Successful microfinance operations demonstrate that the poor repay their loans and are willing to pay higher interest rates if they can access credit. The poor also save, and hence, microfinance should provide them savings facilities. Attaining financial viability and sustainability is, however, a major institutional challenge. Mobilize deposits in order to expand outreach; Be grounded on market principles; Contribute to solving the problem of inadequate housing and urban services; Provide multi-purpose loans for income generation, housing improvement and consumption support; Conduct research on demand for finance and savings behavior of borrowers to determine the mix of multipurpose loans; Enhance creditworthiness of the poor and enable them to qualify for long-term credit from the formal sector; Build financial discipline among borrowers and educate them about repayment requirements.
Microfinance can be defined as the practice of offering small, collateral free loans to member of co-operatives who otherwise would not have access to the capital necessary to begin small business or other income generating activities.
Littlefield, Morduch and Hashemi said that increase access to credit reduces poverty. According to Sirajul the poorest of the world form the vast majority of those without access to health, basic education and majority of those without access to microfinance as well.
Poverty for long has been a major contending force against the pace of development in Nigeria especially the rural areas. It has remained persistently unabated despite many programs designed to alleviate it.
Thus, poverty has become a major concern for development experts and international agencies. The major millennium development goals are the eradication of extreme poverty and hunger. For the goals to be achieved, Importance of microfinance in sustainable development economics essay of the economy like the manufacturing and agricultural sectors need to be improved FAO, Microfinance institutions have become the main source of funding enterprises and agriculture in under-developing countries like Nigeria, Kenya, Pakistan etc.
Microfinance banks are distinguished from other financial institutions in that they offer small advanced loans and or savings, there is also the absence of asset based collateral and simplicity in their operation Madugu and Bzugu, Microfinance is very important in farm production and this fact cannot be overlooked in the sense that, it the bedrock upon which increased food production rests, which means adequate finance to improve on their production Adebayo and Onu, It contributes to the farmers social welfare enhances production and sustainability of income.
With capital, farmers source farm inputs with relative ease and hire labour where it exceeds the strength of the family to handle or carryout farm operations. CBN stated that, shortage of primary production credit was one of the major causes of declining agricultural production in Nigeria. The shortage was attributed to reluctance by the commercial banks to provide credit for real sector achievement in agricultural production, urban and semi-urban based nature and mode of operation of the banks, high cost of administration of agricultural loans and inability of farmers to provide the necessary collateral CBN, Notable among such programmes were the rural banking programmes.
Microfinance banks provide credit to the under banked sector of the economy and development of rural areas as well as the financial empowerment of those rural areas. While substantial progress has been made in this respect, there is still need for further improvement, with the expansion of the agricultural and SME in the rural communities, the financial need of these sectors is also increasing and there are significant opportunities for microfinance banks to deploy their funds in a remunerative manner Ndanecho and Akum, Beside this formal sector exists an informal financial sector with people lending and borrowing directly from each other through methods like esusu, daily contributions and through cooperatives Okpara, The presence of a large informal finance sector in Nigeria had been blamed on several factors, some of which are; population concentration in rural areas most of which are unbanked, low literary level, loss of confidence in the banking system due to distress, elitist banking practices and absence of other financial institutions in the rural areas Acha, Credit is important in the lives of the rural poor in a developing economy, it is an agreed fact that most of the small and medium scale entrepreneurs in rural areas lack the necessary financial services especially loans from the commercial banks; this is because they are considered not credit worthy Chavan and Ramakumar, ; Akinsanmi, Akangbe, Olajide and Ajayirevealed that the Federal and State governments have recognized that for sustainable growth and development, the financial empowerment of the rural areas is vital, being the repository of the predominantly poor in society and in particular the SMEs.
If this growth strategy is adopted and the latent entrepreneurial capabilities of this large segment of the people is sufficiently stimulated and sustained, then positive multipliers will be felt throughout the economy. To give effect to these aspirations, various policies including the micro finance policy of were instituted over time by the Federal Government of Nigeria to im-prove rural enterprise production capabilities CBN, ; Olaitan, This has encouraged the proliferation of Microfinance Banks in rural areas since the year servicing the rural people with a similar goal of alleviating poverty.
Several studies have investigated the effectiveness of microfinance banks from the point of view of the services rendered such as loans supplies and savings Yahaya et al.
Historically, Acha points that it was in a bid to resolve the deficiency of the informal microfinance sector that the CBN in introduced a microfinance policy a prelude to the licensing of microfinance banks in Nigeria.
Microfinance banks were therefore established because of the failure of the existing microfinance institutions to adequately address the financing needs of the poor and low income groups Acha, The CBN further justified its licensing of microfinance banks with the lack of institutional capacity and weak capital base of existing community banks, existence of huge un-served market and need for increased savings opportunity CBN, This is attributed to the high risks inherent in them and their inability to provide asset-based collateral.
It was therefore to make up for the shortfall in the financing of the entrepreneurial poor and their small businesses that microfinance banks were established. It is important to double efforts to transform the economy and continuously explore pragmatic methodologies to address the problem of our rural farmers Maurice and Tashkalma, ; CBN, In Nigeria poverty is pervasive with frightening depth and breath.
It affects all geopolitical zones of the country. The poor in Nigeria like those elsewhere are powerless, voiceless, lack basics of live and are generally deprive. Poor people have insufficient income, lack access to basic services, have limited access to credit and shelter, they survive on menial jobs and can barely afford to send their children to school.to empower the poor, and provides a valuable tool to assist the economic development process.
However, unavoidably, various barriers and obstacles limit the roles of microfinance, entrepreneurship and sustainability in reducing poverty in LDCs around the world. Today sustainable development is one of the biggest challenges. Microfinance Development tools initiative for sustainable development as empowerments are recognized.
Microfinance services poor access to financial services that are defined can major banking industry has been ignored by. Economic Importance of Agriculture for Sustainable Development and Poverty Reduction: Findings from a Case Study of Ghana Xinshen Diao, IFPRI, [email protected] 2.
3 TABLE OF CONTENTS THE ECONOMIC IMPORTANCE OF AGRICULTURE FOR SUSTAINABLE DEVELOPMENT AND the important role agriculture that can play in economic development and the urgent.
The United States Agency for International Development (USAID) is an independent agency of the United States federal government that is primarily responsible for administering civilian foreign aid and development timberdesignmag.com a budget of over $27 billion, USAID is one of the largest official aid agencies in the world, and accounts for .
This paper evaluates MFI successes and failures around the world, and incorporates lessons leant in a model microfinance institutional mechanism for timberdesignmag.comsful microfinance operations demonstrate that the poor repay their loans and are willing to pay higher interest rates if they can access credit.
Research on social innovation has gained momentum over the last decade, spurred notably by the growing interest in social issues related to management, entrepreneurship, and public management.