The broad objective of this study was to examine the operations of microfinance banks in Anambra State and to assess their contribution to poverty alleviation. A total of 140 randomly selected customers and officials of 14 purposively selected microfinance banks from the three geo-political zones of Anambra State.

1. The Role of Microfinance Banks in Poverty Alleviation in
Nigeria–A Study of Selected Microfinance Banks
A Research Submitted to the Department Banking and
Finance In Partial Fulfillment of the Requirements for the Award Of Master Of
Science (MSc) Degree in Banking and Finance
PAGE: 101
TABLE OF CONTENTS
Title page i
Approval page ii
Dedication iii
Acknowledgment iv
Table of content vi
Abstract. ix
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study 1
1.2 Statement of the problem 3
1.3 Objective of the study 5
1.4 Justification of the Study 6
1.5 Research hypothesis 7
1.6 Research questions 7

2. 1.7 Scope of the study 8
1.8 Limitation of the study 8
1.9 Definition of terms 9
CHAPTER TWO: REVIEW OF RELATED LITERATURE 13
2.1 What is microfinance 13
2.2 Origin of microfinance 14
2.3 Importance of microfinance 18
2.4 Providers of microfinance services 19
2.5 Beneficiaries of microfinance services 20
2.6 Overview of microfinance banks in Nigeria 21
2.7 Microfinance banks activities 23
2.8 Benefits of microfinance banks in rural development and
poverty alleviation 27
2.9 Challenges of microfinance banks to rural development and
poverty alleviation 29
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Research design 34
3.2 Area of study 34
3.3 Population of the study 35
3.4 Sample size determination 37
3.5 Sampling techniques 38
3.6 Sources of data 39
3.7 Validation and reliability 40

3. 3.8 Data collection 41
3.7 Data analytical techniques 43
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1 Poverty incidence in the state 45
4.2 Ownership structure, capitalization and spread of microfinance banks in
Anambra state 52
4.3 Services offered by microfinance banks in Anambra State 55
4.4 Evaluation of the services in the microfinance banks in the state 63
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMENDATIONS 77
5.1 Summary of findings 77
5.2 Conclusion 78
5.3 Recommendations 79
Appendix I 84
Appendix II 92
Appendix III 95
References 98

4. ABSTRACT
The broad objective of this study was to examine the operations of microfinance
banks in Anambra State and to assess their contribution to poverty alleviation. A
total of 140 randomly selected customers and officials of 14 purposively selected
microfinance banks from the three geo-political zones of Anambra State.
Descriptive statistics such as averages, tables, frequencies were extensively
employed to analyze data. Also multiple regression analyses were also adopted to
examine determinants of deposit and credit. Findings show that 57% of the
households in Anambra State fall within the poverty bracket, while 42% are above
poverty line. Though Anambra State may not be among the poorest in the country,
identified statistics on poverty incidence give cause for worry. The microfinance
banks in the state have been contributing modestly towards promoting the socio
economic welfare of the citizens through lending and savings mobilization
activities. Indeed, microfinance banks have been responsive to the credit needs of
their customers; microfinance banks do not just mobilise deposits and walk away
but rather they give back multiples of it to the depositors as credit; and credit
beneficiaries are living up to their responsibility of repaying the credits they
received. In spite of the above, however, certain operational problems hinder the
full realisation of the benefits of microfinance, including high interest rates, lack
of awareness, lack of collateral, weak access to refinancing facilities, client
apathy and internal control measures, repayment problems. In view of the
above, the study recommends that efforts should be made to strengthen and
support microfinance bank in the state and thereby enhancing their role in poverty
alleviation in Anambra State.

5. CHAPTER ONE
INTRODUCTION
1.1 BACK GROUND OF THE STUDY
Robust economic growth cannot be achieved without putting in place
well focused programmes to reduce poverty through empowering the
people by increasing their access to factors of production, especially
credit. The latent capacity of the poor for entrepreneurship would be
significantly enhanced through the provision of micro finance services to
enable them engage in economic activities and be more self-reliant;
Micro finance is concerned with providing financial services to the poor
who are traditionally not served by conventional financial institutions.
Three features distinguish micro finance from other formal financial -
products. These are: (i) the small- scale loan level of operations. (ii)
Noninstanceon asset-based collateral for loans, and (iii) simplicity of
operations.
In Nigeria, the formal system provides services to about 35% of the
economically active population, which implies that the remaining 65%
are excluded from access to such financial services (CBN, 2005). The
disadvantaged 65% often rely on the informal financial sector, comprising
non-government organizations (NGO)-micro finance institutions,
moneylenders, friends, relatives and credit unions. The non regulation of
the activities of such institutions has serious implications for

6. the effectiveness of monetary policy and the development of a sound
financial system.
A micro finance policy, which recognizes the existing informal
institutions and brings them within the supervisory purview of the central
Bank of Nigeria (CBN), would not only enhance monetary stability, but
would also expand the financial infrastructure of the country to meet the
financial requirements of the micro, small and medium enterprises. Such
a policy would create a vibrant micro finance sub-sector that would be
adequately integrated into the mainstream of the national financial system
and provide the stimulus for growth and development. It would also
harmonize operating standards and provide a strategic platform for the
evolution of micro finance institutions, promote appropriate regulation,
supervision as well as the adoption of best practices. In the circumstance
the development of an appropriate and all embracing policy has become
necessary to achieve long-term, sustainable micro finance sub-sector.
1.2 STATEMENT OF THE PROBLEM
The Federal Government of Nigeria has made several concerted but
largely unsuccessful efforts at financing the poor and small business for
several years. Notable among the specific initiatives taken by government
in that regard are the establishment of the Peoples’ Bank, the Community
Banks and such other schemes/programs like the Family Economic
Advancement Program (FEAP),, the Nigeria Agricultural Credit
Guarantee Scheme (NACGS), etc The target of the government in
putting all these facilities in place is to enhance rural transformation and

7. sustainable robust economic growth and development by making credit
available to the disadvantaged poor who are discriminated against by the
formal credit institutions.
Worst amongst the problems of credit availability to the rural poor is the
prolonged sub optimal performance of many existing micro finance
institutions due to incompetent management, weak internal control
measures, poor corporate governance, which has intensified the unusual
reluctance of the deposit banks to fund rural and micro economic
activities in the economy.
Millions of people in developing countries live in a state of destitution.
Their opportunities for developing are extremely restricted by economic
and political conditions as well as their financial and social situations.
Through different micro finance and insurance policies the poor could
attain a better standard of life (Islam, 2006) and (Mamun, 2005) through
programs prepared in the field of financial business services. But the
relevant issue has always been whether the available micro finance
resources have really empowered the poor and if yes to ascertain the
extent, degree or dimension of such empowerment. Globally, micro credit
is considered as an important tool for poverty reduction. Different micro
finance institutions (MFIs) have different mechanisms and practices for
micro credit delivery. Poor people confront many of the same risks faced
by the non-poor (e.g. death illness or injury, loss of property due to
theft/fire and natural disasters). But these risks have greater financial

8. impact and occur with greater frequency among the poor. Moreover the
vulnerability of poor people is made worse each time they incur a loss,
creating a vicious cycle that precludes lasting improvements in human
and economic welfare.
In Nigeria microfinance banks were established to address credit
accessibility problem of micro and small businesses and thereby to
contribute to the efforts of government in the fight against poverty.
However after years of operation, many are beginning to question the
impact of the banks particularly on savings mobilization and credit
extension to the poor and vulnerable groups. Another pertinent question
which arises is as regards the structure and operational procedures of
microfinance banks can deliver services that meet the expectations of
Nigerians, particular the poor vulnerable groups.
Adequate knowledge of the above is necessary to enable stakeholders,
including policy makers, to develop appropriate strategies to enhance
their operations.
1.3 OBJECTIVES OF THE STUDY
The broad objective of this study is to examine the operations of
microfinance banks in Anambra State and to assess their contribution to
poverty alleviation. To achieve this goal the following specific objectives
have been set out for the study.
1. To assess poverty incidence and/or level in the state
2. To determine ownership structure, capitalization and spread of

9. microfinance banks in the state.
3. To assess deposit mobilization, sectoral lending and repayment
profiles of microfinance banks in the state.
4. To evaluate the effect of microfinance banks’ services on economic
well-being as represented by growth in income and profitability of
borrowers’ businesses in the state
5. To identify operational and other problems impeding the
performance of microfinance banks in the state.
6. To suggest strategies to enhance the operation of microfinance
banks in the state
TO GET THE COMPLETE THESIS (Chapter 1-5)
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