Assessment of Rural Sustainable Development by Microfinance Banks in Nigeria

By

Onafowokan OLUYOMBO

PhD Student

Department of Accounting and Finance

Faculty of Business and Law

De Montfort University. Leicester, Uk.

e-mail: ooluyombo@yahoo.com

May 21, 2010

Research Objectives

To assess the effect of microfinance banks on rural development in Nigeria from

1992 to 2006

To analyse how loans and advances by microfinance banks penetrate different segmented areas of the rural economy

In terms of ……

Research Objectives (cont..)

Manufacturing and food processing

Agriculture and forestryManufacturing and othersReal estates and constructionMining and quarryingTransport and commerce

Research Questions

i. Does microfinance banks contribute to the growth of economic sustainable development of rural areas

ii. Does microfinance banks credit to rural people proportionate to the deposit mobilised from them

Research MethodologySecondary data from Central Bank

of Nigeria (CBN)

Limited to approved microfinance banks rendering their annual report to the CBN

Annual reports and statement of accounts of microfinance banks

Data Analysis

Quantitative Data Only

SPSS Statistical Package Version 14.0

Pie chart Trend analysis Tables Graphs

Research Findings

Research Findings (cont…)Figure 2. Total Sectoral Loan Disbursement (1992-

2006)

Research Findings (cont…)Figure 3. Sectoral Loan Disbursement (1992-2006)

Agricu

lture

& Fores

try

Min

ning

& Q

uarry

ing

Man

ufac

turin

g & Fo

od pr

oces

sing

Man

ufac

turin

g & O

thers

Real E

state

& Con

struc

tion

Transp

ort &

Com

merce

Others

-

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

30,000.00

Axis Title

Research Findings (cont…)Summary of Microfinance Banks

Loan Allocation (1992 – 2006)

o Mining and Quarrying – 2%o Real Estate and Construction – 4%o Manufacturing and Food Processing –

5%o Agriculture and Forestry – 9%o Manufacturing and Others – 13%o Transport and Commerce – 28%o Others – 39%

Research Findings (cont…)◦Sharp rise in deposit from 2002 to 2006

without a corresponding increase in loan and advances to rural people

◦Loan and advances to productive sector for 15 years was 29%. It shows a neglect of economic sustainability of the rural areas

◦Microfinance Banks have not really improved nor developed the economy of the rural people because 39.6 percent of loans given by the microfinance banks went for other areas that do not directly or indirectly affect the socio economic well being of the rural people and do not contribute to their developmental status.

Conclusion

The results revealed a major downward trend in the value of

credits to rural people compared to the deposits mobilized from them.

It appears that there is a net outflow of finance from the rural poor jeopardizing the sustainable

development of the rural areas.

Thank You