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This research study investigates the impact of microfinance on entrepreneurial development of small scale enterprises in Nigeria and its global significance. Microfinance institutions world over and especially in Nigeria are identified to be one of the key players in the financial industry that have positively affected individuals, business organizations, other financial institutions, the government and the economy at large through the services they offer and the functions they perform in the economy



1.1      Background of the study

It is an undisputable fact that the contribution of microfinance to entrepreneurship activities is increasing being recognized as a primary engine of economic growth. (The Economist, May 18th 1996). By combining existing resources with innovative ideas, entrepreneurs add value through the commercialization of new products, the creation of new jobs and the building of new firms. The Global Entrepreneurship Monitor (GEM) indicates that nations with higher levels of entrepreneurial activity enjoy strong economic growth. In short, entrepreneurs are the link between new ideas and economic development. This is proper using the experience of the industrialized countries of North America and West Europe. Legislative actions have been taken by countries like United States of America, the Netherlands and Japan to see to the fact that entrepreneurial activities can contribute to economic development. This may explain why various governments around the world promoted it since entrepreneurial skills and strategies are used to tackle different social problem and addressing poverty as well as a means of employing the disadvantaged. Speaking at the conference with a theme “Improving Access to Microfinance”, Soludo (2008) revealed that in order to sustain increases participation of skilled entrepreneurs in the credit and other financial service delivery to the micro, small and medium enterprises in the microfinance sub-sector, Central Bank of Nigeria (CBN) is forging ahead in its determination to develop a pool of articulate and well focused entrepreneurs through setting up one Entrepreneurship Development Centre (EDC) in each of the six geo-political zones in the country. The three pilot entrepreneurship development centres, he said,. Will commence January, 2008 are in Kano (North West), Ota (Southwest) and Onitsha (Southeast). Also speaking at the international microfinance conference and annual microfinance conference and annual microfinance and entrepreneurships awards held at the Sheraton Hotel and Towers, Abuja, Soludo (2008) stated that access microfinance by the economically active poor and low income earners in Nigeria is a collective responsibility for the achievement of the Millennium Development Goals (MDGs); He added that it provides a strong focus on macro-economic stabilization, especially in the pursuance of massive trades and investment liberalization program to encourage entrepreneurial capacity to develop business and for the business to success (Nwoye, 1997). Despite the missing links in Africa’s development process, researchers and scholars have increasingly recognized the crucial role that entrepreneurship plays in economic development of nations, especially through the development of microfinance sub-sector. (Rashed, H.S, 2000, Dozie, 2005 Aglion and Howilt 1997). For instance, Dozie argued that this vital factor of production which forms the basis of the Schumpeter’s dynamism is the bedrock to a nation’s industrialization and development. According to them, this is achieves through the innovation and risk taking ability of the entrepreneurs. It is therefore, the entrepreneur who generates the critical momentum an economy requires for economic growth by breaking new grounds in human endeavour as a result of the vital characteristics they possess. However, on this note, this study intend to address the entrepreneurship in Nigerian economy has the potential of becoming the path to success and compete favourably at the global market economy, when the technical and commercial skills of the entrepreneur are effectively develops utilized. Peter and Clerk (1997) affirm that entrepreneurial development is a disposition to accept new ideas and try new methods; a readiness to express opinions, a true sense that make men and women more interested in the present and future than in the past, a better sense of punctuality, a greater concern for planning, organization and efficiency, a tendency to seek the world as calculated a faith in science and technology and finding a belief in distributive justice. The study is an attempt to show how successful entrepreneurship development through microfinance institutions will result in creation of jobs, develop greater skills that can be more readily adopted by local residents (see Green et al, 1990; Kovshling and Allen 2004). Entrepreneurial development programmes offer sustainability and flexibility to meet broader community development needs (Dabson Ricky and Scheveke 1994, Loyons and Hamlin 2001, Lichtentein Iyons and Kutzandua 2004.


Given the problem statement above, the major problems which this research work aims to evaluate are captured in the following research question. What are the contributions of microfinance banks to the entrepreneurial development and what are the modalities to finance?
To what extent has their contribution (financing) impacted on the growth of entrepreneurship? What problems militate against the effective financing of entrepreneurs by the microfinance banks and the attainment of their objective? How effectively and efficiently will microfinance banks functions/to operate and perform better.


Based on the research questions marshaled above the specific objectives seeks;
i. To identify the role of microfinance on the development of entrepreneurial activities in Nigeria

ii. Identify problems that militate against the effective funding of entrepreneurship development (apart from finance).
iii. To identify the viability of microfinance banks in entrepreneurship financing
iv. Make policy recommendation.


For the successful completion of the study, the following research hypotheses were formulated by the researcher; 

H0: microfinance banks do not play any role in the development of entrepreneurial activities in Nigeria

H1: microfinance banks do play a role in the development of entrepreneurial activities in Nigeria

H02: there are noproblems that militate against the effective funding of entrepreneurship development (apart from finance).

H2: there areproblems that militate against the effective funding of entrepreneurship development (apart from finance).


It is important to mention that this study dealt primarily with the examination of the impact of micro-finance firms on entrepreneurial development in Nigeria. Therefore, this study will be useful to stake holders of microfinance firms and also to entrepreneurs in Nigeria. It will help organizations involved in the advancement of entrepreneurs in formulating development programmes and policies. It will also provide necessary professional advice to organizations involved in the advancement of small business enterprises in Nigeria


Although there are many factors and variable responsible for entrepreneurial development, this study focuses only on the microfinance as the major factor responsible for entrepreneurial growth using twenty entrepreneurs from each district as selected sample size. The researcher encounters some constrain which limited the scope of the study;

 a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study     

b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

c) Organizational privacy: Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities


GROWTH: An increase in amount, size, or degree or importance of something.

DEVELOPMENT: The gradual growth of something so that it become bigger, stronger or more advanced.

MICRO CREDIT: Small loans made to low-income individuals to sustain self-employment or to start up very small business.

SMALL SCALE: Ekenyong (1981:50) defined small scale as those enterprises that have relatively little capital investment that produces in small share of the market, that employ not more than fifty workers.

 INDUSTRY: A group of firms that produce similar products or services.

 ENTREPRENEUR: The Oxford Advanced Learners dictionary defined entrepreneur as a person who makes money by starting or running businesses which involves taking financial risks.

 ENTERPRISE: The ability to think of new projects and make them successful.


This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study

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