EVALUATION OF DEMAND-LED MICROFINANCE AS A STRATEGY FOR SUSTAINABLE RURAL POVERTY ALLEVIATION IN NIGERIA: A CASE STUDY OF SELECTED LOCAL GOVERNMENT AREAS IN KADUNA STATE
EVALUATION OF DEMAND-LED MICROFINANCE AS A STRATEGY FOR SUSTAINABLE RURAL POVERTY ALLEVIATION IN NIGERIA: A CASE STUDY OF SELECTED LOCAL GOVERNMENT AREAS IN KADUNA STATE
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Date
2011-08
Authors
MOHAMMED, SHAIBU JIBRIL
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Abstract
The government have sponsored and supported supply-led microfinance schemes and
institutions both to improve rural growth and equity and to neutralize urban-biased
macroeconomics policies. Because of high risks, heavy transaction costs and loan losses,
many of the rural microcredit schemes have drained state resources, reaching only a small
part of the rural poor and making little or no progress towards poverty alleviation and
financial self-sustainability. Following these, the 2005 microfinance policy jettisoned supplyled
microfinance for demand-led microfinance anchored on old and new institutions. The
change in policy was intended to provide sustained access to micro credit and to achieve
financial self-sustainability for microfinance institutions as a strategy for sustained rural
poverty alleviation. The 2005 microfinance policy emphasis is on the replacement of public
funds with market funds in microfinance institutions in order to encourage the pursuit of
financial self-sustainability within the context of private profitability. This raises the question
of the cost implications of full market supply of micro credit to the rural poor as a strategy for
rural poverty alleviation. Furthermore, how would market determined cost impact on
affordability and sustained access to micro credit by the rural poor? Again, how would the
pursuit of financial self-sustainability impact on sustainable rural poverty alleviation? This
study used field survey, Outreach and Repeated Use Approach, and the Subsidy Dependence
Index to evaluate the operations and services of microfinance banks and the implications for
sustainable rural poverty alleviation. It also assessed the performance of microfinance banks
in rural poverty alleviation and investigated the impact of the drive towards financial selfsustainability
by microfinance banks on sustainable rural poverty alleviation in Nigeria. The
findings of this study show that information asymmetry characterized the operations and
services of microfinance institutions. This led to adverse selection of credit products by rural
poor borrowers. Furthermore, the findings indicated that outreach of microfinance banks was
not significant in terms of target clients/population, women participation and number of active
borrowers. Repeated use of loans by borrowers from the selected five microfinance banks in
the study area were not significant for good performance in terms of generating gains to the
borrower over time requisite for sustainable rural poverty alleviation. The demand-led
microfinance as presently constituted and practiced in Nigeria is not financially selfsustainable
and is incapable of achieving sustainable rural poverty alleviation. Along with
other instruments of economic policy, this study recommends an alternative microfinance
model called SEGMENTED RURAL POOR MICROFINANCE MODEL that would ensure
private profitability, sustainability and keep balance with the desired social impact of rural
poverty alleviation.
Description
A DISSERTATION SUBMITTED TO THE POST GRADUATE SCHOOL,
AHMADU BELLO UNIVERSITY, ZARIA,
IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF THE
DEGREE OF DOCTOR OF PHILOSOPHY IN ECONOMICS
DEPARTMENT OF ECONOMICS
AHMADU BELLO UNIVERSITY, ZARIA; NIGERIA.
Keywords
EVALUATION,, DEMAND-LED,, MICROFINANCE,, STRATEGY,, SUSTAINABLE,, RURAL,, POVERTY,, ALLEVIATION,, NIGERIA., LOCAL GOVERNMENT AREAS, KADUNA STATE