CHAPTER ONE

1.0     INTRODUCTION
1.1     OVERVIEW OF THE STUDY
It would be observed that, despite the presumed developments in the Nigerian economy, the country is still largely being regarded as a developing country (Onyema, 2006). More so, its industrial growth is not quite impressive. 
Before the emergence of formal microfinance institutions, informal microfinance activities flourished all over the country. Traditionally, microfinance in Nigeria entails traditional informal practices such as local money lending, rotating credit and savings practices, credit from friends and relatives, government owned institutional arrangements, poverty reduction programmes etc (Lemo, 2006). The Central Bank of Nigeria Survey in 2001 indicated that the operations of former microfinance institutions in Nigeria are relatively new, as most of them never registered after 1981.
Before now, commercial banks traditionally lend to medium and large enterprises which are judged to be credit-worthy. They avoided doing business with the poor and their micro enterprises because the associated cost and risks are considered to be relatively high (Anyanwu, 2004).
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 have been instituted over time by the Federal Government to improve rural enterprise production capabilities. (Olaitan 2006)

In view of this, the impact of micro finance bank in economic growth and development of Nigeria started showcasing itself. With the initiative of microfinance, rural areas are opportune to grow and develop as loan and fund are easily given to rural farmers and entrepreneur. Jobs opportunities were created since there is avenue for lending and investing.
1.2     STATEMENT OF PROBLEM
There are so many problems and challenges that hinder the functionality of the microfinance bank in carrying out their major role of improving economic growth in Nigeria. 
These problems include

• poor attitude of Nigerians towards MFBs
• insufficient support from the regulators and government
• There are communication gaps and inadequate awareness among the masses.
• Undue competition rather than cooperation from the mega banks, and undue malpractice/Sharp practices by microfinance bank operation.

The researcher will in the research find possible ways of solving or making better the conditions for the operation of MFBs.
1.3     OBJECIVE OF THE STUDY
The set objective of this research work are to:

• Investigate the impact of micro finance bank and economic growth in Nigeria.
• It will explicate in detail ways in which micro finance banks can contribute in developing rural areas and improving the life of the poor people.
• It will investigate the ways microfinance bank can contribute in building entrepreneurship within the country.

1.4    RESEARCH QUESTIONS

• To what extent will the poor attitude of  Nigerians towards Micro finance banks affects the economic growth in Nigeria
• To what level will insufficient support from the regulators and government affects the smooth operations of Micro finance banks

1.5    TEST OF HYPOTHESIS
It is quite evidential that the major ways in which microfinance bank can help in economic development is through the encouragement of entrepreneurial development.
The essence of microfinance bank is to enable the poor individual to be able to obtain loan and be able to manage their enterprise.
To this effect, the following hypothesis will be tested, thus.
Hypothesis I
H0:     Micro finance bank is irrelevant to the economic growth and development in Nigeria since the number of entrepreneurs that uses their services is low
Hi:     Micro finance bank is relevant to the economic growth  and development in Nigeria since the number of entrepreneurs that uses their services is low
Hypothesis II
H0:     Microfinance institution do not contribute to entrepreneurial productivity
H1:     Micro finance institutions do contribute to entrepreneurial productivity.

1.6     SCOPE OF THE STUDY
The scope of the study is subjected around the frame work of microfinance bank in Nigeria vis-à-vis its contribution to the economic growth and development.

1.7  SIGNIFICANCE OF THE STUDY
This study is essentially significant in that it is directed towards evaluating the impact and role that micro finance banks have on the economic growth and development in Nigeria, especially the rural areas which is a criteria aimed at measuring economic standard.
Owing to the fact that researcher has aimed at pinpointing the ways in which micro finance bank can help in the revamping of the nation’s economy, the findings of this research work will be of great help to most developing countries who may wish to toe the part of Nigeria in MFB development.

It will also serve as a reference point for future researchers who in one way or the other will try to unveil the role and impact of micro finance bank to economic growth and development.

1.8 LIMITATION OF STUDY

Due to this topic, our area of concentration will be mainly based on the role of Micro finance bank in the development of Nigeria economy.

In a research work of this nature, there are bound to be factors that act on the contrary. There militating against one’s effort. Time which no matter how abundant it was limited, this is one of the factors. The time allowed for research work of this nature is quite short, even though it gives room for supervisor’s day to day consultation.  However, the research work was carried out within Kaduna and some part of Nigeria; therefore, it was administered to a sample of population. This study should be interpreted with caution in the light of fact that a sample can hardly be same as population. The hesitant nature was also a limiting factors in carrying out this research work. The conclusion therefore are based on the readily information provided, but the limitation however does not render research work useless but allows it to used as a basis for decision making and as a basis for further research work.

1.9   DEFINITION OF TERMS

v INTEREST RATE: - Thisis a percentage that expresses the relations between the interest for a particular period and the principal of a given loan.

v BENEFICIARY: - The last in the series of individual or group who gain from a particular activities.

v DISBURSEMENT: - This is the act of giving or paying out of funds.

v POVERTY: - This is a situation or experience of being poor.

v LOAN: - Leveling a sum of money by a lender to a borrower to be repaid with certain amount of interest.

v SCHEME: - To device a plan specifically having certain motives in mind.

v SECURITY: - This is what is put down as a guarantee by a borrower for the payment of loan.

TAX CLEARANCE: - This is a written testimony of having paid a compulsory contribution levied on persons, individual, and business Inland Revenue Development.

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