INTRODUCTION

The major problem facing African nations today is the eradication of poverty which every government has built in as part of its development program. The World Bank Report defined poverty as hunger, lack of shelter and being sick and not being able to go to school, not knowing how to read, not having a job and fear for the future among others. When we speak of absolute poverty, we refer to existence below a reference standard of living. Poverty has been analyzed from five dimensions of deprivation among which are economic deprivation drawn from the lack of access to property, income, assets, factors of production and finance.

Microfinance is the form of financial development that has its primary aim to alleviate the poverty of the poor who are generally remained un-served or were offered improper financial service. Banks and other financial institutions are currently estimated to provide services to only 25% of potential client worldwide. It has been opined that only 2% of micro entrepreneurs are being provided service by banks. It is also opined that the size of the unsaved market by existing financial institutions is large. The average banking density in Nigeria is financial institution outlet to 32,700 inhabitants and in rural areas, it is 1-57,000 inhabitants that is <2% household have access to financial service. Small business firms can be described as the live wire of a developing economy like of Nigeria. Their role in the economic development can be appreciated by fact that they make substantial contributions to the Gross Domestic Product (GDP). Small businesses serve as a reliable revenue source for the government.

Government recognized the need to encourage the small enterprises through the provision of credit and this informed policy reforms that brought about the Microfinance bank that the Federal Government of Nigeria introduced during the Obasanjo regime to replace the formal community banks in Nigeria and the policy became operational in 2005.

Microfinance banks are established to fill the gap created by the formal financial sector by improving the socio-economic condition of the poor income generation. Many researchers, development workers and institution hauled microfinance as a potential solution to alleviation of poverty in which standard of living is one of the indicators.

Nigerian government recognized the need to alleviate poverty and encourage small enterprises through the provision of credit and this inform policy reforms with respect to bringing the Microfinance bank under the Central Bank of Nigeria to create enabling environment for access to small loans and the policy became operational in 2005. There are still important gaps to be filled by this institutions in Nigeria, the Microfinance banks have not been able to adequately address the gap in terms of credits, savings and other financial services required by the small scale enterprises like barbing saloons, hair dressing saloon, block making outlets, sachet water making industries

DEFINITION OF MICRO FINANACE

Microfinance is defined as the provision of a broad range of financial services including loans, savings, insurance, remittances and transfers to low-income households and their microenterprises. For the purposes of this paper, focus will be made on the services that are most commonly associated with microfinance - loans and savings. The selection of these two services is also in line with the focus on the banking sector; as these are the two services provided by the banks with microfinance operations.

HISTORY OF MICRO FINANCE

The history of microfinancing can be traced back as long to the middle of the 1800s when the theorist Lysander Spooner was writing over the benefits from small credits to entrepreneurs and farmers as a way getting the people out of poverty. But it was at the end of World War II with the Marshall plan the concept had an big impact.

The today use of the expression ‘microfinancing’ has its roots in the 1970s when organizations, such as Grameen Bank of Bangladesh with the microfinance pioneer Mohammad Yunus, where starting and shaping the modern industry of microfinancing. Another pioneer in this sector is Akhtar Hameed Khan. At that time a new wave of microfinance initiatives introduced many new innovations into the sector. Many pioneering enterprises began experimenting with loaning to the underserved people. The main reason why microfinance is dated to the 1970s is that the programs could show that people can be relied on to repay their loans and that it´s possible to provide financial services to poor people through marketbased enterprises without subsidy. Shorebank was the first microfinance and community development bank founded 1974 in Chicago. An economical historian at Yale named Timothy Guinnane has been doing some research on Friedrich Wilhelm Raiffeisen´s village bank movement in Germany which started in 1864 and by the year 1901, the bank had reached two million rural farmers. Timothy Guinnane means that already then it was proved that microcredit could pass the two tests concerning people’s payback moral and the possibility to provide the financial service to poor people.

Another organization, the caisse populaire movement grounded by Alphone and Dorimène Desjardins in Quebec, was also concerned about the poverty, and passed those two tests. Between 1900 to 1906 when they founded the first caisse, they passed a law governing them in the Quebec assembly; they risked their private assets and must have been very sure about the idea about microcredit.

Today the World Bank estimates that more than 16 million people are served by some 7000 microfinance institutions all over the world. CGAP experts mean that about 500 million families benefits from these small loans making new business possible. In a gathering at a Microcredit Summit in Washington DC the goal was reaching 100 million of the world´s poorest people by credits from the world leaders and major financial institutions.

OBJECTIVES OF MICRO FINANCE IN NIGERIA

1. Assess and promote the contribution of microfinance to the MFIs2. Make microfinance more visible for public awareness und understanding as a very

important part of the development situation3. The promotion should be inclusive the financial sector4. Make a supporting system for sustainable access to financial services5. Support strategic partnerships by encouraging new partnerships and innovation to

build and expand the outreach and success of microfinance for all

FUNCTIONS OF MICRO FINANCE BANK

1. Provide Loans

The core function of microfinance banks is to provide loans. The Grameen Bank in particular is known for establishing a set of principles for providing loans. For example, an individual loan may be provided to a group of women, with the liability for paying back the loan being distributed to the entire group. Microfinance loans have helped thousands of people in Dhaka, Bangladesh and the surrounding areas stabilize their financial situations. Variations of the Grameen Bank have been created and supported by the World Bank and other non-governmental organizations, resulting in local, regional, and international microfinance programs.

2. Establish an Economic Presence

A core responsibility for microfinance banks is to create a capitalist marketplace where there is not one previously. Microfinance banks are often established in rudimentary Third World conditions (e.g. a hut or small village) and are maintained by a few villagers in the area who work for the bank as representatives of a much larger institution. The banks have a very limited amount of capital and attempt to use it to infuse liquidity into the local economy. The hope is to establish a basic money system, which is easier to use economically than a pure barter system (i.e. trading pots for chickens).

3. Become Self-sustaining

According to Yunus, the goal of all microfinance banks is to become self-sustaining. Whereas commercial banks are motivated to make a profit, microfinance banks aim to recoup its costs of running the bank, paying basic wages, and providing loans. As borrowers prosper, they will request more financing and pay a slightly higher interest rate, resulting in the microfinance bank expanding its economic reach within the community as its overall amount of available capital increases.

THE JOURNEY SO FAR

Every one; the Government, the regulatory authorities, the microfinance practitioners, the poor and small and medium scale entrepreneurs came with so much enthusiasm about microfinance banking in Nigeria when the policy and regulatory framework was launched in 2005. Barely 4 years down the line, there is already great distress in the system and many are wondering why they got hooked up in it. Perhaps the aloof Nigerian elites are after all justified. As always, they don’t believe in elevating the poor and see no reasons to put down their moneys to empower the poor. To them, “the poor will always be among us” so why border with all those stories about empowerment or poverty reduction or eradication. Many Nigerians ran into setting up microfinance banks because they believed it was a business that would enable them amerce more wealth particularly with the government’s pronouncements that N50 billion shall be pumped into poverty alleviation in Nigeria.. Others ventured into it because it appeared to be a good employment avenue for the thousands of Nigerians who lost their jobs during the banking consolidation of the Soludo Apex banking era. Only a few went into microfinance banking with a passion to alleviate poverty in Nigeria.

LIST OF MICROFINANCE BANKS IN NIGERIA

Documented records show that there are over 900 Microfinanc Banks licensed by the Central Bank of Nigeria. Among them are the following 200 MFBs:

1   AACB Microfinance Bank Limited 2   AB Microfinance Bank Limited 3   Abatete Microfinance Bank Limited 4   ABC Microfinance Bank Limited  5   Abia State University Microfinance Bank Limited 6   Abigi Microfinance Bank Limited 7   Abokie Microfinance Bank Limited 8   Abriba Microfinance Bank Limited 9   Accion Microfinance Bank Limited 10   ACE Microfinance Bank Limited 11   ACFL Microfinance Bank Limited 12   Achina Microfinance Bank Limited 13   Acme Microfinance Bank Limited 14   Acorn Microfinance Bank Limited 15   Active Point Microfinance Bank Limited 16   Acuity Microfinance Bank Limited 17   Adaigbo Microfinance Bank Limited 18   Adazi- Nnukwu Microfinance Bank Limited 19   Adazi-Ani Microfinance Bank Limited 20   Adazi-Enu Microfinance Bank Limited 21   Addossar Microfinance Bank Limited 22   Adif Microfinance Bank Limited 23   Adkolm-Emerald Microfinance Bank LImited 24   Afam Microfinance Bank Limited 25   Afemai Microfinance Bank Limited 26   Afotamodi-Ogunola Microfinance Bank Limited 27   Afribank Microfinance Bank Limited 28   Agbarho Microfinance Bank Limited 29   Agbelo Microfinance Bank Limited 30   Agbowu Microfinance Bank Limited 31   Agosasa Microfinance Bank Limited 32   Aguda Titun Microfinance Bank Limited 33   Aguleri Microfinance Bank Limited 34   Ahetou Microfinance Bank Limited 35   Ahmadu Bello University Microfinance Bank Limited 36   Aiyepe Microfinance Bank Limited 37   Aiyetoro Gbede Microfinance Bank Limited 38   Ajasse-Ipo Microfinance Bank Limited 39   Aja-Yejebwo Microfinance Bank Limited 40   Ajeko Microfinance Bank Limited 41   Ajewole Microfinance Bank Limited 42   Ajiya Microfinance Bank Limited  43   Ajose Microfinance Bank Limited 44   Ajuta Microfinance Bank Limited 45   Akalabo Microfinance Bank Limited 46   Akesan Microfinance Bank Limited 47   Akin Microfinance Bank Limited 

48   Akokwa Microfinance Bank Limited 49   Akpo Microfinance Bank Limited 50   Akpor-COE Microfinance Bank51   Aku Diewa Microfinance Bank Limited 52   Akwengwu Microfinance Bank Limited 53   Alache Microfinance Bank Limited 54   Al-Barakah Microfinance Bank Limited 55   Alekun Microfinance Bank Limited 56   Aliero Microfinance Bank Limited 57   Alkaleri Microfinance Bank Limited 58   All Workers Microfinance Bank Limited 59   Alliance Microfinance Bank Limited 60   Allover Microfinance Bank LImited 61   Allstar Microfinance Bank Limited 62   Aloaye Microfinance Bank Limited 63   Alor Microfinance Bank Limited 64   Altitude Microfinance Bank Limited  65   Alvana Microfinance Bank Limited 66   Amaifeke Microfinance Bank Limited 67   Amazing Grace Microfinance Bank Limited 68   Amba Microfinance Bank Limited 69   Amoye Microfinance Bank Limited 70   Amram Microfinance Bank Limited 71   Amucha Microfinance Bank Limited 72   Amuro Microfinance Bank Limited 73   Anchorage Microfinance Bank Limited 74   Aniocha Microfinance Bank Limited 75   Anya Microfinance Bank Limited 76   Aogo Microfinance Bank Limited 77   Apa Microfinance Bank Limited 78   Apeks Microfinance Bank LImited 79   Apex Microfinance Bank LImited 80   Apple Microfinance Bank Limited 81   Aracom Microfinance Bank Limited 82   Aramoko Microfinance Bank Limited 83   Argungu Microfinance Bank Limited 84   Arochukwu Microfinance Bank Limited 85   Arondizuogu Microfinance Bank Limited 86   Asabari Microfinance Bank Limited 87   Ascent Microfinance Bank Limited 88   Asha Microfinance Bank Limited 89   Aspire Microfinance Bank LImited 90   Asset Matrix Microfinance Bank Limited 91   Assets Microfinance Bank Limited 92   Associated Investment Trust Microfinance Bank Limi 93   Astra Polaris Microfinance Bank Limited 94   Atlas Microfinance Bank Limited 95   Atta Nwambiri Microfinance Bank Limited 96   Atyap Microfinance Bank Limited 97   Auchi Microfinance Bank Limited 

98   Avalon Microfinance Bank Limited 99   Avyi Microfinance Bank Limited 100   Awe Microfinance Bank Limited 101   Awgbu Microfinance Bank Limited 102   Awka Microfinance Bank Limited 103   Awka-Etiti Microfinance Bank Limited 104   Awkuzu Microfinance Bank Limited 105   Ayete Microfinance Bank Limited 106   AZSA Microfinance Bank Limited 107   Baba Microfinance Bank Limited 108   Babura Microfinance Bank Limited 109   Bakassi Microfinance Bank Limited 110   Balera Microfinance Bank Limited 111   Balogun Ajikobi Microfinance Bank Limited 112   Balogun Fulani Microfinance Bank Limited 113   Balogun Gambari Microfinance Bank Limited 114   Bam Microfinance Bank Limited 115   Bama Microfinance Bank Limited 116   Bancorp Microfinance Bank Limited  117   Barnawa Microfinance Bank Limited 118   Bauchi Investment Corporation MFB Limited 119   Bejin-Doko Microfinance Bank Limited 120   Bekwarra Microfinance Bank Limited 121   Berachah Microfinance Bank Limited 122   Best Star Microfinance Bank Limited 123   Bestway Microfinance Bank Limited 124   Bethel Microfinance Bank Limited 125   Bethseda Microfinance Bank Limited 126   Beulah Microfinance Bank Limited 127   BFL Microfinance Bank Limited 128   Biraidu Microfinance Bank Limited 129   Birni Microfinance Bank Limited  130   Birnin Kudu Microfinance Bank Limited 131   BishopGate Microfinance Bank Limited 132   Biyama Microfinance Bank Limited  133   Biztrust Microfinance Bank LImited 134   Blue Intercontinental Microfinance Bank Limited 135   Blue Ridge Microfinance Bank Limited 136   Bmazahin Microfinance Bank Limited 137   BOI Microfinance Bank Limited 138   Boji Boji Microfinance Bank Limited 139   Boluwaduro Microfinance Bank Limited 140   Bonded Microfinance Bank Limited 141   Bonghe Microfinance Bank Limited 142   Bonny Microfinance Bank Limited 143   Borgu Microfinance Bank Limited 144   Bosak Microfinance Bank Limited 145   Bowman Microfinance Bank Limited 146   Brass Microfinance Bank Limited 147   Bristol Microfinance Bank Limited 

148   Briyth Covenant Microfinance Bank Limited 149   Broad Based Microfinance Bank Limited 150   Broadview Microfinance Bank Limited 151   Brooks Microfinance Bank Limited 152   Bukuru Microfinance Bank Limited 153   Bungudu Microfinance Bank Limited 154   Bunkasa Microfinance Bank Limited 155   Business Support Microfinance Bank Limited 156   Busu Microfinance Bank Limited 157   Calabar Microfinance Bank Limited 158   Calm Microfinance Bank Limited 159   Capital Microfinance Bank Limited 160   Capstone Microfinance Bank Limited 161   Cardinal Rock Microfinance Bank Limited 162   Caretaker Microfinance Bank Limited 163   Cash Cow Microfinance Bank Limited 164   Cashjet Microfinance Bank Limited 165   Castle Microfinance Bank Limited 166   Catland Microfinance Bank Limited  167   Cedar Microfinance Bank Limited 168   CEDEP Microfinance Bank Limited 169   Century Microfinance Bank Limited 170   Chanelle Microfinance Bank Limited  171   Chat Microfinance Bank Limited 172   Chevron Employee Co-operative MFB 173   Chibueze Microfinance Bank Limited 174   Chidera Microfinance Bank Limited  175   Chigbe-Yaji Microfinance Bank Limited 176   Chikum Microfinance Bank Limited 177   Chukwunenye Microfinance Bank Limited 178   Circular Microfinance Bank Limited 179   Citadel Microfinance Bank Limited 180   Citigate Microfinance Bank Limited 181   Citiserve Microfinance Bank Limited 182   City Microfinance Bank Limited 183   City Mission Methodist Microfinance Bank Limited 184   Civic Microfinance Bank Limited 185   CKC Microfinance Bank Limited 186   Classic Microfinance Bank Limited 187   Coalcamp Microfinance Bank Limited 188   Coastline Microfinance Bank Limited 189   Coconut Avenue Microfinance Bank Limited 190   Combined Benefits Microfinance Bank Limited 191   Common Benefit Microfinance Bank Limited 192   Common Trust Microfinance Bank Limited 193   Compass Microfinance Bank Limited 194   Complete Trust Microfinance Bank Limited 195   Confidence Microfinance Bank Limited 196   Confluence Microfinance Bank Limited 197   Congress Microfinance Bank Limited cv

198   Conpro Microfinance Bank Limited 199   Consumer Microfinance Bank Limited 200   Convenant Microfinance Bank Limited limited

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