Islamic Development Bank's Microfinance Support Programme and the Growth of Small Scale Enterprises in Nigeria

By Noibi, Mubarak Ademola | Canadian Social Science, March 1, 2014 | Go to article overview

Islamic Development Bank's Microfinance Support Programme and the Growth of Small Scale Enterprises in Nigeria


Noibi, Mubarak Ademola, Canadian Social Science


Abstract

It is obvious that poverty is endemic in Nigeria. One of the reasons contributing to this uncomplimentary situation is lack of employment for the majority of Nigerians. Several attempts aimed at creating employment have been embarked upon at governmental and non-governmental levels, with little effect. On the other side, the Islamic Development Bank (IDB), to which Nigeria is a key member, has been actively involved in the support of Small Scale Enterprises in some member countries through skilfully carved sustainable non-interest-based microfinance programme. Most studies on microfinance in Nigeria have not paid attention to the application of the IDB's Microfinance Support Programme to Nigeria. Hence, this paper fills the gap through examining some of the past and present attempts of the government at providing microcredit and microfinance to Nigerians. It also considers the operational strategy utilised by the IDB at bringing sustainable microfinance scheme to the doorsteps of the poor in member countries. Consequently, it advocates this laudable microfinance scheme for Nigeria, arguing that if this is done, mass employment accompanied by best practices capable of reducing poverty would be injected into Nigeria.

Key Words: Nigeria; Islamic Development Bank; Microfinance Support Programme; Non-interest

INTRODUCTION

Nigeria, one of the Least Developed Countries (LDCs), is confronted with cyclical unemployment in which the number of the unemployed far outweighs the vacancies available. Although unemployment could engender a number of social and psychological challenges, it is obviously most felt in the area of paucity of funds, which is a feature of poverty. The International Monetary Fund (IMF) in its 2007 report, claimed that, although the Nigerian government targeted the provision of seven million (7,000,000) jobs, this was not met. Further, the period between 2005 and 2006 witnessed the growth of employment rate at an average of 3.4% as against 3.2% in 2003. In addition, 2006 witnessed the reduction of unemployment rate to 10% from 17% in 2004 with youths within the age range of 15-30 mostly affected (IMF, 2007).

In 2004, the Federal Ministry of Labour and Productivity declared that graduate unemployment was 25%, while youth unemployment stood at 60%. This development has led to youth restiveness and various crimes (FMLP, 2004), some of which are quite sophisticated, displaying high level of education and exposure of their perpetrators. Since there is a confluence of unemployment and poverty, it is normal that the rate of poverty will be high in Nigeria.

Nigeria is in support of the Copenhagen Declaration which decided to end global poverty "through decisive national actions and International Cooperation (Salih, 1999)" and the Millennium Declaration which dwells much on the eradication of poverty and injustice in the world (CDD, 2008). Microcredit and microfinance are some of the mechanisms expected to assist in meeting these declarations. This is expected to jumpstart the informal sector which accounted for 90% of low wage employment and underemployment in 2004, just as it contributed 70% of non-oil exports in Nigeria (Adebowale, 2011).

Whereas microcredit and microfmance had reached six hundred thousand (600,000) clients in 2001, by 2003, forty million (40,000,000) potential clients were excluded from this outreach. Bamisile (2006) claims that, by 2006, eighty million (80,000,000) people, representing 65% of the active population of Nigeria, were excluded from accessing credit facilities. In view of that, it is taken that this sector, with great potential, has been greatly underutilised, as it could create employment, boost the economy and alleviate poverty in Nigeria, just as was done by the Asian Tigers, if properly funded and managed.

In 2005, the average-banking density in Nigeria was one (1) financial institution to thirty-two thousand seven hundred (32,700) people. …

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