Date of this Version
Awojobi, N.O. (2013). Microfinance as a Strategy for Poverty Reduction: The Nigerian Experience. (Master Thesis) Berlin School of Economics and Law, Berlin, Germany.
Conroy, D., J. 2003. The Challenges of Microfinancing in Financing Southeast Asia’s Economic Development. Singapore: Institute of Southeast Asian studies
Ijere, M. O. (1992) Leading Issues in Rural Development, Enugu: Acena Publishers
Obisesan O & Oyedele O (2015). Assessment of Microfinance Institution as Poverty Reduction Mechanism in Nigeria. Research Journals on Finance and Accounting, 6(2), 18-22
Tanko, S. K. (2007). Profits and Profitability of Indian Commercial Banks in Seventies. Bombay: National Institute of Bank Management, 24 – 25.
Poverty is perhaps one of the most difficult challenges bedeviling the developing countries of the world today. Statistical evidences show that there has been a surge in poverty since 1960 in Nigeria. The level of poverty 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). 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. Microfinance was adopted by Nigeria as a tool for poverty alleviation after the worldwide acceptance of a Grameen Bank model. It targets poor women because they lack assets that can be used as collateral to obtain loans from commercial banks. However, because loan given is non collaterized, adequate information provides a social collateral, but the problem of information asymmetry between the banks and the clients is a major reason why the banks deny these women opportunity to access loans. 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 Information Asymmetry and Lending by Microfinance Banks to the Poor Women in Oyo State. The analysis of the hypothesis gave values (r = .606, N= 529, P<.01). Since r is close to 1, it means there is a relationship between the variables (Information Asymmetry and Lending by Microfinance Banks). The P value of .000 obtained indicates a true Alternative hypothesis. Hence, the Alternative hypothesis is accepted. This means that as banks’ information increases, lending by Microfinance banks also increases. This means that information asymmetry does exist between the Banks and the clients. Increased information disclosure has an incentive of reducing information search costs and promotes informed lending practice. Information sharing avails more information to the lenders which further reduces on the risks of information asymmetry. The findings of this study reveals that, wherever banks believe that they do not have sufficient information either in terms of quality and quantity, problems of moral hazard and adverse selection do occur. The bank either rationalize the funds they loan out, restrict the number of loans the clients can access, screen out some clients based on the quality and quantity of information they have. In the process, some prospective good clients can inadvertently be omitted while bad clients who possesses some information will be given the loans and they will eventually not repay.