An Investigation of Activities of Microfinance Banks As a Veritable Tool for Reducing Poverty and Unemployment in Developing Economies. The Evidence From Nigeria

Abstract

The practice of microfinance in Nigeria is culturally rooted and dates back to self-Help Groups (SHGs) or Rotating Savings and Credit Association (ROSCAS) types. Microfinance is all about providing financial services to the poor who are traditionally have no access to the conventional financial institutions. A microfinance policy will enhance monetary stability and expand the financial infrastructure of the country to meet the financial requirements of Micro, Small and Medium Enterprises (MSMEs). The major purpose of this policy paper, therefore, is to present a microfinance policy framework for Nigeria that would enhance the provision of diversified microfinance services on a long term sustainable basis for the poor and low income groups. Both theoretical and empirical literature review that Microfinance Banks (MFB) are panacea for unemployment and poverty reduction in developing economies. These problems can be referred to as twin sisters or as Siamese twins (Umo, 2007). The study indentifies the needs for the establishment of Microfinance Banks, microfinance policy and goals, policy strategies, frameworks for the supervision of microfinance banks and the challenges of microfinance Banks (MFBs) in Nigeria. From the findings, the study recommends that the banks should provide diversified, affordable and dependable financial services to the active poor to enable them develop sustainable entrepreneurial activities. The government should as a matter of urgency license, regulate, monitor and evaluate the performance of Microfinance Banks (MFBs) if our objective of sustainable poverty and unemployment reduction is to be achieved now and in the future.

DOI: 10.5901/mjss.2014.v5n6p99