PROBLEMS AND PROSPECTS OF MICRO FINANCE BANKS IN NIGERIA

ABSTRACT This study examines the problem and prospect of micro-finance banks in Delta State. It also emphasizes on the contributions of micro finance banks in rural areas. This study have helped to reveal the problems hindering the smooth and proper running of micro finance banks such as problem of capital structure, problem of not operating branches, problem of quality personnel, problem of inadequate infrastructure and competition from other financial institution. This study also reveals the prospect of micro finance banks. The micro finance banks serves as an agency for building up the serving at the lower group, providing funds to small scale industries, providing farmers to with fund to engage in farming and also provision of basic economic development for the country, it provide employment, engender rural development and reduce poverty. It is now the responsibility of the Central Bank of Nigeria (CBN) being the apex bank to give priority attention to micro finance banks in terms of monetary policies to enable the bank fulfill their aim and objectives. 

PRELIMINARY PAGE
Title Page    –        –        –        –        –        –        –  Certification         –        –        –        –        –        Dedication –        –        –        –        –        –         Acknowledgement         –        –        –        –        –        Abstract      –        –        –        –        –        –         Table of Content –        –        –        –        –        –        TABLE OF CONTENT PAGE
CHAPTER ONE
1.0     Introduction         –        –        –        –         1.1     Background to the Study         –        –        –         1.2     Statement of Research Problem        –        –
1.3     Research Objectives       –        –        –        –        1.4     Research Questions       –        –        –        –        1.5     Research Hypothesis     –        –        –        –        1.6     Significance of the Study         –        –        –        1.7     Scope of the Study        –        –        –        –        1.8     Limitations of the Study          –        –        –        1.9     Definition of Terms       –        –        –        –

CHAPTER TWO: LITERATURE REVIEW
2.1     A brief History of Micro Finance Bank      –
2.2     Objective of Micro Finance Bank      –        –
2.3     Control of Micro Finance Bank in Nigeria –
2.4     Relationship of Micro Finance Bank with Central Bank and           Other Financial Institutions in Nigeria-      –        2.5     Ownership of Micro Finance Bank – –        –
2.6     Duties of Micro Finance Banks to Customers      –        2.7     Features of Micro Finance Bank in Nigeria          –         2.8     Functions of Micro Finance Bank     –        –        –        2.9     Roles of Micro Finance Bank in Nigeria Development –        2.10   Contribution to Nation’s Development      –        –        2.11   Granting of Loans to Customers       –        –        –        2.12   Types of Account Opened by Micro Finance Bank       –         2.13   The Problems Hindering Smooth Running of Micro Finance           Banks in Nigeria –        –        –        –        –        –         2.14   Prospect of Micro Finance Bank in Nigeria         –        References –        –        –        –        –        –        CHAPTER THREE:    RESEARCH METHODOLOGY 
3.1     Research Design   –        –        –        –        –        3.2     Sources of Data    –        –        –        –        –       3.3     Population of the Study          –        –        –         3.4     Sampling Technique and Sample Size        –        –         3.5     Instrumentation    –        –        –        –        –        3.6     Validity of Instrument   –        –        –        –         3.7     The Reliability of the Instrument      –        –        3.8     Method of Data Collection      –        –        –         3.9     Method of Data Analysis        –        –        –        CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1     Data Presentation          –        –        –        –        4.2     Data Analysis      –        –        –        –        –        4.3     Testing of Hypothesis    –        –        –        –        CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS 
5.1     Summary of Findings    –        –        –        –        – 5.2     Conclusion –        –        –        –        –
5.3     Recommendations         –        –        –        –        Biblography         –        –        –        –        –        – Appendix   –        –        –        –        –        –        –

CHAPTER ONE 
1.0     INTRODUCTION 

Modern civilization erupted from the advent of banking operations. The society became placed and organized as a result of corporate banking activities and the economy at large determined by the varied affluence of the banking industry. Okoduwa (2008) According to Agbadudu (2005) the birth of colonialism ushered in modern banking in 1892. The establishment of the Africa Banking Corporation (ABC) being the first bank to be established in Nigeria and late in 1894, the bank of British West Africa which is now first bank of Nigeria Plc was established. However, not until 1950, the banking legislation were introduced in Nigeria. Before the year 1950, nobody could set up a bank and this restriction was contained in company’s ordinance of 1937, prohibiting an association of above ten (10) enterprises from establishing a company (bank). The decree established micro finance bank spelt out the following objectives;
a. The promotion of rural development through the provision of financial and banking services.
b. Inculcate banking habit to the rural population
c. To assist rural farmers in agricultural production by granting of loans.
d. Enhancing rapid development of production activities in rural and urban areas.   
1.1 
BACKGROUND TO THE STUDY 
The banking institution is an enormous sector of business and finance that has existed in human civilization in some form for thousands of years. In the modern world, the bank plays a large part in financial dealings, as it is a major and popular means of investing, borrowing and storing money and other valuables like jewelries, wills. Banks exist all over the world and are usually regulated by government in order to prevent corruption and protect the money and valuables of the general public. Between 1892 and 1946, only few banks were in existence. The federal government with the central bank has constantly been in search of ways to improve the nation’s financial system and make it efficient and able to perform its functions in order to bring economic growth and development. Despite all the effort of the government, the financial system continues to show weakness in the area of structures that would enable savings and allocation of resources possible at the grass root level. To address the nation’s financial weakness, the idea of micro finance initiated as part of the general reforms of the financial system commenced in 1986. Batchford (2006) defined micro finance bank as an array of financial service, including loan, savings and insurance available to poor entrepreneurs and small business owners who have no collateral and would not otherwise qualify for a standard bank loan. Adekeye (1991) defined micro finance bank as a financial institution owned and managed by a community or group of communities in other to provide credit facilities. 
1.2 STATEMENT OF RESEARCH PROBLEM 

This research will address the problem of micro finance banks in Nigeria with special reference to some selected micro finance banks in Delta State. So many problems are bound to be faced by micro finance banks due to some important requirement which shall be considered necessary for the micro finance to grow and function efficiently. Some of these problems are;
a. Low capital formation in the micro finance system
b. Inability for micro finance to maintain and sustain their customers c. Problems of operating branches
d. Inability to grant loan to customers
e. Inadequate infrastructures.

1.3     RESEARCH OBJECTIVE 
The objectives of this research are;
a. To evaluate the system of granting loans
b. Make appreciable recommendation that would enhance the growth of micro finance banks in Nigeria.

1.4     RESEARCH QUESTIONS
a. Does lending affect the growth and operation of micro finance bank? b. Can the effort of micro finance banks be improved upon?
c. Does the establishment of micro finance banks improve the development of banking habit?
d. Does lack of proper management hinder continuous existence of micro finance banks?

1.5     RESEARCH HYPOTHESIS 
Hypothesis 1

Ho:     Non payment of loan by customers at the stated time does not hinder the growth of micro finance bank.
H1:     Nonpayment of loan by customers at the stated time hinder the growth of micro finance bank.
Hypothesis 2
Ho:     Poor management practices does not affect the continuous existence of micro finance bank.
H1:     Poor management practices does affect the continuous existence of micro finance bank.

1.6 SIGNIFICANCE OF THE STUDY 
The importance of this study is to guide in the checking of the pitfalls and adjust them to the needs of the society. The result will not only be a great value to staff and management of some selected micro finance banks but the public in general. It also seeks to highlight the prospect of micro finance banks in development of rural and urban sections of the society.

1.7 SCOPE OF THE STUDY 
This study will treat the impact of various motivational techniques including financial and non financial techniques among workers and staffs in micro finance banks in Nigeria. This study will be limited to the micro finance bank Umuje, Ibusa, Adaigbo micro finance bank Ogwashi-Uku Delta State because of the time and economic constraints.

1.8 LIMITATION OF THE STUDY The limitation or problem encountered by the researcher in search for information includes;
a. Finance: This limitation was the most serious of all. It limited the number of journeys made to my research center to collect data which led to narrowness of the scope of the study.
b. Time: Time limit was another restriction to the completion of this work. Having to cope with assignments and lectures here and there and examination at the corner was not an easy task especially having to measure up the high standard of the department in particular, thereby reducing the physical and mental contribution which we would have wished to put into the study.
c. Inadequate facilities in the library: Inadequate facilities in the library such as modern textbooks, journal, magazines and other materials almost frustrated my effort.

1.9 DEFINITION OF TERMS 
Banks: 
This is a financial institution where money and valuable items are kept for safe custody. 
Central Bank: 
A central bank is an institution that provides financial and banking services for its country’s government and commercial banking system as well as implementing the government’s monetary policy and issuing currency. In order words, it is an institution which is charged with the responsibility of managing the value of money in a country (Apex Bank). 
Business: 
Business is the buying and selling of goods and services and to satisfy consumers’ needs. 
Capital: 
Capital is a wealth or money used in creating further wealth. Profit: It is a financial gain in a business after total costs are deducted from total revenue.
Share: it is a unit of interest or money a shareholder has in a company based on his contribution of capital to the company or it is a unit of money invested in a business.
Loan: This is a special amount of money given to a customer over a fixed period of time, interest is paid on the total amount given out. 
Grass-Root: 
These are people who live in the rural areas.