Microfinance is the process of providing a small collateral-free loan to cooperative members who otherwise wouldn’t be unable to access the capital required to start a small business or any other income-generating activity. The effectiveness of microfinance institutions in reducing poverty is acknowledged and recognized around the world as a potent method of reducing poverty. In particular, microfinance institutions are involved used to alleviating poverty make use of Ojo local government Area located in Lagos State. The sample of this study comprises of one hundred people from the college level, which were selected randomly for the study. Chi-square was utilized to analyze results and the implications of this finding is that there’s a substantial solutions to the issues of microfinance institutions in reducing the burden of poverty. Based on these findings, it was unanimaously suggested to, among other things, that the Government make promises to improve the social infrastructure. Additionally, there is a an urgent need for microfinance institutions, especially those in the northern region of India to take a lead in the process of developing production.



The term “micro” literally is small in meaning and “finance” can also mean support or investment, thus microfinance could be described as a small amount of support or investment. Microfinance could be described as the practice of providing a small, collateral-free loans to cooperative members that otherwise wouldn’t be able to access the funds needed to start a small-scale business orto engage in other income-generating activities. Littlefield Morduch and Hashemi (2002) claimed that increased access to credit can reduce the amount of poverty.

According Sirajul (2007) the most disadvantaged people in the world comprise the bulk of those who are unable to access health care or basic education, and the most of them are not able to money and.

Microfinance is a financial institution that provides financial assistance for the most vulnerable people who are not normally offered by the traditional microfinance banking institutions of the financial sector. (MFBs) is the principal source of financing micro-businesses in Africa as well as other emerging regions (Anyanwu 2004).

The launch of the microfinance program was an important milestone, and was an essential part of a series of forum initiatives launched by the federal government, which includes alongside the national poverty elimination programme (NAPEP) as well as National Economic Empowerment and Development Strategy (NEEDS). These were designed to combat poverty, improve the number of employed people, and encourage growth and development in the market for financial services. Kolade, O. (2005).

Microfinance is well-known and is widely accepted as a potent tool to aid in poverty reduction. The needs for microfinance are increasing and growing in Nigeria however the exact quantity isn’t well-known. There is a wealth of evidence that proves microfinance helps in achieving the millennium development targets. The microfinance sector is improving the status of poor people’s economy and social standing as well. The current administration believes that providing financial services to the poor who are active will aid in the achievement of the Millennium Development Goals (Yamus 2004).).

The rise in microfinance activity is a result of the growth in informal sector activity in addition to the exclusion large portion of the population that is economically active from the various financial services of traditional sector. The majority of financial transactions are conducted by microfinance banks, and receive minimal or no media coverage about the transactions. They are not included in official financial statistics and their activities are not covered by the mass media. However, their transactions have a direct impact on a significant portion of people, and particularly the most vulnerable. Udeme Ekwere (2003).

Central bank in the year 2005 report stated the existence of 160 MFBs within Nigeria in 2001. They are situated in 28 of the 36 states within the country. They mostly operate in areas of rural development. Their activities have increased exponentially over the past ten years in regards to size branches, branch expansion, and staging volumes and value of credit as well as savings. Alongside the new trend, microfinance is becoming an enterprise that is commercial with a returns on capital. One of the numerous reasons for these is the desire to expand financial services and improve the lives of those in need.

MFBs that receive bank financing in Nigeria must be given particular focus. Microfinance’s financial engineering has demonstrated that poor people are high risk for credit. The growing access of the less fortunate access to financial services and the insufficient rates of repayment has transformed microfinance into an extremely profitable business. Therefore commercial banks within Nigeria are expected to begin playing a an important role in the provision of microcredit financing. The experience of Bangladesh, Egypt and Kenya are great examples where banks have performed much to support microfinance as well as micro-enterprises. Additionally, in Indonesia the fourth-largest country, there is a single micro-banking institution, Bank Rakyat Indonesia, provides services to approximately one-third of the population through it operates a micro-banking system. (charistemento, 2001). The reaction to the bank’s response has changed. In the Banker’s committee has made the decision that 10 present of the money that is accruing to small and medium-sized industries equity investments (SMIEIs) are to be channeled towards enterprises through a an accredited microfinance institutions.


1.2. A SUMMARY of the problem

The role of microfinance policies in reducing poverty. These policies include SAP Better life and NEEDs, FSP, NAPEP etc.

Microfinance banks play a crucial role in helping to achieve the millennium development Goals (MDG) tagged “vision 2020” in the fight against the level of poverty.

The impact of poor subsidies on the agricultural industry. Microfinance Bank is an important participant in financing the sector , giving loans to farmers in order to alleviate unemployment and poverty.


The aim of this study is stated as follows:

To analyze the role of microfinance institutions in alleviating the burden of

To determine the impact of microfinance banks in alleviating poverty

To determine the amount of contributions from the government to microfinance institutions.

To examine the issues faced by microfinance lenders in reducing the burden of poverty.

To propose a possible solution to solving the microfinance problems banks to alleviate the burden of poverty.


What are the role of microfinance banks in reducing the effects of poverty?

what are the impact of microfinance banks in alleviating poverty?

What are the challenges faced by microfinance institutions in reducing the burden of poverty?

What is the amount of government contribution to microfinance institutions?

What solutions are possible to address the challenges encountered by microfinance in reducing the burden of poverty?

1.5. Significance to the Study

Microfinance bank is a financial institution which was created to address the issue of poverty that is prevalent in less developed nations.

As per Joseph Sughts (2005) poverty is the primary reason for increasing the financial status of the nation. Thus, microfinance banks are an institution that provides financial services to the low-income segment. Microfinance bank has helped the growth of the agricultural sector within the economy.

1.6. Scope and Limitation to the STUDY

The importance of this research is that it offers a brief review of the role of microfinance banks in the reduction of poverty and economic growth in Nigeria.

The final report will offer a plan and more efficient agenda for all those involved in the daunting task of the reduction of poverty and economic growth and expansion.

In the end, the study once completed could be utilized to the benefit of government officials at a any levels to manage the threat of poverty in the country.

the impact of microfinance banks in alleviating poverty

1.7. Definition of Terms

Poverty: is the inability to meet basic needs.

Microfinance: It is the providing of financial services to clients with low incomes such as self-employed.

Community: is a community of people who live within a geographic area.

Financial institution: A business entity which grants loans to individuals or cooperative.

MDGs: Millennium Development goals created to combat poverty in the country.

Financial Activities of Microfinance: They are actions that microfinance banks provide, such as savings mobilization loans, the creation of loans as well as payment services.

micro-enterprises: are an enterprise which requires micro credit/loans in order to run. The management and operations of a micro-business are centered around the sole proprietor or micro-entrepreneur who runs mast times and works on his own or provides jobs for a small number of people generally, the registration is immediate to start, is a solo worker or offers employment to just a few individuals, generally an immediate registration to begin.

Transaction: is the act of carrying out business operations.

Microfinance Policy: They are a planned program which are implemented by the government to reduce the burden of poverty.

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