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Awojobi, N.O. (2013). Microfinance as a Strategy for Poverty Reduction: The Nigerian Experience. (Master Thesis). Berlin School of Economics and Law, Berlin, Germany.

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Information Resources Management Department, Babcock University.


Nigeria like any other developing country is facing the problems of poverty, Nigeria’s case is peculiar given the country’s natural endowment in agriculture, mineral resources, crude oil, human capital and friendly climatic conditions. World Bank estimated that over 70 percent of Nigerians are classified as poor, and half of this number lives in absolute poverty. Indeed, part of the experience in rural development in Nigeria has clearly shown that efforts at expanding the economic base of the rural areas almost always fail because of scarcity of and restrictive access to loanable funds.

Poverty alleviation is perhaps one of the most difficult challenges bedeviling the developing countries of the world today. Poor women were targeted because they lack assets that can be used as collateral to obtain loans from commercial banks. However, some horrible occurrences experienced by the commercial banks due to information asymmetry between the banks and the clients are a major reason why the commercial banks insist on collaterals before issuing out loans. In Nigeria, poverty alleviation has been a rather herculean venture because the causes of poverty are ubiquitous and the solution to the problem would require a mix of interventions and programmes in an integrated manner. Statistical evidences show that there has been a surge in poverty since 1960 in Nigeria. The level of poverty in Nigeria between 2004 and 2010, rose from 54.4%, to 69% and by 2011, relative poverty had risen to about 71.5% (National Bureau of Statistics NBS (2012). Microfinance was adopted by Nigeria as a tool for poverty alleviation after the worldwide acceptance of a Grameen Bank model. In order to enhance the flow of financial services to the poor, Nigeria along with other developing nations adopted microfinance as a tool for poverty reduction. Microfinance policy was released in the year 2005 by the Central Bank of Nigeria, existing Community banks were converted to Microfinance banks and establishment of new Microfinance banks were encouraged by the government. The intention is for the banks to cater for the financial needs of the poor populace both in the rural and urban areas of the country by lending in small chunks to them. Data collection was done through the use of well-structured questionnaires. A total of 50 questionnaires were distributed to the Managing Directors of the 50 Microfinance Banks in Oyo State. A total of 39 Banks (78%) returned their questionnaire. 623 women were randomly selected out of which 529 (85%) submitted filled questionnaire. This study adopted descriptive, correlation and regression statistical analysis. The descriptive analysis used includes frequency distributions, means and percentages between the identified variables. The correlation and regression analysis measure, explain and predict the linkage between the variables. Correlation and regression analysis were also used to test the hypothesis, answer the research questions and to determine the relationships among asymmetric information, microfinance lending and poverty alleviation. The analysis of the hypothesis gave values (r = .009, N= 529, P> .05). Since r is close to 0, it means there is no relationship between the variables (response from Clients on information asymmetry and response from the banks on information asymmetry). The High P value of .836 obtained indicates a true Null hypothesis. Hence, the Null hypothesis is accepted. This means that information asymmetry does exist between the Banks and the clients. The findings of this study indicates that Microfinance has succeeded in providing financial services to the poor women and it has enhanced their income thereby assisting them in meeting their basic financial needs. Microfinance has also empowered these poor women, by providing them with confidence, self-esteem, and the financial means to play a larger role in their household and the economy in general, thereby gradually alleviating the poverty that had impoverished Nigeria.



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