THE IMPACT OF MICRO CREDIT ON POVERTY ALLEVIATION IN NIGERIA
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Poverty is the major problem in most developing economies. In these economies, it is argued that among others absence of access to credit is presumed to be the cause for the failure of the poor to come out of poverty. Meeting the gap between demand and supply of credit in the formal financial institutions frontier has been challenging (Von Pischke 1991). In fact, the gap is not aroused merely because of shortage of loan-able fund to the poor rather it arises because it is costly for the formal financial institutions to lend to the poor. Lending to the poor involves high transaction cost and risks associated with information asymmetries and moral hazards (Stiglitz and Weiss 1981). Nevertheless, in several developing economies governments have intervened, through introduction of microfinance institutions to minimize the gap then allow the poor access credits.
One of the main policy objectives for the establishment of microfinance banks in Nigeria was to assist small and medium scale enterprises in Nigeria in raising their productive capacity and level of employment generation, thus alleviating poverty and enhancing human capital development. According to Haque and Yamao (2009), poverty alleviation through microcredit is now well recognized all over the world as microcredit propagandists, governments, donors, development agencies and others have an increasing interest in using the microcredit medium to advance the course of poverty reduction as well as enhance human capital development. In a bid to utilize the benefits of microcredit in alleviating poverty and enhancing human capital development in Nigeria, the Central Bank of Nigeria (CBN) formulated the micro finance policy and framework in 2005. The December 2005 policy statement establishing Micro finance banks in Nigeria was laudable and well-intentioned as the microfinance industry was fast becoming the next “frontier” for the financial service industry to provide and promote the grant of microcredit.
According to the CBN policy and regulatory framework for microfinance banks in
Terms of Use: This is an academic paper. Students should NOT copy our materials word to word, as we DO NOT encourage Plagiarism. Only use as a guide in developing your original research work. Thanks.
Disclaimer: All undertaking works, records, and reports posted on this website, eprojectguide.com are the property/copyright of their individual proprietors. They are for research reference/direction purposes and the works are publicly supported. Do not present another person’s work as your own to maintain a strategic distance from counterfeiting its results. Use it as a guide and not duplicate the work in exactly the same words (verbatim). eprojectguide.com is a vault of exploration works simply like academia.edu, researchgate.net, scribd.com, docsity.com, course hero, and numerous different stages where clients transfer works. The paid membership on eprojectguide.com is a method by which the site is kept up to help Open Education. In the event that you see your work posted here, and you need it to be eliminated/credited, it would be ideal if you call us on +2348064699975 or send us a mail along with the web address linked to the work, to eprojectguide@gmail.com. We will answer to and honor each solicitation. Kindly note notification it might take up to 24 – 48 hours to handle your solicitation.