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Full Project – The roles of micro finance bank in the economic empowerment of the Nigerian masses

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CHAPTER ONE

1.0 INTRODUCTION

1.1 GENERAL OVERVIEW OF THE STUDY

Micro finance banking or otherwise grassroots banking is a new phenomenon in Nigeria which attempts to reach the masses who have not been able to tape with modern system of banking with its attendant complex and sophisticated operations which emphasis much on collaterals.

The ideas of micro finance banking was the brain child of the former military president, general Ibrahim badamosi Babangida who ruled the country between August 1985 and august 1992 as a means of involving the rural populace in economic development of their various communities.

Prior to this time, the central bank of Nigeria, CBN which has the sole responsibility of licensing balance as well as the major supervisor of banking operations in the country had instructed the conventional banks to open specific number of the rural branches to of their banks in the rural area.

This is because the C.B.N known the importance of the rural populace in the economic development of the nation and also to highlight the importance of carrying them along in the scheme of things.

It was evident that the rural dwellers were shortchanged in the daily transaction of the convention banks because as it were, they are certain rules and regulation and worst of it all being that their numerous requests for credit and loan audience were never met so all these tend to alien cite them further and made them feel lost in their ways to get entrenched in the banking system.

However, the global banks directive could not properly give solution to these unseeing intractable problems faced by the rural dwellers and this led to further effort being made to find a lasting solution to it through the establishment of micro finance Banks.

The rural people have always led viable and functional local credit mobilization schemes, which through informal, served their intents and purposes. In this part of the country, these informal arrangements have various names varying form ajo” Isusu, Akawo” Bam, Adashi etc.

These local systems of financial transactions are characterized by voluntary contributions from member on daily, weekly or monthly basis while some of these money so collected are given out as loans to needy members according to the rules with nominal interest changed on the loans while appropriate firms are imposed on any member who defaulted in repayment of such loans taken.

The then directorate for food, roads and rural infrastructure (DFFR) came up with the idea of grassroots unit banks which would aid the programmes of rural development, self reliance and better economic well being for the majority of the people in the sub-urban and rural areas, an idea which the CBN quickly gave heed to and as a result micro finance banking came into being.

STATEMENT OF PROBLEMS

Although evidence abound about the role being played micro finance banks in empowering the masses there is still the need to clearly define the concept of micro finance banking

Knowing that after more than a decade of its existence, people are yet to know the importance of micro finance banks in their problem here is to find out the wants ands methods which micro finance banks are using to empower the Nigerian masses economically.

OBJECTIVES OF THE STUDY

Micro finance banks are expected to play certain roles in the overall economic life of the people where they some of these clauses include:

Consideration: The reason for tasking the guarantee is always sated most often as the giving of advance is any form.
Whole debt: This means that the guarantee is for whole debt, which implies that the liability of the guarantor is not reduced in the presence of other securities there, is also liable to pay interest on outstanding balance until final liquidation.
Effect of Guarantors Death: Notice of death of a guarantor is not deemed to determine the guarantee until his personal representatives give notice to determine it.
Payable on demand: By executing the guarantee the guarantor undertakes to make good his guarantee on demand. This implies that demand is necessary for his liability to become due.
Joint and several guarantee: This clause is necessary so that where two or more guarantors are involved, their liability on the guarantee becomes joint and several instead of jointly only which will make a guarantor only liable for has share of the debtors commitment.
Subordinate clause: This makes it possible for whatever, claims the guarantor and debtor may have against each other to queue behind the indebtedness of the debtor of the micro finance bank.

SCOPE OF THE STUDY

Microfinance banks in Owerri orlu and okigwe in the state will form the nucleus of this study ands the findings can be generalized to the entire nation bearing in mind some factor in the areas of social political and religious of the people life.

1.5 RESEARCH QUESTIONS

Do micro finance banks have significant roles to play in the economic empowerment of the masses?
Does lack of qualified staff affect the performance of micro finance banks?
Do micro finance banks have significant roles to play in the economic empowerment of the Nigerian masses?

SIGNIFCANCE OF THE RESEARCH

Students often make the mistake of taking methods of settlement for payment and vice versa. While methods of payment refer to different ways an oversea buyer pays for the goods supplied to him. Methods of settlement refer to the instrument in use for the payment.

NOSTRO AND VOSTRO ACCOUNTS: – It will be pertinent to mention here that all the accounting procedures in respect of the methods of settlement passes through nostro and vostro accounts. Nostro is a Latin word for our while nostro means for your.

Nostro accounts are assets account i.e. the account that a bank keeps in foreign currency with its correspondent bank overseas while Nostro is the reverse. We say it is an assets account for simplicity because it will be come a liability if the account is overdrawn.

A nostro account refers to the account held in naira by a Nigeria bank on behalf of its correspondent bank abroad.

Remember that a nostro account to one bank is a vostro account to another. Example Union bank of Nigeria PLC in Nigeria has account with Midland bank PLC London its correspondent bank. To union bank Nigeria PLC, the account at midland bank is a nostro account while it is a vostro account to midland bank.

1.7 LIMITATION OF THE STUDY

This project work is expected to cover among other specific issues the root or foundation of micro finance in Nigeria and its background history of the study will also appraise the achievement of the micro finance bank in Nigeria and Imo state in particular and ethicizes the lapses. There may have to be some suggestions by this researcher on the way forward in the micro finance bank.

Every research study is not without some limitations encounter in the process of assembling the work. So this study was faced with the following problems.

Upon all the books which authors published in the study of banking and finance as a discipline it was difficult to find the very few that deals the inability of the operations to release accurate information of their operations as well as the financial limitations of the researcher, all contributed to make this study a hectic one.

1.8 DEFINITION OF TERMS:

ROLES: The expected functions, which a thing is to perform to realize certain objectives.

MICRO FINANCE BANK/BANKING: This is a new phenomenon in the Nigeria banking sub-sector, which tires to encourage the rural dwellers to participate actively in the economic emancipation.

ECONOMIC EMPOWERMENT: The ability of a people to the part and parcel of the economic development of their area through gainful employment.

NIGERAIN MASSES: This is the population of Nigeria as was put forward by the 1991 census figure.

NATIONAL BOARD FOR ECONOMIC FINANCE BANKS: The body charged with the responsibility of promoting developing monitoring and general supervision of micro finance.

CO-OPERATIVE SOCIETIES: A collection of individuals with the aim of assisting members achieves their financial and other obligations.

CENTRAL BANK OF NIGERIA CBN: The apex banking regulatory body in Nigeria and the lender of the last resort.

MICRO FINANCE DEVELOPMENT ASSOCIATION CDAS: One of the bodies that are expected to partake ion the ownership of a micro finance bank in a locality.

UNITED BANKING: a situation where a bank cannot open branches outside the micro finance where it is situated.

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