Microfinance and Poverty Reduction: The Nigerian Experience

Poverty has been one of the major problems of mankind and its reduction/alleviation is imperative for societal progress. Poverty is viewed largely as a problem of the poor earning too little income, consuming too little to attain a socially acceptable standard of living. Microfinance is a key development strategy for promoting poverty reduction and economic empowerment. The paper revealed that microfinance has the potential to effectively address material poverty, that is, the physical deprivation of goods and services and the income to attain them by granting financial services to households who are not served by the formal banking sector. The paper also revealed that in Nigeria, poverty alleviation has spawn a broad array of initiatives, including the Green Revolution, Operation Feed the Nation, Sectoral Allocation of Credits, National Poverty Eradication Programme and host of others. In spite of all these lofty initiatives, the paper revealed that rural poverty has remained unabated. The study found out that most of the microfinance banks tend to concentrate their operations in urban and semi-urban towns instead of the rural areas where the poorest of the poor are concentrated. It was the finding of this study too that there is a need for capacity building as more of the managing Directors of these banks are ill-equipped for the services they are meant to provide, thereby leading them to miss their target market. The paper recommended therefore that capacity building for stakeholders and proper supervision should be put in place by the regulatory agencies to avoid them losing their focus. The paper concluded by emphasizing the need for the three tiers of government to be encouraged to actualize their commitment of 1 percent of their annual budget in form of agency participation to strengthen the financial capability of microfinance banks.Key words: Poverty alleviation; Microfinance and ban