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The thrust of this study is to evaluate the impact of Microfinance banks credit on Kaduna State
and to examine the impact of Microfinance on the beneficiaries. The data utilized cross sectional
data obtained through questionnaires administered randomly to six (6) operators, one hundred
and eighty (180) questionnaires beneficiaries of microfinance banks’ credit facilities and one
hundred and eighty (180) questionnaires non- beneficiaries of microfinance bank credit facilities
respectively. The tools of analysis used are Descriptive Statistics, Paired sample t test technique
and Double Difference (DD) estimator model. The study reveals that (i) there is a significant
difference (in terms of income, business expansion and improved profit) in the number of
businesses who use microfinance products than those that did not use Microfinance Credit. This
study concludes that there is a significant relationship between Microfinance Credit and change
in income, output growth and general welfare level in Kaduna State. Therefore, the study
recommends that the state government in partnership with the Central Bank of Nigeria should
ensure that Microfinance product should be combined with other development tools to leverage
the effect of Credit. Second, repayment should include a grace period with reasonable schedule
instead of weekly payment period that is presently practiced among the microfinance banks in
the State.



1.1 Background of Study
Nigeria is among the few countries of the world characterized by contradictory socioeconomic
and development scenarios (Nwokocha, 2007). Despite her enviable human and
material resources, the country and its peoples are still classified among the very poor
(Okunmadewa, 2001, HDI Report 2010) with no fewer than 54% of Nigerians living below
poverty level (Akinyele, 2005). It is described as a country with a complex socio-political
history that has for most part, impacted adversely on the population through worsening
income distribution and increased poverty (Salamatu, 2008). Consequently, the number of
rural inhabitants that migrate to cities with high hopes of overcoming powerlessness
consistent with rural life is unprecedented.
The resulting population densities in these destinations and the corresponding disadvantages
require effective regulations that will engage the push factors on one hand, and how
immigrants could adjust to destination cities without infringing on existing social
equilibrium on the other (Ezebunwa, 2009). Majority of the people living in rural
communities are categorically the small farmers, tenants, micro entrepreneurs, and the
landless poor. However, it is obvious from the trends between 1980 till date that poverty is
becoming an increasing problem in Nigeria (Fidelis, 2009).
Meeting basic amenities and cash requirement for family maintenance is the main challenge
for the micro entrepreneurs and farming communities of which account for about 58 percent
of the informal sector of the economy (World Bank Doing Business, 2007; Klaus, 2010).
Survival strategy is the main philosophy of the entrepreneur from generation after generation. Nowadays, poverty is considered as the main unbalancing element of the human
being and nature. It is therefore truly said, ‘Poverty anywhere is a threat to everywhere.” It
is a global phenomenon with all the evils, which are dissatisfaction, desperation, anger,
anxiety, diseases and hunger, the consequences of poverty (Shanti, 2008; Mike, 2008).
Microfinance has evolved as an economic development approach intended to benefit low
income men and women, thus regarded as an effective tool for economic development
(Siebel, 2003; Zahra, 2008; Ojo. 2009). An effective economic development programme is
one in which the poor are the agents of change. The poor do not need aid, they need
opportunity (Tessi, 2005) thus promoting economic growth, reduce poverty, support human
development and improve the status of urban-rural communities. For the past 20 years, the
government, international agencies and social organizations have been focusing on rural and
women’s development Programmes (Rieneke, 2010; Shanti, 2008) one of the priorities of
the Millennium Development Goal is poverty alleviation and economic development,
women’s empowerment and gender mainstreaming.
According to Kevin (2009) most of the poor people have little financial opportunity thus
micro-finance could help poor people who have no collateral, but the willingness to work
and to do some business activities from which they will acquire employment as well as
income. Most Nigerian micro entrepreneurs are economically isolated, which means that
their market is often local, small and does not offer any demand growth prospects.
Commercial banks and other financial institutions normally do not like to go in that area
because of the geographical constraints, underdeveloped infrastructure and other physical
constraints. However, on the other hand, there is a substantial demand of micro credit. In
this scenario, microfinance banks could obviously play an important role to mobilize local savings, extend credit as well as channelize borrowed fund/grant to the local rural people
(Dhakal, et al, 2002).
Micro finance is equally important to both men and women. Women’s experience of poverty
is different and more acute than those of men because of gender-based forms of exclusion.
Women become poor through deterioration in the household’s access to resources. Women’s
are governed by more complex social constraints and responsibilities than men, and they are
more concentrated in the non-monetized sector (United Nations, 2004; Shanti, 2008). In
almost every African country, women comprise a large percentage of the poor (World Bank,
2002). The existence of the gender complexities in the handling of income affects the
quality of family life, the quality of children’s nutrition and education, as well as household
stability. Until women have access to economic opportunities, poverty cannot be reduced
(Shanti, 2008) and economic development may not be sustained.
1.2 Statement of the Problem
Lack of access to income opportunities or skill-based training opportunities kept many
people in Nigeria shackled to poverty. Unemployment is high, forcing many people to
immigrate to other countries. Unless the poor people are brought into the mainstream for
economic and social change, we will fail to bring change development (Aku, 1997).
They (poor) need to be organized for the decision of their choices and voices. Prevalence of
poverty is quite high among urban-rural population. There is need for economic
development program to be target-focused so as to reach a majority of the poor population
in Nigeria who suffer disproportionately from poverty. Among the poor, women are
considered the most disadvantaged due to their limited access to economic opportunities and
basic social services and the excessive burden of household chores on them (Gaudel, 2004).
Capital accumulation in modern world requires financial intermediation because economic
and social issues are closely intertwined, one reinforcing the other (Njiforiti, 2008).
People’s access to credit is limited because both formal and informal credit institutions are
inclined towards funding property owners (Shanti, 2008). All formal credit institutions seek
tangible collateral for their loan and majority of the poor are disadvantaged from these credit
since they have no access or limited collaterals. The money lenders are also interested in
earning high interest or acquiring the debtor’s property rather than financing people in need
(Siebel, 2003). In the case of some women, their access to institutional credit is further
restricted by their confinement to household activities and lower level of awareness and
educational attainment (World Bank, 2002).
On balance, however, a school of thought argues that there is evidence that microfinance,
does have a positive economic impact on economic development in terms of income growth
and reduced vulnerability, although the effects are often small (Kevin, 2009) and all clients
do not benefit equally. While the other school of thought states that microfinance banks
have been shown to be interested in their own financial survival than embarking on poverty
alleviation or economic development exercise (Davies et al,2006). The World Bank recently
confirmed that poverty is increasing in Nigeria and capital is one of its highest rank
constraints (Human Development Index Report, 2010-2011) in economic development.
Nigeria since her independence, various credit schemes have been put in place to alleviate
poverty to bring about desired economic growth and development but they have failed to
achieve these targets (Fidelis, 2009). In December 2005, the Central Bank of Nigeria (CBN)
introduced a Microfinance Policy Framework to enhance the access of micro- entrepreneurs and low income households to financial services required to expand and modernize their
operations in order to contribute to rapid economic growth and development.
The policy is prepared in exercise of the powers conferred on the CBN by the provisions of
Section 33 (1) (b) of the CBN Act No. 7 of 2007 and in pursuance of the provisions of
Sections 56-60 (a) of the Banks and Other Financial Institutions Act [BOFIA] No. 25 of
1991 [as amended].The rationale was that no inclusive growth can be achieved without
improving access of this segment of the economic strata to factors of production, especially
financial services.
1.3 Research Questions
Arising from the above statement of problem are the following questions
i. What is the extent of synergy between Microfinance banks and economic growth in
Kaduna State?
ii. What is the likely impact of microfinance banks on business in Kaduna State?
iii. What are the problems militating against the MFBs and Client in Kaduna State.
1.4 Objectives of the Study
The main objective of the study is to evaluate the impact of microfinance banks in
Economic growth in Kaduna State.
The specific objectives are:
i. To evaluate the activities of Microfinance banks on economic growth in Kaduna State.
ii. To assess the impact of microfinance banks on the business of the beneficiaries in
Kaduna State
iii. To investigate the problem(s) militating against Microfinance banks in Kaduna State if
1.5 Hypotheses
The research hypotheses are as follows
H0: Microfinance banks have not impacted on business of beneficiaries.
H1: Microfinance banks have impacted on business of beneficiaries.
1.6 Significance of the Study
Kaduna State predominantly agro based economy, micro-credit is largely applied to
agricultural and allied activities and livestock development. The marginal farmers and micro
enterprise are designed to benefit greatly from the micro-finance programs. This study focus
on the microfinance experimental groups (user) in Kaduna State and try to find out how they
are getting benefit from the programme. The data collected in turn will provide the
information on the effect of credit and saving facilities if they (poor) are provided equal
This study would help policy makers and the regulatory body examine whether or not there
is need for modification in its policy framework (Daily trust Newspapers dated 12th March
2011, an advert call position paper on microfinance bank). It would also provide data to all
other institutions and individuals who intend to work within the group that fight against the
existing poverty of the country. The study will provide recommendations to the International
Agencies, NGO’s, Government and Human right activist.
1.7 Scope and the Limitations of the Study
The study area of this research work is Kaduna State. This is because; Kaduna State is one
of the states with the highest number of Microfinance Banks its state. The main limitation of the study was the difficulty in obtaining accurate data from some of the MFBs. The data
used for the study is primary source which some operators and its client were not willing to
give out.
1.8 Organization of the Study
This study consist of five chapters, the first chapter deals with the general introduction,
statement of problems, research questions, objectives of the study, hypotheses and
significance of study.
The second chapter focus on the conceptual framework, theoretical framework, Empirical
Literature, Microfinance role in economic development, Microfinance policy and
development framework and transmission mechanism.
Chapter three discussed the study area, source and nature of data, data collection technique,
and analytical framework.
In Chapter four the result of the study findings is presented and analyzed.
The final chapter discussed the finding, recommendation and conclusion of the research.

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