Access and Impact Assessment of Micro Finance Banks on Rural Poor in Nigeria: A Case Study of Edo State

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Abstract

This study takes a critical look at the access and impact of micro finance banks on the entrepreneurial and economically active rural poor in Nigeria using Edo State as a case study. The objective being to determine if indeed they constitute the category of people targeted by micro finance banks, if they have access to credits on a regular basis, and indeed if the credits or other ancillary services received by them have had any significant effect upon their livelihoods, homes and standard of living. Revelations from our field survey indicated very minimal impact of micro finance banks on the livelihood of entrepreneurial and economically active rural poor. That is, the micro finance banks have had very minimal presence in the rural communities; they preferred to extend credits to non poor clients in the urban areas. Some of the recommendations to increase impact of micro finance banks on rural poor with particular reference to Edo State, in Nigeria, are more efforts at increasing the number of micro finance banks and services in the rural areas. Others include the provision of adequate infrastructures such as functional roads and electricity in the rural areas.

Keywords: Poverty Alleviation, Micro Finance Access and Impact, Economically active rural poor, Regular Repayment Schedule.

1. INTRODUCTION

Over the past decade, providers of micro finance have developed an array of models for delivering financial services to the poor that meet the dual criteria of sustainability and outreach. As programmes mature, debates within and outside the industry have moved beyond questions of scale and outreach to the question of whether micro finance can reduce poverty (Sebstad and Cohen, 2001). While many people agree that micro finance can make a great deal of difference in poor people's lives, the jury is still out on the extent to which micro finance contributes to poverty reduction. In Nigeria, limited research has been done on this topic, while the few available have derived their conclusions and recommendations from a systematic synthesis, of the results of the field studies, and literature reviews conducted in other countries (see, e.g., Olaitan, 2005; Eluhaiwe, 2005; Ukeje, 2005; Abosede 2007 and Idolor, 2007 to cite only a few). In recent time, the question of the link between micro finance and poverty has aroused much passion among providers, promoters, and others involved in the micro finance field (Rutherford, 2003). At one extreme, the "sustainability first" camp believes that these services reach the poor through open access. At the other extreme, the "poverty first" camp defends the importance of targeting the poorer strata of the population to ensure that they have access to micro finance services. Outside the industry, micro finance has the reputation of being a tool that can pull people out of poverty. Supported by convincing vignettes of poor people who have "made it", micro finance has garnered wide appeal as a development success (Sebstad and Cohen, 2001).

While the passion surrounding this issue remains intense, the debates have grown to the point of acknowledging that the relationship between micro finance and poverty reduction is not straightforward. Just as the causes of poverty are complex, so is its reduction. As a result, many people have come to recognize that micro finance alone is not a magic wand to lift people out of poverty; as it is at best only one of many factors that can contribute to poverty alleviation. Today, many micro finance institutions in Nigeria subscribe to a mix of goals, including sustainability, outreach to poor households, and poverty reduction. However, a continuing challenge they face is how to deepen and maintain outreach to poor households on a sustainable basis; as well as significantly increase the impact of micro-financing on the lives and activities of the economically active; especially rural poor. These would require not only a careful analysis of the category of people which micro finance institutions do and do not reach along the poverty continuum, but also a detailed in-depth analysis of how access to credits and other financial services have impacted positively on the businesses, assets, households and lives of the economically active rural poor, whose needs and interests micro finance institutions purportedly claim to serve. …