NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, April 29, 2015

To say that the Small, Medium Enterprises is the engine room for economic development is to state the least, especially, in the third world countries, where the degree of unemployment is high and where there are so many qualified applicants chasing few and sometimes not available white collar jobs.

The economic situation in the country is such that has forced lots of people to look inwards, and think outside the box on how best to sustain themselves. But this only works out, if they have their own personal capital with which to set up something of their own, no matter how small.

Hence, no matter the kind of excellent idea that some of these people have, on how best to sustain themselves, without the required capital, their ideas are as good as dead, and poverty continues to stare them in the face.

That is where the microfinance banks are supposed to come in, to bridge the gap and provide financial services to the poor who are traditionally not served by the conventional financial institutions.

But to what extent are these microfinance banks living up to their biddings, since the funds are supposed to be made available for people to start up new businesses or to revamp an already existing one? Today, there are so many microfinance and microcredit banks spread across the country. It would have been expected that based on that the standard of living of the average Nigerian would have improved immensely.

But the reverse is the case, as findings show that there is no significant difference between people who use the microfinance banks and those who do not. In other words, there is no significant effect of microfinance on poverty alleviation or sustainable economic activities.