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1.1 Background to the Study

It is a common belief among Nigerians that it is the sole responsibility of government

and functionaries to provide for the needs of their people. The notion is that government

could and should develop the communities including infrastructures, social amenities and

job opportunities.

Government is regarded as the only provider who has everything at its disposal. On

the contrary, government alone cannot do it, it needs to partner and collaborate with

individuals, groups and development organizations to bring about desired development

that will meet the need, yearning and aspirations of the citizenry, therefore, other viable

ways and means must be identified for community development other than relying on

government alone.

One of the viable means and ways of helping the citizenry to meet their need,

yearning and aspirations is to empower them to cater for themselves and the government

to serve as a supporting agent and a regulatory body. This is because empowerment

means to facilitate an individual with what he needs to be able to live comfortably and

develop in a given community or society. Therefore, if human empowerment is taken

care of, the government will be relieved of her over – burden and be able to focus on

other sectors of improving the standards of life. An example of this is that the citizens if

empowered will be self employed and even be employers of labour and take care of

themselves and at the same time contribute to the growth and development of the


There are different and several ways of human empowerment, one of them is

micro – finance banking system. Microfinance bank is a financial institution where small

scale enterprises are empowered to carry out their activities towards economic

development. Microfinance provides broad range of financial services such as deposits,

loans, savings, payment services, money transfers, and insurance to the poor and low

income households and their micro-enterprises, who are excluded from the formal

financial systems (Tuan, 2006). Therefore, it is clear that microfinance banks contribute a

lot on human empowerment. It is the contributions that this study dwells on particularly

in Kano metropolis.

The study area of this research work is Kano metropolis of Kano State. Kano state

is a state that was created by Nigerian military regime of General Yakubu Gowon. The

first governor of Kano state is Police Commissioner Audu Bako, the state has 44 local

government areas with Kano - municipal as the state capital.

According to the 2006 population head - count the population of Kano state

people is more than 9 million that qualified the state as the state with the highest

population. Majority of the people of Kano state are Muslims and their tribe is Hausa and

the language they speak is also Hausa language. Most of Kano people are traders and that

is why the state had the slogan of "centre of commerce".

Geographically, Kano is situated in northern Nigeria and in tropical savannah

neighbouring Jigawa, Katsina and Kaduna states of Nigeria. Kano has three weather

seasons namely rainy, dry and cold seasons. Kano soil is agriculturally fertile, that is why

most of the rural dwellers in the state are farmers. Sorghum, rice, wheat, maize, millet are

cultivated in the state. Irrigation farming, where crops like pepper, tomato, onion, and

vegetables are cultivated, is also done in the state, especially in Kura and Garun Malam

local government areas.

Islamic education is prevalent in Kano city in particular and there are many

Islamic religious scholars.

1.2 Statement of the Problem

Community development has been highlighted by scholars, development experts

and the government as the basis of any meaningful economic development. And human

empowerment is one of the essential methods of community and economic development.

With this fact in view successive governments in Nigeria have initiated a number of

programmes aimed at mobilizing, promoting and funding community development,

especially human empowerment. An example of these programmes includes: Nigerian

Agricultural Development Bank (NADB), Operation Feed the Nation, National

Accelerated Food Production Programme (NAFPP) Family Economic Advancement

Programme (FEAP) and Better Life for Rural Women (Nuhu, 2007).

Inspite of all the above - mentioned development initiatives, little or no impact

was noticed on the life of the citizens and human empowerment in general, especially

since the members of such communities have not been sufficiently integrated into such

programmes. To go another way round for once another effort, Kano State government

under the leadership of Malam Ibrahim Shekarau has introduced the idea of micro -

finance banking in 2008 with a view to develop the Kano community and get citizens

empowered. It is on this light that this study looks into the significance of micro - finance

banks (MFBs) on development programmes in Kano metropolis with a particular

reference to human empowerment.

1. 3 Research Objectives

The study intends to achieve the following objectives.

1. Identify the categories /types of micro-finance banks in Kano state.

2. Examine the participation pattern of people in the micro –finance bank system in

Kano metropolis.

3. Determine the strategies adopted by micro-finance banks in promoting human

empowerment in Kano state.

4. Examine the relationship between micro-finance banks and community

development departments in Kano metropolis.

5. Identify the major factors affecting the microfinance banks activities and people’s

involvement in the system.

1.4 Research Questions

The research will be guided by the following questions with a view to finding

appropriate answers to them, they are:

1. What are the major types and categories of micro – finance banks in Kano


2. How is the participation pattern of people in the micro-finance bank system in

Kano metropolis?

3. What are the strategies adopted by micro –finance banks in promoting human

empowerment in Kano state?

4. How is the relationship between micro –finance banks and community

development departments in Kano metropolis?

5. What are the major factors affecting the micro-finance banks activities and

people’s involvement in the Kano metropolis?

1.5 Significance of the Study

The contributions of micro- finance banks (MFBs) on human empowerment

cannot be overemphasized. The research intends to examine the operations of MFBs in

Kano. The research could proffer recommendations for the government and development

agencies in making of micro-finance banks as tools for human empowerment and

economic development.

The research could serve as a useful document and a guide to community building

practitioners on Kano state and Nigeria at large. The research could, once again, serve as

a guide to micro - finance bank operators, especially when it comes to the case of Kano

state. The research if published will be of significance/ immensely to provide a way —

out for grassroots community building and human empowerment.

1.6 Scope and Delimitation of the Study

This research work is restricted to contributions of micro- finance banks on human

empowerment.. The study is concentrated on concept, operations, effectiveness, and

limitations, Strengths and evolution of micro - finance banking system with regards to the

view of development experts as model for appraising the concept of community

development program.

In the aspect of delimitation some other issues are observed in this research work,

which are equally essential in contributing to human empowerment. But those issues

have been avoided because of this research work is confined to the contributions of micro

finance banks on human empowerment in Kano metropolis. The issues are:

The contributions of conventional commercial banks in human empowerment, self – help

groups, Rotating Savings and Credit Associations (ROSCAS), savings collectors and co-

operative societies, National Directorate of Employment (NDE), Community Based

Organizations (CBOs) and Non-Governmental Organizations (NGOs)

1.7 Operational Definition of Terms

For the study to be better understood there is need to understand the operational

definition of terms used. The followings are the terms and their definitions:

‘Development’ Means refinement, change, review and transformation of

individuals for better.

‘Community’ A group of people in one place, village or town and sharing a

common identity.

‘Community Development’: The organization of people in a locality to deal with the

problems and opportunities in the vicinity, especially that affect

their patterns of living and mutual advantage.

‘Bank’ Financial institutions where financial services, like loans, savings,

foreign - exchange etc. are provided.

‘Micro - Finance Bank’ A financial institution where small scale enterprises are

empowered to carry out their activities towards economic


‘System’ A set of things or ideas organized in an arrangement to work

together as to attain to a given goal.

‘Empowerment’ Means to facilitate an individual with what he needs to be able to

live comfortably and develop in a given community or society.

‘Evolution’ Emergence of something into being



2.1 Theoretical Framework

Theory includes propositions or hypotheses that are problematic and not verified

(though they may be verifiable). A theory is constructed by formulating a coherent group

of propositions designed to help understanding and / or making judgments. The most

familiar type of theory is that classified by content and generally associated with several

disciplines. Each discipline specializes in attempting to explain a particular class of

phenomena (cook, 1994).

For a group — as a whole to exist, it must be interdependent with other groups in

a larger community. Only thus can it have purposes of "acting on" a situation to change

the situation. Groups arise through the coming together of “like minded" individuals

within the community and their methods of operation are seriously affected by the overall

culture of the community. Conversely, whatever changes occur within the community

come about through the changes within and between groups.

The fact that people belong to different groups for different purposes produces the

situation of "overlapping group membership" within each individual (Thelen, 1954)

Structural - factionalism draw its inspiration primary from the ideas of Emile

Durkheim and Max Weber. Functionalism emphasizes the central role that agreement

(consensus) between members of a society on moral plays in maintaining social order.

This moral consensus creates equilibrium, the normal state of society. Durkheim was

concerned with the question of how societies maintain internal stability and survive

overtime. Durkheim proposes that such societies tend to be segmentary, being composed

of equivalent parts that are held together by shared values, common symbols, or as his

nephew Mauss held, system of exchange. In modern complex societies members perform

very different tasks, meaning that a strong interdependence develops between them. Base

on the metaphor of an organism in which parts function together to sustain the whole,

Durkheim argued that complex societies are held together by organic solidarity. He

espoused a strong sociological perspective of society which was continued by Radcliff

Brown, who following Auguste Comte believed that the social constituted a separate

"level" of reality distinct from both the biological and from inorganic matter.

Explanations of social phenomena therefore, had to be constructed within this social

level, with individuals merely being transient occupants of comparatively stable social

roles (Wikipedia encyclopedia)

The central concern of structural functionalism was a continuation of the

Durkheimian in task of explaining the apparent stability and internal cohesion of societies

which are necessary to ensure their continued existence overtime. Societies are seen as

coherent, bounded and fundamentally relational constructs, who function like organisms

with their various parts (social institutions) working together to maintain and produce

them. The various parts of society are assumed to work in an unconscious, quasi

-automatic fashion towards the maintenance of the overall social equilibrium. All social

and cultural in the sense of working together to achieve this state and are effectively

deemed to have a "life" of their own. They then primarily analyzed in terms of this

function they play. Individuals are significant not in and of themselves but in terms of

their status, their position in patterns of social relations, and their roles, the behavior (s)

associated with their status. The social structure is then the network of status connected

by associated roles (wikipedia encyclopedia)

It is helpful to begin by noting that community can be approached as a value

(Frazer; 2000:76 cited in Smith, 2001). As such it may well be used to bring together a

number of elements, for example, solidarity, commitment, mutuality and trust. It comes

close to the third of the ideals that were inscribed in many of the banners of the French

revolution - fraternity (the others, as you will most likely remember were liberty and

equality). Socialists such as Morris talked similarly of' “fellowship”.

Fellowship is heaven and lack of fellowship is hell; fellowship is life and lack of

fellowship is death and the needs that ye do upon the earth, it is for fellowship's sake you

do them. (Smith, 2001)

Community development does not provide detailed descriptions appropriate to

every community system. It does not distribute a particular improvement programme.

Rather community development theory expresses a unique perspective on development.

It supplies to those who would consciously intervene in community system, a conceptual

framework. It present a logical basis for and general guides to the use of open system of

democratic structuring and the application of a holistic approach in efforts to stimulate

the building of capacities and to improve the performance of and in community system

(Cook, 1994).

General community development theory establishes an orientation toward

community systems and human behaviors to be considered relevant in and for this level

and type of social organization. It does not purport to give answers to the basic questions

of what, why, or how for every community system. It does provide a conceptual platform

or grounding for the building of community setting and time specific theory by which to

guide and assess intervention in each particular system (Cook, 1994).

A growing body of research suggests that where trust and social networks flourish

individuals, firms, neighborhoods, and even nations prosper economically. Social capital

can help to mitigate the insidious affect of socio - economic disadvantage (Beem

1999:319 - 325, cited in Smith, 2001).

2.2 Theory of Finance/Banking

A substantial body of empirical work on finance and growth assesses the impact

of the operation of financial system on economic growth, whether the impact is

economically large, and whether certain components of the financial system e.g. banks

and stock markets, play a particularly important role in fostering growth at certain stages

of economic development. Theory focuses on particular functions provided by the

financial sector – producing information, exerting corporate governance, facilitating risk

management, pooling savings and casing exchange and how these influence resource

allocation decision and economic growth.

Patrick (1966) in his work postulates a bi-directional relationship between

financial development and economic growth. Ever since, a large empirical literature has

emerged testing this hypothesis (see Levine, 1997 for survey). Two trends in this respect

have emerged in the literature. The first tests the relationship between economic growth

and financial development a single using either cross section or panel data techniques

(see et al, 2007 for survey). The second trend examined the hypothesis for a particular

country using time series data techniques as done by Murinde and Eng (1994) for

Singapore, Lyons and Murinde (1994) for Ghana, Odedokum (1998) for Nigeria, Gung

and Ford (1998) for Indonesia, Wood (1993) for Barbados and James and Warwick

(2005) for Malaysia.

Recent research (king and Levine, 1993 a and 1993 b) Demetriades and Hussain,

1996; Levine, 1997; Demiaguc Kunit and Maksimovic 1998, Beck et al, 2000, Beck and

Levine (2004).

Wachtel (2003) and Demetriades and Andrianova (2004), Wachtel (2000) and

Demetriades and Andrianova (2004); structural on the works of Bagehot (1873)

Schumpeter (1912), Gurley and Shaw (1955), Goldsmith (1969) and Mckinnon (1973)

employed different econometric Methodologies and data sets to assess the role of the

financial sector in stimulating economic growth. The mounting empirical research, using

different statistical methods and data has produced remarkable results. First, results have

shown that countries with well – developed financial systems tend to grow faster

especially those with (i) large privately owned banks that channel credit to the private

sector and (ii) liquid stock exchanges. The level of banking development and stock

market liquidity exerts positive influence on economic growth. Second, well functioning

financial system case external financial constraints that obstruct firm and industrial

expansion. Thus, access to external capital is one channel through which financial

development matters for growth because it allows financially constrained firms to expand

(Levine, 2003). The endogenous growth literature has supported the fact that financial

development positively affects economic growth in the steady state (Greenwood and

Jovanovich, 1990). Bencivenga and Smith (1991), Roubini and Sala – Imarin (1992)

Pagano (1993) King and Levine (1993b), Berthemy and Varoudakis (1996), Green Wood

and Smith (1997). However, over the last two decades, literature has shown a growing

body of new empirical approaches to treating the causality pattern based on time series

techniques: Gupta (1984), Jung (1986), Murende and Eng (1994), Demetriades and

Hussain (1997) and Kul and Khan (1999). In these studies, the focus is on long – run

relationship between financial sector development and real growth using frameworks of

Bivariate and Multivariate vector auto regressive (AVR) models for different country

samples. The outcome was that the causality pattern varies across countries given the

success of financial liberalization policies implemented in each country and the level of

development of the financial sector (Daradara, 2009).

The theoretical argument that supports the link between financial development

and growth is that a well developed financial system performs several critical functions to

enhance the efficiency of intermediation by reducing information, transaction and

monitoring costs. A well developed financial system enhances investment by identifying

and funding good business opportunities, mobilizes savings, enables the trading hedging

and diversification of risk and facilitates the exchange of goods and services. These

functions result in a more efficient allocation of resources, rapid and faster technological

progress, which in turn results in economic growth. An efficient financial system is one

of the foundations for building sustained economic growth and an open vibrant economic

system. In the early neoclassical growth literature, financial services played a passive role

of merely channeling household savings to investors. Nevertheless, Goldsmith (1969)

and Mckninon (1973) were among authors who offered a contrary view. They proposed a

more active role for financial services in promoting growth. Ever since, substantial

volume of theoretical and empirical literature has emerged, analyzing the role of finance

in growth and development. The role of the financial system in economic growth,

especially the role of stock markets and banks has been extensively discussed in both

theoretical and empirical studies (see Levine (2003) for the survey of the literature). The

key findings of these studies are that countries with well developed financial institutions

tend to grow faster, particularly the size of the banking system and the liquidity of the

stock markets tend to have strong positive impact on economic growth (Beck and Levine,

2002; Beck et al, 1999, Arestis et al, 2001). Schumpeter (1912), in his own perspective of

the theoretical link between financial development and economic growth opines that the

services provided by financial intermediaries are the essential drivers for innovation and

growth. In the alternate, Robinson (1952), argues that finance does not exert a causal

impact on growth. Instead, financial development follows economic growth as a result of

higher demand for financial services. He further noted that, when an economy grows,

more financial institutions, financial products and services emerge in the markets in

response to higher demand for financial services. Literature in this area of study is

generally more supportive of the argument put forward by Schumpeter (1912).

Schumpeter’s (1912) argument was later formalized by Mckinnon (1973) and Shaw

(1973) and popularized by Fry (1988) and Pagano (1993). The McKinnon-Shaw

Paradigm postulates that government restrictions on the operations of the financial

system such as interest rate ceiling, district credit programs and high reserve requirement

may hinder financial deepening. This may in turn affect the quality and quantity of

investments and hence has a significant negative impact on economic growth. Therefore,

the Mckinnon Shaw financial repression paradigm implies that a poorly functioning

financial system may retard economic growth. The endogenous growth literature also

supports this argument that financial development has a positive impact on the steady

state growth (see Bencivenga and Smith 1991; Bencivenga et al 1995, and Greenwood

and Jovanovich, 1990 among others).

The success of the financial system through out the world has been predicated on

the initiation of financial sector reforms such as the introduction of market – based

procedures for monetary control, the promotion of competition in the sector, and the

relaxation of restriction on capital flow. The aim of initiating these reforms is to create a

more efficient and stable system which will facilitate optimum performance in the

economy. This means providing a foundation for implementing effective stabilization

policies and successfully mobilizing capital and putting it to efficient use, which leads to

achieving higher rates of economic growth (Johnston and Sundararajan, 1999). Many

countries have experienced successful financial sector reforms which have been

accompanied by improvements in economic growth and efficiency of the financial

system, while other countries have faced financial crisis and disruptions to economic

growth (Daradara, 2008).

2.3 Evolution of Micro - Finance Banking System

On the evolution of micro - finance banking system in Nigeria Nuhu (2007) has

this to say: in the face of the glaring inability of formal service(s) of finance to meet the

needs of these rural poor farmers, the informal sources took up the challenge. This is in

form of the participation of the non -governmental organizations (NGOs) in the

agricultural credit market. The NGOs are notable in the area of micro – finance, which is

a major anti poverty strategy being supported by several international organizations. The

practice of micro - finance in Nigeria is culturally rooted and dates back to several

centuries. The traditional micro - finance institutions provide access to credit for rural and

urban low - income earners. They are mainly of the informal self–help groups (SHGs) or

rotating savings and credit associations (ROSCAS) types. Other providers of micro-

finance services include savings collectors and co—operative societies. The informal

financial institutions generally have limited outreach due primarily to paucity of loan able


The financial liberalization era of the SAP brought them into limelight. Several

NGOs are in operation now but notable among them are the Farmers Development Union

(FADU), Lift Above Poverty Organization (LAPO) Community Development

Foundation (CDF) Community Women and Development (COWAD), the Group

Dynamics Initiative (GDI) amongst others.

The liberalization of the economy since the introduction of the Structural

Adjustment Programme (SAP) in 1986 has tended to exacerbate the financial problems of

the rural communities. Loan able funds from government sources dwindled considerably.

The cost of borrowing enterprises multiplied several folds irrespective of the scale


In order to enhance the flow of financial services to Nigeria rural area,

government credit programmes and policies was targeted at the poor. Notable among

such programme were Rural Banking Programme, Sectoral Allocation of Credit,

concessionary interest rate, and the Agricultural Credit Guarantee Scheme (ACGS).

Other institutional arrangements were the establishment of the Nigerian Agricultural and

Cooperative Bank Limited (NACB) the National Directorate of Employment (NDE) the

People’s Bank of Nigeria (PBN), the Community Banks (CBs) and the Family Economic

Advancement Programme (FEAP). In 2000 government merged the NACB with the PBN

and FEAP to form the Nigerian Agricultural Co-operative and Rural Development Bank

Limited (NACRDB) to enhance the provision of finance to the agricultural sector. It also

created the national poverty eradication services to alleviate poverty.

Subsequently, Tuan (2006:15) says: microfinance is a new term in the

development, prominently emerging in the 1970s (Robinson, 2001). From the 1950s to

the 1970s, the provision of financial services by donors of governments was mainly

subsidized rural credit programmes. These programmes often resulted in high loan rural

households (Robinson, 2001). The 1980s, Gramen Bank and Bank Yakyat Indonesia

began to provide small loans and saving services profitability on a large scale. They had

received no subsidies, but they could attain wide outreach to clients (Robinson, 2001).

Microcredit insisted on repayment, on charging relevant interest rates that could cover

credit provision costs and on focusing on the poor. Therefore, micro credit could provide

large – scale outreach profitably in the 1990s (Robinson, 2001). The provision, just credit

(micro credit), to the poor was not so effective that the provision of other financial

services (microfinance) as savings, insurance and pension met the demand of the poor.

The microcredit summit in 1997 again asserted the roles of MF in the field of

development. Furthermore, the objectives of the microcredit summit 2005 were to serve

175 million of the world’s poorest families, especially the women of those families, with

credit for the self employed and other financial and business services by the end of 2015.

In short, along with infrastructure construction and policies relating to serving the poor,

MF has become more popular in the developing countries to attack poverty.

2.4 Concept of Microfinance Banking

Robust economic growth cannot be achieved without putting in place well

focused programmes to reduce poverty through empowering the people by increasing

their access to factors of production, especially credit. The latent capacity of the poor for

entrepreneurship would be significantly enhanced through the provision of micro-finance

services to enable them engage in economic activities and be more self - reliant increase

employment opportunities enhance household income and create wealth.

Microfinance is about providing financial services to the poor who are

traditionally not served by the conventional financial institutions. These features

distinguish microfinance from other formal financial products .These are (i) the smallness

of loans advanced and / or saving collected, the absence of assets based collateral, and

(iii) simplicity of operations (CBN, 2005)

2.5 Concept of Community Development

Kularatne (2009) says: the need for community development is widely recognized

but there is an inconsistency in the definition, usage and general understanding of what

community development represent The word community comes from the latin

'communis’ meaning public shared by all or many. German sociologist, Ferdinand

Tounies in his work, Gemeinschaft and Gesellschaft in 1887 perceived community to be

tighter and more cohesive entity within the context of the larger society due to the

presence of a unity of will. He added that family and kinship were the perfect expression

of community but that other shared characteristics, such as place of belief could also

result in community.

Kularatne (2009) continues to say: development is a fairly elusive and ambiguous

concept that assumed different meanings depending on the contest in which it is used

however; the concept of development generally, implies a positive change in specific


Development means eliminating poverty, unemployment and inequality as well.

Later it was recognized not only economic development but also social, cultural and

political development and it should be future oriented and sustainable. Therefore

community development means improving the quality of people lives and expanding

their ability to shape their own futures through improving their access to opportunities to

better themselves, (Soubbotina and Sheram, 2000, World Bank Cited in Kularatne, 2009).

2.6 Characteristics of Micro - Finance Bank

According to Central Bank of Nigeria (CBN, 2005) micro finance bank has the

following characteristics:

1). Microfinance bank has a minimum paid - up capital shareholders funds of N20.0

million (to operate as a unit bank) and Nl.0 billion, (to operate in a state) respectively.

2). As a unit bank, microfinance bank operates within a local government area and not in

sophisticated banking services, such as forex business and in a state (if licensed to

operate in the state).

3). Credit subject to a single obligor limit of 1% for an individual/ corporate entity and

5% for a group.

4). No limit on deposits from an individual or a company.

5). Access to public sector deposits is permitted for only micro – credit programmes on a

non - recourse basis and for payment purposes.

6). Cheque using is customized to the correspondent bank

7). Geographical coverage of microfinance bank (as a unit bank) is in rural and urban

areas, while that licensed to operate in a state must be in both rural and urban areas within

a state in a proportion prescribed by the CBN.

2.7 Operations and Effectiveness of Micro - Finance Bank

CBN (2005) listed the following operations for micro finance bank:

i. provision of diversified, affordable and dependable financial services to the

active poor in a timely and competitive manners that would enable them to

undertake and develop long term, sustainable entrepreneurial activities

ii. mobilization of savings for intermediation

iii. creation of employment opportunities and increasing the productivity of the

active poor in the country, thereby increasing their individual household

income and uplifting their standard of living

iv. Enhancing organized, systematic and focused participation of the poor in the

socio - economic development and resource allocation process.

v. Provision of acquit able avenues for the administration of the micro - credit

programmes of government and high net with individuals on a non —

recourse basis.

vi. Rendering payment services, such as salaries, gratuities and pensions for

various tiers of government.

2.8 Micro - Finance Banks as Instrument for Human Empowerment

Robust economic growth cannot be achieved without putting in place well

focused programmes to reduce poverty through empowering the people by increasing

their access to factors of production, especially credit. The latent capacity of the poor for

entrepreneurship would be significantly enhanced through the provision of micro finance

services to enable them engage in economic activities and be more self - reliant, increase

employment opportunities, enhance household income and create wealth. Microfinance is

about providing financial services to the poor who are traditionally not served by the

conventional financial institutions (CBN, 2005).

The baseline economic survey of small and medium industries (SMIs) in Nigeria

conducted in 2004 indicated that the 6,498 industries covered currently employ a little

over one million workers. Considering the fact that about 18.5 million (28% of the

available work force) Nigerians are unemployed, the employment objectives / role of the

SMIs is far from being reached. One of the hallmarks of the National Economic

Empowerment and Development Strategy (NEEDS) is the empowerment of the poor and

the private sector, through the provision of the needed financial services to enable them

engage in or expand their present scope of economic activities and generate employment

delivering needed services as contained in the strategy would be remarkably enhanced

through additional channels which the microfinance bank framework would provide. It

would also assist the SMIs in rising their productive capacity and level of employment

generation, (CBN, 2005).

2.9 Past Government Efforts at Poverty Eradication and Human Empowerment

In order to enhance the flow of financial services to Nigeria's rural areas,

government has in the past, initiated a series of publicly - financed micro / rural credit

programmes and policies targeted at the poor. Notable among such programmes were the

rural banking programme, sectoral allocation of credits, Concessionary Interest Rate and

the Agricultural Credit Guarantee Scheme (ACGS). Other institutional arrangements

were the establishment of the Nigerian Agricultural and Co - operative Bank Limited

(NACB), the National Directorate of Employment (NDE), the Nigerian Agricultural

Insurance Corporation (NAIC), the Peoples Bank of Nigeria (PBN), the Community

Banks (CBs), and the Family Economic Advancement Programme (FEAP). In year 2000,

government merged the NACB with the PBN and (FEAP) to form the Nigerian

Agricultural Co -Operative and Rural Development Bank Limited (NACRBD) to

enhance the provision of finance to the agricultural sector. It also created the National

Poverty Eradication Programme (NAPEP) with the mandate of providing financial

services to alleviate poverty (CBN, 2005).

2.10 Strengths and Limitations of Micro - Finance Banks

2.10.1 Strengths of Micro - Finance Banks

Nuhu (2007) mentions the followings as some of the strengths of micro finance


1. Development of grassroots enterprises

2. Involvement of the less privileged individual in the development process.

3. Poverty reduction

4. Bringing about social security

5. Mobilizing and developing the rural areas

6. Providing family support facilities

7. Women empowerment

8. Bringing about ideal community development activities

2.10.2 Limitations of Micro - Finance Banks

CBN (2005) has mentioned the following as limitations of micro finance banks:

1. Incompetent management

2. Weak internal controls

3. Lack of deposit insurance scheme

4. Poor corporate governance

5. Lack of well defined operations and restrictive, regulatory / supervisory requirements

6. Weak capital base

7. The existence of a huge un-served market

Summary and uniqueness of the study

At conclusion, going with what have been explained by experts as reviewed in

this chapter, micro finance banking system and microfinance banks are very effective

tools for human empowerment especially when it comes to poverty eradication and up -

lifting the socio economic status of the grassroots level citizens.

The effective use of micro - finance institutions has been described as the surest

way of conquering poverty and leading Cameroon to achieving the UN millennium

development goals, MDGs by 2015.

According to a Yaounde micro - finance specialist and university lecturer, Dr.

Justin Bomda, micro finance institutions help the poor to have access to finances. "This

means that only micro - finance institutions have the capacity to create wealth among the

poor", he said ( Nsom, 2005)

Therefore, micro - finance banks strengths should be maintained and promoted,

and their limitations should be caught and dealt with in order for the MFBs to work

effectively and efficiently in community development and human empowerment. The

study is unique of its kind, this is clear from the literature reviewed and the fact that

Microfinance banking is a novel idea introduced in 2008 to Kano state.



This chapter takes care of how the research is to be conducted, as methodology is

a powerful weapon in the field aspect of research. It also shows the procedures that have

been taken before a conclusion is reached.

3.1 Research Design

This research is adopting the survey methodology. Survey research method is

used when studying phenomena that influence the interactions of people as they pursue

their everyday life. Survey could also be seen as one which involves the assessment of

the public opinion using questionnaire and sampling method.

Survey research design according to Osunbiyi (2005:56) is used in studies such


a. Audience reaction to a particular programme or medium

b. Opinion on certain policies or organization and

c. Number on certain policies or organizations and number of individuals or

organizations that have adopted a particular policy.

3.2 Population of the Study

The population of the study will comprise all the micro-finance banks in Kano

metropolis. The micro-finance banks are: (1) Grassroot Microfinance Bank (2)

Northbridge Micro-finance Bank and (3) Women Development Micro – finance Bank.

The population is comprised of 243 customers and 56 staff, making a total of 299.

3.3 Samples and Sampling Procedure

From the population mentioned above 40 respondents will be selected from each

of the banks, making a total of (120) respondent. Base on Morgan and Kreycie (2006)

sample size determination procedure, a population of (120) requires a sample size of (80).

Therefore, 65 will be customers of the banks, 40 males and 25 females. 15 will be staff of

the banks, 10 males and 5 females. This research work adopts random cluster sampling

technique so as to have full participation of the population. This is base on the

assumption that, the researcher wants to discover and understand the contributions of

micro-finance banks on human empowerment.

3.4 Data Collection

3.4.1 Data Collection Instrument

The following instruments will be used for data collection. The instruments are:

(1) researcher made questionnaire and an interview schedule. These will be developed by

the researcher to elicit information on the contributions of micro-finance banks on human

empowerment. The researcher questionnaire will be in two types. Type ‘A’ will be for the

customers of the banks, while type ‘B’ will be for the staff of the banks. Both the types of

questionnaire will be categorized into two parts. Part (A) personal data and part (B) the

questions to be asked. (2) An interview schedule for the management staff of the banks

will be conducted on the contributions of micro-finance banks on human empowerment.

3.4.2 Procedure for Data Collection

The research will use, the two main methods of obtaining data; primary and

secondary sources of data, the research will make extensive use of the various annual or

end of the year reports and other publications of the banks on study. The primary data

will be collected from interview and questionnaire administration. These will be used to

evaluate the response and attitude of the officials and customers of the bank and the

impact of the bank in developing their living standard as the community members, as to

test the hypothesis.

3.5 validation of the instrument

The instruments to be used for data collection will be subjected to validity and

reliability test in order to ascertain their ability and consistency. The research supervisor

will examine the instrument for its usability and make all necessary corrections and

observation. This will make the validity and reliability on the consistency of the

instrument. To ensure the validity of the instrument, the instrument will be field-tested on

twenty respondents.

3.6 Administration of Questionnaire

The questionnaire will be introduced to the respondents by explaining what is

meant for and asking them to follow the instructions in filling the questionnaire. The

respondents will be asked to please, provide their true and honest response as this is

certainly related to the veracity of what will be inferred from their responses with regards

to the research problem.

3.7 Data Analysis

Once the data is gathered, it will be analyzed to give some meaning, such that it

could be understood and interpreted properly. Descriptive statistics i.e. simple percentage

and frequency count will be used. The use of this statistical tool is based on that the study

employs survey research design that is appropriate to the research problem. And the

design of the study normally dictates what statistical technique should be used. And by

using this appropriate tool the analysis of the findings will be more accurate during



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paper presented at the 2nd National Conference of Nigerian Polytechnics

Organized by Nuhu Bamalli Polytechnic, Zaria.

Daradara, J.B. (2008). Microfinance as a Tool for Poverty Eradication. A paper presented

at a workshop on economic development in Kano state organized by the office of

the special assistant on economic affairs and private sector development in

collaboration with Daradara and associate limited. August, 2008

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Wikipedia encyclopedia (2008)













1.1 Background to the study - - - - - 1

1.2 Statement of the problem - - - - - 3

1.3 Research objectives - - - - - - 4

1.4 Research questions - - - - - - 4

1.5 Significance of the study - - - - - 5

1.6 Scope and delimitation of the study - - - - 5

1.7 Operational definitions of terms - - - - 6



2.1 Theoretical framework - - - - - 8

2.2 Theory of finance/banking - - - - - 11

2.3 Evaluation of micro - finance banking system - - 15

2.4 Concept of micro - finance banking - - - - 18

2.5 Concept of community development - - - - 18

2.6 Characteristics of micro - finance bank - - - 19

2.7 Operations and effectiveness of micro - finance bank - 20

2.8 Micro - finance banks as instrument for human empowerment 20

2.9 Past government efforts at poverty eradication and human empowerment 21

2.10 Strengths and limitations of micro - finance banks - - 22

2.10.1 Strengths of micro-finance banks - - - - 22

2.10.2 Limitations of micro - finance banks - - - 23

Summary and uniqueness of the study - - - - - 24



3.1 Research design - - - - - - 25

3.2 Population of the study - - - - - - 25

3.3 Samples and sampling procedure - - - - 25

3.4 Data collection

3.4.1 Data collection instrument - - - - - 26

3.4.2 Procedure for data collection - - - - - 26

3.5 Validation of the Instrument - - - - - 27

3.6 Administration of questionnaire - - - - 27

3.7 Data analysis - - - - - - - 27

References - - - - - - - - 28