Assessment of Microfinance Institutions as Poverty Reduction Mechanism in Nigeria

Microfinance Institutions are intended to bridge the financial gap usually created by the dearth of capital created by the inability of the conventional banks to support the Small and Medium Scale Enterprises in the country. This has however provided the compelling reasons why issues relating to Microfinance Institutions have to be taken more seriously in Nigeria than ever before.This paper therefore focused on the identification of the causes of poverty in Nigeria and the extent to which microfinance institutions have helped in reducing poverty in the Nigerian economic development.. The researcher used Chi- square, Analysis of Variance (ANOVA) and the method of regression analysis for investigating the contribution made by the microfinance institutions to poverty reduction in the Nigerian context. The study revealed that exclusion of the poor from the financial system seriously contributed to their inability to participate in the development process. Equally with no access to funding therefore, the household finds in extremely difficult to take advantage of economic opportunities to improve their lots and their children and protect them against financial imbalances, thereby making them to be permanently within the vicious circle of poverty. The analysis revealed that increase microcredit finances drastically reduced poverty level in Nigeria and also the poverty index. The study also revealed that microfinance institutions contributes most considerably to the empowerment of the masses, majority of whom were women, rural dwellers and this has translated in business and financial development in Nigeria. Keywords: Microfinance, Financial empowerment, Entrepreneurial functions, Development Finance Institutions(DFIs), Poverty