RURAL COMMERCE AND MICROFINANCE STUDIES
The institute will lead research on how best to use financial products to combat poverty.
Nigeria remains effectively underbanked. The failure of commercial banking in Nigeria to meet the socio-economic needs of rural communities gave rise to the emergence of community banking, currently classified as microfinance banks).
They serve as a means of providing financial answers to the low income earners, as a means to seek finance and deposit savings. Microfinance banks can be seen as an economic growth method intended to advantage the low income class of a given country, be they rural or urban.
The lack of access to credit is been identified as a reason for the growing level of poverty in many developing countries. This further emphasizes the crucial role microfinance institutions play in economic growth especially in their service for unserved and underserved markets (economically active person in rural and urban areas) to help meet economic and development objectives which include to create businesses, generate employment, help existing businesses diversify and grow.
The Central Bank of Nigeria launched the Microfinance banking scheme on December 2005 as part of Government’s strategy to achieve one of the cardinal agendas of the millennium Development Goals (MDGs) of reducing extreme poverty by 2015. The MFBs were promoted to provide financial inclusion to boost the capacity of micro and small businesses, prevalent in our rural areas.
The operation of Microfinance institutions date back pre-independence, when traditional thrift saving systems and activities of the traditional co-op networks served as proprietors of financial exchange. In recognition of the fact that many rural people do not have access to credit, the Nigerian government conceived the idea of microfinance banks to fill the gaps created by the collateral-based conventional banks that are reluctant or ill-equipped to meet the special credit needs of the rural farmers and petty traders.
The Microfinance Banks like the former Community Banks and Peoples Banks were established to address some of the identified constraints that deny many poor Nigerians access to bank credit. Both People’s Bank (which has been merged with Nigerian Agricultural and Co-operative bank) and Community Banks that have been redesigned and re-christened are addressing essentially the same target group, but their mode of operation is conceptually different.
Significant developments in this area include the recent announcement from the Minister responsible for Youth Empowerment within the Nigerian government’s Niger Delta Ministry signalling the launch of a microfinance scheme to provide soft loans to constituents who successfully complete the ministry’s skills training program. The skills training provided by the ministry will enable the youth to set up sustainable businesses as well as enhance their employability.
Fellowship at HSDI will lead research into the tackling rural poverty through modern financial instruments
The institute will also offer training programs and microcredit schemes.
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