The Role of Microfinance in Poverty Alleviation: Empirical Evidence from South-West Nigeria

By Kasali, Taofeek Aremu; Ahmad, Siti Aznor et al. | Asian Social Science, September 2015 | Go to article overview

The Role of Microfinance in Poverty Alleviation: Empirical Evidence from South-West Nigeria


Kasali, Taofeek Aremu, Ahmad, Siti Aznor, Lim, Hock Eam, Asian Social Science


Abstract

Microfinance programme has been generally regarded as a development strategy that can enhance the economic performance of the poor. The government of Nigeria has made concerted efforts to alleviate poverty in the country. One of such efforts is Poverty alleviation through Microfinance loan but poverty still remains pervasive and widespread in the country especially in the rural communities. This study examines the role of microfinance vis-à-vis poverty reduction particularly in the South- West Zone of Nigeria. Data were collected through survey questionnaire in the study area. Descriptive Statistics together with Binary Logit Regression Model were employed to analyse the data collected. The result of the analyses revealed that microfinance loan made significant impact on the loan beneficiaries in the study area which lead to poverty reduction. The government is advised to provide more enabling environment to make Microfinance operations more effective in the country particularly in the rural areas. Microfinance Institutions are implored to create more awareness on their operations and make less stringent conditions for the loan accessibility.

Keywords: economic development, poverty, microfinance, survey, Nigeria

(ProQuest: ... denotes formulae omitted.)

1. Introduction

In the past two decades, microfinance programmes have been considered by the development economists as one of the foremost strategies for poverty reduction. Although some researchers argue that Microfinance has not really succeeded in its role as grassroots economic developer in the sense that it has not been effective in reaching the poorest (Hulme & Mosley, 1977). But others opine that the programme is capable of bringing the poor into the lime light if properly implemented. This debate creates the gap for independent researchers to further examine the impact of Microfinance on poverty alleviation as donors and practitioners may be biased in their assessment. It is therefore believed that this study will contribute to literature and further make clarification on this debate by examining the impact of microcredit on poverty alleviation using Nigeria, the most populous black nation in the world as a case study.

Poverty contributes to underdevelopment and its reduction leads to economic development. To be poor connotes deprivation from the basic necessities of life. In fact, poverty engenders inability to afford the minimum basic essentials like food, children education, good housing, healthcare and good clothing to mention few (Todaro & Smith, 2011, p. 2). Suffice to say that the poor are being denied their share of the nation's resources and other necessities that are generally available in the society for their comfort.

Poverty is a worldwide socio-economic problem. Hence, its awareness is much more favored at the international level of finance and governance. For example, the World Bank, United Nations (UN) and International Monetary Fund (IMF) have developed various programmes and projects that would improve the life of the poor, ensure health improvement and sustainable growth and development (Ssewamala, Sperber, Zimmerman, & Karimli, 2010).

Records have shown that about half of the world's population (about three billion people) lives on income of less than two dollars a day (Goel & Rishi, 2012). It is also disheartening that one child out of five living in these poor communities does not live to see his or her fifth birthday! No wonder that the United Nations declared Millennium Development Goals (MDGs) in September 2000 to ensure global development. The major policy thrust of this program is to make life more meaningful to the poor and downtrodden. In essence, reduction of poverty and hunger constitute the basic root of all other problem issues focused on MDGs (Kalirajan & Singh, 2009). Ironically, in Sub-Saharan Africa which is considered as the World's poorest region, the concept of poverty is relatively understudied and has attracted less attention in academic literature (Ssewamala, Sperber, Zimmerman, & Karimli, 2010). …

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