Input-output Theory

Input-output Theory

This theory points out that finance need is assumed to equal the amount of other input used from other sector. These include social welfare programs, basis education, basic amenities and transportation. It also point that developing economies do not have a large financial market and the amount of informal finance that reaches for poor is small. Access to institutional microfinance by the poor is generally limited. Self finance predominate the Poor’s balance sheet in the market economies. Thus, availability of funds in an economy is a sine-qua-non to the overcoming of the constraints. Klaus (2010) has identified finance as an indispensable tool in development. A poorly developed finance system is an obstacle to the development of wealth, enhancement of soci-economic welfare

and promotion of human dignity (Iniodu and Ukpak, 1996).

It is obvious that no production, no matter how simple the technology, can take place without the use of capital (finance). The provision of financial support through credit and saving for the acquisition of capital goods is crucial for effective economic management, the aims of which are to increase prosperity, equity and sustainability. Economic management goals are consistent with the primary objectives of the provision of micro finance, which focuses on the improvement of the living condition of the poor. All these are based on the assumption that additional money, either as loan or saving will result in the overall liquidity available to the households’ production, consumption and/ or investment activities as enunciated in the saving-investment or foreign exchange gap models, which are normally used to justify borrowing for economic development.