good living (welfare) so as to identify the
poor; (ii) choice of poverty index and (iii) the econometric procedure to better understand the effects
of human capital and institutions on rural poverty in Nigeria. The overall analysis indicates that
poverty is widespread in rural Nigeria and those engage in farming activities are poorer than those
engaged in non-farming activities.
Aigbokhan (2000) the study investigated the profile of poverty in Nigeria in the context of
structural policy reforms introduced in 1986 and the reversal introduced in January 1994. National
consumer survey data sets for 1985/86, 1992/93 and 1996/97 from the Federal Office of Statistics
were used. The study found also that there was positive real growth throughout the period studied,
yet poverty and inequality worsened.
Kiiru (2007), to address the empirical objectives of the study, primary data was collected in 3
cross sections within Makueni district Kenya. The data was collected for the same households after
every six months for a period of 18 months; thus giving us a rich pooled primary data for analysis.
These measures mainly focused on household access and ownership of assets, and the fluctuations
therein within the period.
The overall study is designed as an experimental case study. A randomised sample of 200
treatment households (participants of Microfinance programs) and 200 control households (non
participants of microfinance programs) in every cross section was used. Data in this study is
analysed using both qualitative and quantitative techniques. On integrating time dynamics in the
analysis, the results indicate a positive and significant impact of microfinance on household income.
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Proceedings of 11th International Business and Social Science Research Conference
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Review of Related Literature
According to Sarshar (2010), the concept of poverty can be stated in three different ways. The
first and most effective definition of poverty is that Poverty is a situation in which there is dearth of
essential facilities, resulting from inadequate income‘. There is a socially accepted minimum level of
living in every society. Those who live below this minimum level are said to live in poverty. The second
definition of poverty is based on basic or fundamental needs, i.e. a failure to meet the basic human needs;
or to remain deprived from such needs is a state of poverty. The basic human needs include not only
food, clothing and dwelling, but also health and education. The third way of defining poverty is in
respect of lack of opportunities.
Ajakaye and Adeyeye (2001), various theories have been advanced in order to put in proper
perspective the mechanics of poverty. The orthodox Western views of poverty, reflected in the ―Vicious
circle‖ hypothesis stating that a poor person is poor because he is poor, and may remain poor, unless the
person‘s income level increases significantly enough to pull the person in question out of the poverty
trap.
Sameti et al (2012) opined that many poverty authors point out that the various ways poverty is
conceptualized and measured are very crucial because different poverty measures tend to capture
different people as poor. That understanding of the causes of poverty could be grouped under three major
factors: individual factors, cultural and neighbourhood factors, and structural factors.
The Microfinance Revolution
Perhaps the best known story in microfinance is that of Mohammed Yunus, the founder of
the Grameen Bank that has inspired many other microfinance institutions world wide. The Grameen
Bank started during the aftermath of the country‘s war of independence. During this time
Bangladesh was plagued by desperate poverty that was made worse by very high birth rates. The
economy was still very rural, coupled by a government that was perceived to be weak and corrupt. In
order to deal with the poverty situation, there was a strong preference for non bureaucratic ‗grass
roots‘ and other collective approaches. This prompted the formation of self help groups for equally
disadvantaged groups in order to pool resources for mutual benefit of the group members. It was in
this environment that Muhammad Yunus, an Economics professor at the University of Chittagong,
began an experimental research project providing credit to the rural poor of Bangladesh. He began
by lending little money from his pocket and realised that it was enough for villagers to run simple
business activities like rice husking and bamboo weaving. He later found that borrowers were not
only benefiting greatly by accessing the loans but they were also repaying reliably even though they
could offer no collateral. The Grameen Bank today boasts a Nobel Prize, 1,700 branches, 16000
employees, and six million customers of which 96 % of them are women (Kiiru 2007).
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Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
Rahman et al (2009) used primary data collected through a structured questionnaire from
borrowers of two major microcredit institutions in Bangladesh such as the Grameen Bank and the
BRAC. In this study, they investigated the impact of microcredit on economic indicators of
borrowers in Bangladesh and compared if the impact is same across borrowers having different
income levels. Their estimation results showed that the microcredit programs are effective in
generating higher income and assets for borrowers in general.
Chowdhury (2009) attempts to provide a critical appraisal of the debate on the effectiveness
of microfinance as a universal poverty reduction tool. It argues that while microfinance has
developed some innovative management and business strategies, its impact on poverty reduction
remains in doubt. Microfinance, however, certainly plays an important role in providing safety-net
and consumption smoothening.
Khandker (2003) studies about Micro-finance in Bangladesh addressed two issues. First, he
identified the participants of a microfinance program and their characteristics. Second, he assessed
the impacts of micro-finance on short-term and long-term welfare indicators of program participants,
as well as all participants in a local economy.
Oshewolo (2010), analysed the poverty situation in Nigeria and concluded that on the
continent of Africa, using selected world development indicators, Nigeria is poorly ranked. That to
halt the galloping nature of Nigeria‘s poverty situation, he contends that the Nigerian state should be
reformed and repositioned; the conducive environment should be created for the development of
market and civil society institutions; and inter-sectoral governance system should be encouraged.
THEORETICAL FRAMEWORK
The theories central to the analysis in this study are the Structural Theory of Poverty and
Agency Theory.
Structure Theory of Poverty:
This theory assumes that individuals have strong motivation to succeed
However, the poor are overwhelmingly prevented from success by structural barriers that need to be
removed. Progressive thought seeks reform of the system rather than punishing individuals. Barriers
that lead to poverty are found in many sectors of the society: Economy, Education, Health, Housing,
Politics, Safety and environmental, justice as well as Transportation. Structural barriers cause
poverty in many ways, people are prevented from achieving their potential by irrelevant criteria such
as race, gender, age…People with advantage perpetuate and extend their opportunities because they
can and Political structures do not value the poor. Bradshaw (2004).
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Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
Perspectives regarding structural factors argue that capitalism creates conditions that promote
poverty, the economic structure is such that irrespective of individual effort (hard work, skill);
millions of people are poor. The economic system is structured in such as way that poor people fall
behind regardless of how competent they may be. (Bradshaw 2006), (Sameti et al 2012).
The Agency Theory
The agency theory is concerned with how agency affects the form of the contracts and the
way they are minimized, particularly, when contracting parties are asymmetrically informed.
Asymmetric information refers to situations in which one party to a transaction has more
information about the transaction than the other. This situation could cause markets to deviate from
the conventional behaviour patterns and lead to moral hazards and adverse selections, Osotimehin
(2011). Agency theory argues that in the modern corporation, in which share ownership is widely
held, managerial actions depart from those required to maximise shareholder returns. In agency
theory terms, the owners are principals and the managers are agents and there is an agency loss
which is the extent to which returns to the residual claimants, the owners, fall below what they
would be if the principals, the owners, exercised direct control of the corporation, Donaldson and
Davis (1991).
Adelegan (2007) assert that a fundamental issue in agency theory is the divergence in the
objectives of the principal, the economically powerful entity, and the agent. The theory assumes that
a principal strives to make contractual arrangements with an agent in a way which best serves the
principal‘s objectives. The problem, therefore, generally concerns how to craft contract terms, which
would maximize the principal‘s objective function subject to the so-called incentive and
participation constraints. Given the contract terms, the agent behaves optimally. It is normally
assumed that the principal knows the possible level of an agent‘s action for each contract. The
principal is, therefore, saddled with the responsibility of crafting the contract in a way which would
guarantee optimal result. This is incentive constraint. Since the agent may be able to reject a
contract, the principal should also consider a participation constraint in the construction of an
optimal contract. This implies that the utility the agent derives from accepting a contract should at
least equal the one it would derive by declining the contract, which is the reservation utility.
It should be noted that for the purpose of this study, principal and agency relationship exist
between the government and the citizens as well as between the government and microfinance
banks. In the first case, the citizens stand as the principal while the government is the agent because
the citizens elected the government officials for the purpose of managing the resources entrusted in
their hands for the benefits of the citizens. In the second case the government is the principal while
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Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
microfinance banks stand as the agent because the government issues the guidelines by which the
microfinance banks operate to ensure judicious use of the funds in their care.
The method used by Kiiru (2007) in Makueni district in the Eastern province of Kenya shall
be adopted in this study. Hence the study shall be designed as an experimental case study using
panel data. To address the empirical objectives of the study, primary data shall be collected in 3
cross sections within South West geo-political zone of Nigeria. The data shall be collected for the
same households after every four months for a period of 12 months; thus giving us a rich pooled
primary data for analysis. The data shall be collected using questionnaires that focused on household
access to microfinance, household uses of the credit, as well as fluctuations of household income
over the period. To achieve a more accurate data about household incomes and expenditure and also
to be able to capture any changes including marginal changes over the relatively short period,
relative measures of income and poverty shall be used. These measures mainly focused on
household access and ownership of assets, and the fluctuations therein within the period.
The overall study is designed as an experimental case study. A randomised sample of 200
treatment households (participants of Microfinance programs) and 200 control households (non
participants of microfinance programs) in every cross section shall be used. Data in this study shall
be analysed using both qualitative and quantitative techniques.
RESEARCH METHODOLOGY
3.1.1 Brief Introduction
This aspect deals with step-by-step procedure that was observed in the course of this research
work. The various sections that were involved include description of the population of the study,
sampling method and sample size, target respondents, research design, research instrument, validity
and reliability test, pilot study, administration of research instrument and method of datas analysis.
Research Design
This work centres on awareness of micro-finance bank on poverty alleviation. On this
background attention was focussed on two categories of individuals, that is, those poor who are
customers of at least a microfinance bank and those who are not patronizing microfinance bank.
Some socio and economic indicators shall be considered as the basis for assessment. Due to the fact
that there are many microfinance banks in South West Nigeria, some microfinance banks with
branches in South West states shall be selected.
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Proceedings of 11th International Business and Social Science Research Conference
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Population of the Study
The target respondents are beneficiaries and non-beneficiaries of microfinance bank fund. In
this case, the population of the study shall be all microfinance bank customers who are relatively low
(poor) income earners and non-beneficiaries of microfinance bank funds who are also low income
earners. Respondents in this category are predominantly artisans, farmers and traders in South West
geo-political zone of Nigeria.
Sampling Method and Sample Size
Due to the nature and coverage of this study, South West geo-political zone shall be viewed
as an entity containing six clusters (states). A random sample of two states (clusters) was selected at
the first stage (first stage unit (fsu)). Each selected states was considered as an entity with n-clusters
(second stage clusters) where the clusters are Local Government Areas. In each state, a random
sample of four Local Government Areas (second stage unit (ssu)) was selected. Furthermore, in each
Local Government Area, 25 random sample of microfinance bank fund beneficiaries and 25 nonbeneficiaries were selected. This means that a total of 50 respondents were selected from each Local
Government Area and for the four Local Government Areas in each state, a total of 200 respondents
were selected. Since the fsu contains two states, there was a total of 400 respondents. On this
background, multi-stage sampling method was employed and a total of 400 respondents selected.
Justification for Multi-Stage Sampling
Multi-Stage sampling was adopted due to the fact that there is the tendency that people‘s attitudes
and perception would vary from one area to another particularly business orientation and ideology
and the variation may be significant. In order to take care of the variability with respect to location
and some other characteristics, a sample design which will capture virtually all groups was used. The
sampling method that is capable of controlling all forms of diverse views, attitude and perception in
different groups or location is the multi-stage sampling.
Scope and Sources of Data
The data for the study were collected through interview method with the aid of a well
designed questionnaire. The target respondents are in two groups, namely: (i) Individuals who are
beneficiaries of micro-credit facilities and (ii) Individuals who are non-beneficiaries of micro-credit
facilities. The investigation was carried out in the South West geo-political zone of Nigeria.
Specifically, attention was focused on the level of awareness of low income earners about existence
of micro-credit facilities within their communities.
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Proceedings of 11th International Business and Social Science Research Conference
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Methods of Data Collection
This is a very crucial aspect. Data for this study consist primary data that were collected
through personal interview with the aid of a well structured questionnaire. Each randomly selected
respondent was asked questions contained in the questionnaire and their responses recorded for each
question.
Pilot Study
A preliminary study was carried out before the actual survey. This was done to ensure that
the questionnaire does not only ensure clarity of expressions but also guarantee the ability of the
questionnaire to measure essential components of the study which in turn were used to answer the
stated research questions. In this case, a random sample of 10 respondents was selected and the
questionnaire was administered. Both content validity and reliability were examined.
Reliability Test
The questionnaires collected at the pilot study stage were used to examine reliability of the
questionnaire. The cronbach‘s alpha statistic was used as the basis for testing reliability.
Method of Data Analysis
Basically, descriptive statistics was employed. The descriptive analysis involves frequency
counts, percentages and bar charts.
Are you a Microfinance Participant?
Cumulative
Frequency
Valid
Percent
Valid Percent
Percent
Yes
205
59.1
59.1
59.1
No
142
40.9
40.9
100.0
Total
347
100.0
100.0
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Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
59.1% of the respondents are microfinance participants while 40.9% are non-participants.
Are you a Microfinance Participant? SEX
SEX
Male
Are you a Microfinance
Participant?
Yes
Count
% within Are you a Microfinance
Participant?
No
Count
% within Are you a Microfinance
Participant?
Total
Count
% within Are you a Microfinance
Participant?
Female
Total
143
62
205
69.8%
30.2%
100.0%
83
59
142
58.5%
41.5%
100.0%
226
121
347
65.1%
34.9%
100.0%
Among the microfinance participant respondents 69.8% are males while 30.2% are females. On the
other hand, for non-participants 59.5 are males while 41.5 are females.
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Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
Are you a Microfinance Participant? * Age
Age
15-30yrs
Are you a Microfinance
Participant?
Yes
Count
% within Are you a
Microfinance Participant?
No
Total
Count
% within Are you a
Microfinance Participant?
45-above
Total
90
103
12
205
43.9%
50.2%
5.9%
100.0%
59
59
24
142
41.5%
41.5%
16.9%
100.0%
149
162
36
347
42.9%
46.7%
10.4%
100.0%
Count
% within Are you a
Microfinance Participant?
31-45
Age distribution among the microfinance participants are 15-30yrs, 43.9%, 31-45yrs, 50.2%
and 45yrs and above 5.9%, for non-participants 15-30yrs, 41.5% 31-45yrs 41.5% and 45yrs and
above 16.9%.
Are you a Microfinance Participant? * Marital Status
Marital Status
Single
Are you a Microfinance
Participant?
Yes
Count
% within Are you a
Microfinance Participant?
No
Count
17
Married
Divorced
Total
76
123
6
205
37.1%
60.0%
2.9%
100.0%
49
93
0
142
Proceedings of 11th International Business and Social Science Research Conference
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% within Are you a
Microfinance Participant?
Total
34.5%
65.5%
.0%
100.0%
125
216
6
347
36.0%
62.2%
1.7%
100.0%
Count
% within Are you a
Microfinance Participant?
Microfinance participants consists of 37.1%, 60% and 2.9% of single, married and divorced
respectively while 34.5%, 65.5% and 0% represent single, married and divorced non-participants respectively
Are you a
Microfinance
Participant?
Yes
Count
Are you a Microfinance Participant? * Education Background
Education Background
Pry JSS
O'level NCE
ND
HND BSC
Sch
14
2
64
10
44
51
18
% within Are you a
Microfinance Participant?
6.8%
1.0
%
31.2%
18
4.9%
21.5
%
24.9
%
8.8
%
Total
PGD
Masters
0
2
205
.0%
1.0%
100.0%
Proceedings of 11th International Business and Social Science Research Conference
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No
Total
Count
4
% within Are you a
Microfinance Participant?
Count
% within Are you a
Microfinance Participant?
0
29
4
41
30
30
2
2
142
2.8% .0%
20.4%
2.8%
28.9
%
85
21.1
%
81
21.1
%
48
1.4
%
2
1.4%
100.0%
4
347
24.5
%
23.3
%
13.8
%
.6%
1.2%
100.0%
18
2
93
14
5.2
%
.6%
26.8%
4.0%
Microfinance participants who have either primary, secondary, NCE or ND certificates account for
65.5% those with HND, or BSc 33.7% while those with PGD and Masters represent 1%. On the other hand
non-participants with primary, secondary, NCE or ND certificates account for 54.9% those with HND or BSc
42.2% while those with PGD and Masters represent 2.8%.
Are you a Microfinance Participant? * Nature of Business
Nature of Business
Farmer
Are you a Microfinance
Participant?
Yes
Count
% within Are you a Microfinance
Participant?
No
Count
19
Trader
Artisan
Other
Total
10
107
34
54
205
4.9%
52.2%
16.6%
26.3%
100.0%
6
74
28
34
142
Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
% within Are you a Microfinance
Participant?
Total
4.2%
52.1%
19.7%
23.9%
100.0%
16
181
62
88
347
4.6%
52.2%
17.9%
25.4%
100.0%
Count
% within Are you a Microfinance
Participant?
Microfinance participants consist of farmers 4.9%, traders 52.2% Artisans 16.6% and others 26.3%
while non-participants consist of farmers 4.2%, traders 52.1% Artisans 19.7% and others 23.9%
S/No
1.
2.
Question
SA
I a m well aware of
197 (56.8%)
existence of micro –credit
facilities
The most efficient means of
getting information on micro
–credit facilities is:
A
D
128(36.9%)
20(5.8%)
SD
0(0%)
U
2(0.6%)
Media
Group
Friends
Others
3.
4.
The poor in my community
are well aware of existence
of micro – credit facilities
The awareness of micro –
Total
164(47.26)
156(44.96)
17(4.9%)
10(2.9%)
140(40.3%)
115(33.1%) 54(15.6%) 23(6.6%) 15(4.3%)
101(29.1%)
146(42.1%) 62(17.9%) 15(4.3%) 23(6.6%)
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Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
5.
credit facilities has
encouraged my community
members to benefit from the
scheme.
There is usually short
duration between period of
aware and participation by
the poor in my community.
96(27.7%)
129(37.2%) 63(18.2%) 14(4.0%) 45(13.0%)
The above table shows the summary of responses obtained from the respondent to each of each
question on awareness.
For Q1, 197(56.8%) of the respondent strongly agreed (SA) that they are well aware of existence of
micro-credit facilities, 128(36.9%), choose agree (A), 20(5.8%) choose disagree, none (0%) choosen
strongly disagree (SD) while 2(0.6%) were undecided.
For Q2 which is on the most efficient means of getting information on micro-credit facilities,
164(47.3%) choose media, 156(45.6%) choose group participation, 17(4.9%) choose other medium
of awareness. It can be conducted that the most efficient means of getting information on microcredit facilities is through friends. Though ―others‖ has a lesser value but the specific type can not be
identified.
For Q3 which deals with the awareness of micro-credit facilities by the poor, 140(40.3%)
choose strongly agree (SA), 115(33.1%) choose agreed, 54(15.6%) choose disagreed (D) 23(6.6%)
choose strong disagree and 15(4.3%) were undecided. This implies that the poor are well aware of
existence of micro-credit facilities.
For Q4. which is concerned with community members being beneficiaries of micro-credit
facilities on a result of their awareness:101(29.1%) choose strongly agree,(SA) 146(42.1%) choose
agree (A),62(17.9%) choose disagree, 15(4.3%) choose strongly disagree while 23(6.6%) were
undecided cases. The implication is that community members are benefiting from micro-credit
facilities as a result of their awareness of the existence of micro-credit facilities.
For Q5: On duration between awareness and participation; 96(27.7%) choose strong
agree(SA),129(37.2%) choose disagree (D) 14(4.0%) choose strongly disagreed (SD) and 45(13.0%)
were undecided. This simply means that over 60% of respondents said that the duration between
awareness and participation is usually short.
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Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
The above bar chart shows the distribution of participants and non-participants of microcredits on their level of awareness of existence of micro-credit facilities for the participant category,
119 (58.0%) choose strongly agree (SA), 78 (38.8%) Agree, 8 (3.9%) choose disagree, and none
(0%) were undecided. On the other hand, for the non-participants 78 (54.9%). Choose disagree (D)
and 21 (1.4%) were undecided.
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Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
The above bar chart shows that 93 (45.4%) out of 205 participants choose media on the most
efficient means of getting information on micro-credit facilities; 96 (46.8%) choose group, 12 (5.9%)
choose friends while 4 (2.0%) choose others. Out of 142 non-participants, 71 (50%) choose media,
60 (42.3%), choose Group 5 (3.5%) choose friends while 6 (4.2%) choose others.
The above bar chart shows the respondents (opinion) distribution on awareness of the poor on
existence of micro-credit facilities. 89 (43.4%) choose (SA), 70 (34.1%) choose (A), 26 (12.7%) choose
Disagree (D), 16 (7.8%) choose strongly disagree (SD), 4 (2.0%) were undecided on the part of micro-finance
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Proceedings of 11th International Business and Social Science Research Conference
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participants. 51 (35.9%) choose strongly Agree, 45 (31.7%) Agree, 28 (19.7%) choose disagree, 7
(4.9%) strongly disagree (SD), 11 (7.7%) were undecided
For the participant category, 59 (28.8%) choose strongly agree, 106 (51.7%) choose agree, 36
(17.6%) disagreed and 2 (1.0%) choose strongly disagree and undecided each, on the other hand, 42
(29.6%) and 40 (28.2%) choose strongly Agree and Agree respectively in the non participants
category, 26 (18.3%) and 13 (9.2%) choose disagree and strongly disagree respectively while 21
(14.8%) were undecided.
The above bar chart shows the responses of the chosen respondents. It can be observed that
66 (32.2%) and 86 (42.0%) chose strongly agree and agree respectively 35 (17.1%) and 4 (2.0)
choose disagree and strongly disagree respectively while 14 (6.8%) were undecided in the
participant category for the non participant category, 30 (21.1%) and 43 (30.3%) choose strongly
agree and agree respectively 28 (19.7%) and 10 (7.0%) choose disagree and strongly disagree
respectively while 31 (21.8%) where undecided
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Proceedings of 11th International Business and Social Science Research Conference
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Are you a Microfinance Participant? * I find it easy to pay my household education and medical care Crosstabulation
I find it easy to pay my household education and medical
care
SA
Are you a Microfinance
Yes
Participant?
Count
A
D
SD
U
Total
45
98
50
9
3
205
22.0%
47.8%
24.4%
4.4%
1.5%
100.0%
36
59
16
17
14
142
25.4%
41.5%
11.3%
12.0%
9.9%
100.0%
81
157
66
26
17
347
23.3%
45.2%
19.0%
7.5%
4.9%
100.0%
% within Are you a
Microfinance
Participant?
No
Count
% within Are you a
Microfinance
Participant?
Total
Count
% within Are you a
Microfinance
Participant?
From the above table, out of 205 participants of micro credit facility, 143 participants (SA & A) representing
69.76% have been able to escape from poverty while 95 (SA & A) out of 142 non-participants representing
66.9% have been able to escape from poverty.
Conclusion and Recommendation
There is no gain saying the fact that larger percentage of Nigerians are wallowing in abject
poverty. Microfinance banks that serve as tools for alleviating poverty abound in various parts of
Nigeria. Even though majority of the citizens are well aware of the existence of microcredit
facilities, the level of participation by the poor is not encouraging. This may not be unconnected with
the economic structure of the country where capitalism creates condition that promotes poverty. The
economic system is structured in such a way that the poor people fall behind regardless of how
competent they may be.
In order to reverse the trend and bring an end to poverty ravaging the society, it is highly
important that the government should work hand in hand with microfinance banks entrepreneurs to
create awareness and encourage participation by the poor.
This can be achieved when federal government sets aside, through annual budgetary
allocation, certain amount of money. The fund should be channelled through microfinance
for onward loan to the poor who are genuine entrepreneurs with low interest rate.
25
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Proceedings of 11th International Business and Social Science Research Conference
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The Microfinance banks in Nigeria should try as much as possible to create awareness about
their existence and services so that the larger community will get the required information relating to
them. This can be achieved through advert on the radio, television and face-to-face contact etc.
The banks should put necessary control measures in place in order to ensure that customers
use the loan collected for the purposes meant for.
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