THE ROLE OF MICRO-FINANCE BANK IN THE DEVELOPMENT OF RURAL AREAS. (A STUDY OF OKO MICRO-FINANCE BANK) 2004-2014.
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THE ROLE OF MICRO-FINANCE BANK IN
THE DEVELOPMENT OF RURAL AREAS.
(A STUDY OF OKO MICRO-FINANCE
BANK) 2004-2014.
TABLE OF CONTENTS
Title
page i
Approval
page ii
Dedication
iii
Acknowledgements iv
Table
of contents vi
Abstract
x
CHAPTER ONE
INTRODUCTION
1.0
Background of the study 1
1.1
Statement of the problem 6
1.2 Purpose
of the study 8
1.3
Research question 9
1.4 Statement of Hypothesis 10
1.5 Theoretical Framework 11
1.6 Significance
of the study 12
1.7 Scope
of the study 13
1.8 Limitations of the study 14
1.9 Definitions of terms 14
CHAPTER TWO
LITERATURE
REVIEW
2.1 Introduction 16
2.2
Concept of Oko Micro-Finance Bank 25
2.3 The
record of Micro-Finance Bank 27
2.4 Importance
of credit to the Development
of
the Rural Communities 35
2.5 Micro-Finance Bank
offer a number of credit
delivery
schemes
40
2.6
Products and Services 41
2.7 Summary of Literature review 42
CHAPTER THREE
RESEARCH
METHODOLOGY
3.1 Design
of the study 44
3.2 Area of
the study 44
3.3
Population of the study 45
3.4 Sample/Sampling Techniques 45
3.5
Instrument for data 46
3.6 Reliability
and Validity of the instrument 46
3.7 Distribution
and retrieval of the instrument 47
3.8 Method
of data analysis 47
CHAPTER FOUR
DATA
PRESENTATION AND ANALYSIS
4.1
Personal Data 49
4.2 Data presentation 53
4.3 Analysis of research questions 53
4.4 Testing of hypothesis 58
CHAPTER FIVE
SUMMARY OF FINDINGS,
CONCLUSION AND RECOMMENDATIONS
5.1
Summary of findings 63
5.2
Conclusion 64
5.3
Recommendation 65
References 67
Appendix I: Letter of Respondents 70
Appendix
II: Questionnaire 71
Abstract
This study
aim at describing the role of micro-finance banks in the development of rural
areas. To this effect, a case study was used which is Oko Micro-Finance Bank
2004-2014. This study aim at unearthing the powerful strategy for alleviating
poverty in general and rural poverty in developing country, to analyze the
strengths, weakness, opportunities and threats of micro-finance institutions in
the selected region, to access the problems encountered by micro-finance
service consumers in the rural areas. To achieve this purpose, 4 (four)
research questions were raised Vis: how does micro-finance institution operate
in selected rural settling in the country? What are the problems encountered by
micro-finance service consumers in the rural areas? What are strengths,
weaknesses, opportunities and threats of micro-finance institutions in the
selected region? In addition, hypotheses were formulated to guide the study
namely: Micro-Finance Banks helps in the development of rural areas. Oko
Micro-Finance Bank is aimed at increasing the level of per-capital income of
Oko-community in Anambra State. The researcher uses percentages respondents’
opinion. The researcher also made some Recommendations among which were:
Micro-Finance Banks should involve themselves in the catchments areas. Because
is the last hope of rural dwellers.
CHAPTER ONE
Introduction
1.0 Background to the Study
A major development issue facing many developing
countries has been the need to reduce the scale and depth of poverty among the
growing population. Chandy and Gerts (2011) estimate that there were about
878.2 million people living below the poverty line in the year 2010. Of this
number over 700 million live in rural areas. African has 369.9 million
population or proportion of poor people the elimination and reduction of
poverty is a key concern of development thinkers and practitioner (Coyle, 2007;
Ifrpi, 2008).
The beginning of the 1970’s saw attention general
towards improving the wellbeing of the rural poor who formed the majority of
the population in developing countries, many governments and international and
local agencies shifted their attention and channeled their resources towards
development of rural area. This idea was motivated by the intention of reducing
the levels of unemployment, increasing access to public goods and services by
the development of rural population and more particularly, lowering poverty and
overcoming income inequalities in most developing and least-developed countries
according to brad show (2006), the explanation of poverty may be structural, personal, social
or economic according to (Burgess & Pande, 2002). In the fight against
poverty it is believed that the introduction of banks in rural areas enhance
the livelihood of the rural dwellers. It
is
assumed that intervention will change human behaviors and practices in a way
that will lead to the achievement of desired outcome.
According to (Van
Santen, 2010) said that financial services for the poor have also been proven
to be a powerful instrument for reducing poverty, enabling poor people to build
assets and increase incomes, and reducing
vulnerability
to economic stress and shocks the idea of establishing micro-finance banks in
Nigeria was initiated under the former head of state general Ibrahim Babagida in
1990 the idea
was to mobilize funds and sensitize people on the need for development
particularly those in the rural areas. The micro-finance becomes effective on
the 16th day of July 1991 with the Inauguration of the National Board
for Micro-Finance Bank implementation committee and subsequent opening of the
first Micro- Finance Bank in the country at Althen which was located in Kaduna
state. Since then there had been major efforts at improving the understanding
of Nigeria about the objectives and modalities of establishing micro-finance
bank.
Many communities have established their own Micro-Finance
Bank, already the country is having about 1,450 Micro-Finance banks as at the
end of December 1999. Stood at N200m
mostly is currently form of cash bank, balance loan e.t.c of the One Hundred and
Five Bank Licensed before February 2004 about 52 fifty two have share capital
of between N500,000 and N1million. Twenty seven banks, between N1billion and N3billion loan and advance range from 500,000 to 5.8million in
zone. Over 20 micro-finance banks have asked to be allowed to increase their
share capital to N1million while far
ones are requesting to raise their share capital to N5million banks like Ibeto Micro-Finance Bank, Oganiru
Micro-Finance Bank and so on have already assests worth over N10million each. As a mark of growth, so
many micro-finance banks had qualified for a board matching loan repayment over
a period of five years. The loan is being given to those banks that have met
the condition of submitting the return for the first three months, board
resolution requesting the loan and an understanding by the board of directors
to guarantee the loan.
In 1993 precisely, there was a boom on
establishing of Micro-Finance Banks, which then was regarded as the last hope
of the rural dwellers, this encouraged customers to deposit and granting loan to
rural dwellers thereby developing rural areas through investment by the rural
people, it was within this period that Oko Micro-Finance Bank was registered
with the National Board of Micro-Finance Banks. Oko Micro-Finance Bank has a
staff strength of between 15-20 a share current capital of about N700,000 to N1million and numerous customers which are mainly students of the Federal
Polytechnic Oko. Their function includes to lend loans to their customers, to
help in export financing.
1.1 Statement of the Problem
Micro-Finance Bank could be powerful strategy or instrument
among several others, for alleviating poverty in general and rural poverty in
particular in developing countries. Although many developing countries, such as
African have scored relative successes in using micro-finance bank as an
instrument for alleviating poverty in general, and rural poverty in particular,
it has not been so for many other developing countries.
Most of the micro-finance programs operated in
these countries have left the so-called beneficiaries in debts. In a similar
vein, most organization involved in providing micro-finance service, including
government institution, co-operatives and Non Governmental Organizations (NGOs)
have in most cases performed very poorly. High rates of non-repayment of loans
by clients have on several occasions led to the collapse of micro-finance
institutions. Notwithstanding this, micro-finance has continued to gain
popularity among rural developers as a visible tool for improving rural
agricultural practice and the diversification of economic activities of small-
holder farming householders.
Lack of adequate loan funds, inadequate
institutional capacities, poor coordination, little or no participation of the
beneficiaries in the planning of micro-finances programs, lack of effective
training programs for the both beneficiaries and operators of the programs are
some of the reasons behind the ineffectiveness of micro-finance as a strategy
for alleviating rural poverty in developing countries.
1.2 Purpose of the Study
The main objective of this study is to critically
examine how micro-finance can be used as an effective instrument or strategy to
reduce the high level of poverty in the rural areas of respective developing
counties especially in Africa. The researcher have to look at the Nigeria
situation.
1.
To examine how
micro-finance institutions operate in selected rural settings in the country.
2.
To analyze the
strengths, weaknesses, opportunities, and threats of micro-finance institutions
in the selected region.
3.
To access the
problems encountered by micro-finance service consumers, in the rural areas.
4.
To investigate
and analyze the types and nature of micro-finance service provided in selected
rural settlements in the country.
1.3 Research Questions
1. How does micro-finance institution operate
in selected rural settlings in the country?
2. What are the problems encountered by
micro-finance service consumers in the rural areas?
3. Does micro-finance bank alleviate poverty
in general and in rural developing countries?
4. What are the strengths, weaknesses,
opportunities and threats of micro-finance institutions in the selected region?
1.4 Statement of Hypothesis
The following hypotheses were designed to guide
the study:-
H0: Micro-Finance Bank does not help in the
development of rural areas.
H1: Micro-Finance Banks help in the development
of rural areas.
H0: Oko Micro-Finance Bank is not aimed at
increasing the level of per capital incomes of Oko Community.
H1: Oko Micro-Finance Bank is aimed at increasing
the level of per capital income of Oko community.
1.5 Theoretical Framework
Past studies on diffusion theory have shown strong
influence of the awareness of idea and innovation by a member of the community in
which it spreads to all other members of such community. Also is the influence
of distance on diffusion process which shows that a further away member of the
society may not be aware of the innovation or ideas from the source on time
unlike some one else to the source. Thus, this theory depicts an application to
development of rural areas through self-help projects by the process of social
contract through spatial ranges and dimension and field of influence. A member
of the community through community unions
and association in most cases, the expansion and diffusion process is most
applicable in development of rural areas through self-help projects in which
ideas, innovation and communication spread spatially and temporarily until
increasing members of individuals in the society become aware of the need for
self-help project for development of rural areas.
1.6 Significance of the Study
On the completion of this study, it is hoped that
it will be useful and profitable to the Micro-Finance Banks executives,
students and the researcher in particular together with the rural people since Micro-Finance
Bank is seen as poor man’s bank. To the management of the Micro-Finance Bank,
it will help them to know the areas of services they are performing well as
those areas that needed improvement in development of rural areas. To the
students more of those in public administration will also use it as a guide for
literature review in carrying out more research work on the topic. to the rural
dweller’s the idea of micro-finance bank will enlighten them on the need to
bank their money no matter how small which will help to combat the number of
loses/stolen being encountered by these ones. The idea will also encourage
savings in the rural areas.
1.7 Scope of the Study
The study would concentrate on the role of Micro-Finance
Banks in the development of rural areas a study of Oko Micro-Finance Bank in
particularly including the staffs of Federal Polytechnic Oko and staffs of Micro-Finance
Bank Oko.
1.8 Limitations of the Study
Financing: During this study there was limited finance
in producing questionnaires and also going to other micro-finance banks around
together information.
Time:
It was a problem combing the
research work with other activities and assignment of the semester.
Data Collection:
It was a problem collecting data because of the busy schedule of staffs in the
bank.
1.9 Definition of Terms
Roles: Is a set of connected behaviour rights,
obligations, beliefs, and norms.
Rural Areas: are areas which are not town or cities they are
often farming or agricultural areas.
Development: the processes of economic and social
transformation that is based on complex cultural and environmental factor and
their interactions. It is also a process of adding improvements to a parcel of
land, such as grading, subdivision, drainage, access, roads utilities.
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