EFFECT OF MICROFINANCE BANK LOAN SCHEME ON THE ENTREPRENEURSHIP DEVELOPMENT IN NASARAWA LGA OF NASARAWA STATE

EFFECT OF MICROFINANCE BANK LOAN SCHEME ON THE ENTREPRENEURSHIP DEVELOPMENT IN NASARAWA LGA OF NASARAWA STATE

ABSTRACT

The study examined the effect of microfinance bank loan scheme on the entrepreneurship development in Nasarawa LGA of Nasarawa State. The specific objectives include; to find out the effect of microfinance bank loan scheme on the income of entrepreneurial activities in Nasarawa LGA, find out the extent at which microfinance bank loan scheme impact on the poverty of entrepreneurs in Nasarawa LGA and to find out the impact of microfinance bank loan scheme on operational pattern of entrepreneurship development in Nasarawa LGA. The researcher used primary data collection to gather information for analysis. Base on statistical test carried out using X,² hypothesis the study shows that microfinance loan scheme have a significant effects on entrepreneurship development in Nasarawa LGA of Nasarawa State. The study recommends that the microfinance institutions should put more effort in financing entrepreneurs and small and medium scale business in general and that the government should make laws and policies that improve the services of microfinance banks thereby removing the various problems militating against the effectiveness of microfinance banks in rural areas.

CHAPTER ONE

INTRODUCTION

1. Background to the study

Empowering the poor and small scale enterprises economically and liberating them from poverty is the major reasons for the establishment of micro finance institutions. According to Ehigiamusoe (2005), access to Sustainable access to microfinance operations helps alleviate poverty by generating income, creating jobs, allowing children to go to school, enabling families to obtain health care, and empowering women socially to make the choices that best serve their needs.

Microfinance activities encompasses the provision of financial services to poor and low income people who are normally excluded from traditional financial systems as they are considered uncomfortable due to lack of collateral, steady employment and a verifiable credit including market women (Egyir, 2010). The situation that envisions the poor and low income people of having permanent access to an appropriate range of financial services that include credit, savings, and insurance and fund transfers is the core business of microfinance (Westover, 2008).

Microfinance does not only mean providing poor families with small loans to help them engage in productive activities or grow their small businesses, but over time, microfinance operations has come to provide a broader range of services such as credit, savings, insurance, money transfer facilities for all. This is because developers have come to realize that the poor who lack access to traditional formal financial institutions require a variety of financial products to help them grow their businesses, support their households and to engender sustainable livelihoods (Hagen, 2004).

Entrepreneur tend to operate in an environment with low investment, low potential growth, cheap and home-based premises and endure harassment on issues concerning licensing (Stevenson and Onge, 2005). Researches support the fact that entrepreneurs, mostly in developing countries, do not have easy access to credit for their entrepreneurial activity; likewise, women entrepreneurs tend to have little or no education and often lack confidence (Gakure, 2003). This has necessitated a research of this kind in order to assess the effect of microfinance bank loan scheme on the entrepreneurship development in Nasarawa LGA of Nasarawa State.

1. Statement of the Problem

Despite the crucial role of women entrepreneurs in the economic development of their families and countries; it is, however, discovered that women entrepreneurs have low business performance compared to their male counterparts (Akanji, 2006; Gakure, 2003); and this is caused by lack of access to finance. The microfinance banks from studies have proved to be the only recognized institution strategically positioned to eradicate poverty. Berg (2001) argues that, most of the businesses in developing countries lack access to basic financial services that would help them manage their assets and generate income. Studies finds that participation in microcredit programs results in economic and socio empowerment (Mayoux, 2001), most entrepreneurs in microfinance institutions fall under informal sector with most of them involved in small business to earn income to support their families. In developing country like Nigeria, entrepreneurship play a major role in household production (Mayoux, 1995; Ledgerwood, 1999; Pitt and Khandker, 1998). These are researches conducted on the impact of microfinance on the development of women entrepreneurs, however, the situation is different in Nigeria and none of these researchers provided sufficient justification for the effect of microfinance bank on entrepreneur thus there is need for this study to assess the effects of microfinance bank loan scheme on entrepreneurship development in Nasarawa LGA of Nasarawa State.

1. Objectives of the Study

The main objective of this study is to assess the effects of microfinance bank loan scheme on entrepreneurship development in Nasarawa LGA of Nasarawa State

The specific objectives will include;

1. To find out the effect of microfinance bank loan scheme on the income of entrepreneurial activities in Nasarawa LGA.
2. To find out the extent at which microfinance bank loan scheme impact on the poverty of entrepreneurs in Nasarawa LGA
3. To find out the impact of microfinance bank loan scheme on operational pattern of entrepreneurship development in Nasarawa LGA

1. Research Questions

The following research questions will guide the researcher towards achieving the set objectives of the study:

1. What effect do micro-finance bank loan scheme have on the income of entrepreneur activities in Nasarawa LGA?
2. Do micro-finance bank loan scheme impact on the poverty of entrepreneurs in Nasarawa LGA
3. What effect do micro-finance bank loan scheme have on the operational pattern of women entrepreneur in the study area

1. Statement of Hypotheses

Ho: Micro-finance bank loan scheme does not have significant effect on the income of entrepreneur in Nasarawa LGA.

H₁: Micro-finance bank loan scheme has significant effect on the income of entrepreneur in Nasarawa LGA.

1. Scope and Limitations of the Study

The scope of the study shall cover the effects of microfinance bank loan scheme on entrepreneurship development in Nasarawa LGA. However, owing to shortage of literature and financial data, raw data shall be generated from selected small business operators in Nasarawa LGA.

The researcher encountered problems at the time of carrying out this research. The following limitations are inherent in the study:

1. Time: Since there is no time set aside for writing this project, researcher has to combine the writing of the project with her normal academic and other commitment in the academic environment.
2. Finance: Finance hinder the researcher from expanding the scope of this study beyond Nasarawa LGA as this will involve more money which is not at the disposal of the researcher.
3. Lack of adequate materials: Arising from inadequate reading materials and uncooperative attitude of a few respondents.

1. Significance of the Study

Given the fact that literature on effects of microfinance bank loan scheme on entrepreneurship development in Nasarawa LGA, the importance of this study is that it adds to the literature, and can also provide a basis for further research. As such, the study will contribute to recent debates on the roles of social capital and economic empowerment on Nigerian entrepreneurs and other small and scale medium business.

The findings of this study will benefit the Government of Nigeria and its agencies, Microfinance banks, and entrepreneurs. Moreover study revealed the importance of such institutions and furthers the understanding of its importance to society. Understanding its importance, the government will also be able to provide support services and strategies to enforce the micro-finance industry in order to reach the economically active entrepreneurs in Nasarawa LGA and the country at large.

Furthermore, it is expected that this study will be beneficial to MFIs, policymakers, small and medium enterprises operators and the community at large. It is further expected that the study will explore and recommends potential areas that MFIs needs to put more efforts when delivering their services. On the other hand, policymakers will also benefit in the sense that, the findings will provide informed suggestions on how policies can be improved.

1. Historical Background Of Nasarawa Microfinance Bank

Nasarawa Microfinance Bank Limited formerly known as Nasarawa Community was incorporated in Nigeria under the Companies and Allied Matter Act as a Private Limited Liability Company on the 8th March 1993 with RC No: 217845.

Nasarawa Microfinance Bank is located at  17, Umaru Makama Dogo Road, Nassarawa, Nasarawa LGA of Nasarawa state with sole aim of providing financial services effectively and sustainably to women, youth, and MSMEs in the community and beyond through the motivated human and requisite material resources so as to improve their standard of living.

The Nasarawa Microfinance presently operates from three location with corporate head office at N0 17 Umaru Makama Dogo Road, Nasarawa Local Government area of Nasarawa State and Lafia branch office at Block K1 shop No. 1 Lafia Modern Market and Toto branch office located at Opposite Central Pilot Primary School, Toto Abaji Road, Nasarawa State.

The bank presently offers several services among which accounts and loans services

Types of accounts services offered by the bank

1. Personal savings account
2. Individual current account
3. Fixed deposit account
4. Weekly / daily adashi saving account
5. Target Savings Account
6. Remittance account
7. Infant orphans savings account

Types of loan services offered by the bank

1. Microcredit loan
2. No worries loan
3. Assets acquisition loan
4. LPO finance loan
5. Joint venture loan
6. Lets go to farm loan
7. Self help loan
8. Adashi microcredit loan
9. Staff loans

1.9       Definition of Key Terms

Small Scale Business: Small and medium scale business as used in this project refers to any form of business which is private own and operated with a small number of employees, relatively low volume of sales and small capital based (Akanji, 2006)..

Microfinance: Microfinanceare small-scale financial services which are primarily credit and savings provided to entrepreneurs or rural dwellers such petty traders which is targeted at improving their businesses thus enhancing social economic wellbeing (Marguerite, 2001).

Entrepreneur: An entrepreneur is a person who sets up a business with the aim to make a profit. In the concept of this study, entrepreneurs are women who engaged in petty trades such as sales of food stuff, vegetables, clothes, provision store etc (Baba, 2013)

Microfinance Bank (MFBs):  Microfinance are financial institutions licensed to carry on the business of providing microfinance services such as savings, loan, domestic funds transfer, and other financial services that are needed by the active poor, micro, small and medium enterprises to conduct or expand their businesses (Marguerite, 2001). Micro- credit: In the light of this study, micro-credits are loans given out small and medium scale business especially women entrepreneurs to development and improvement their business (Hagen, 2004).