Date of Award


Degree Name

Master of Science


Agribusiness Economics

First Advisor

Asirvatham, Jebaraj


Despite abundant natural resources, such as agricultural, petroleum, gas and mineral resources, the poverty situation has been on the rise. Particularly worrisome is that the country earned over US$300 billion from one resource – petroleum – during the last three decades of the twentieth century. But rather than record remarkable progress in national socio -economic development, Nigeria retrogressed to become one of the 25 poorest countries at the threshold of twenty-first century whereas it was among the richest 50 in the early-1970s. An important reason could be the disparate distribution of gains from production and trade. A closer look at the industries that did well in the past three to four decades suggests that utilizing these resources required large investments which only drew large companies. Without a good social distribution model, the gap between the haves and have-nots have only widened. Despite gains in the GDP, the poverty rate continued to slide, and is currently around 40%. Nigeria has strived to reduce poverty and increase participation of ordinary citizens in the economic development. Some of the earlier efforts by the government focused on education, then on increased farm production, and finally on microfinance. To encourage very small business owners to make investments and to foster a small business-friendly environment, the government initiated a series of microfinance programs. Microfinance refers to loans, savings opportunities, insurance, money transfers and other financial products targeted at the poor; micro-credit refers specially to small loans. Three features distinguish microfinance from other formal financial products. These are: (a) small loan principals of the loans advanced or savings collected; (b) absence of asset based collateral; and (c) simplicity of operations. In 2005, the federal government implemented a policy that led to the establishment of microfinance banks operating in two-tiers. At the local level, the microfinance banks would provide capital of up to 20 million naira (₦). At the state level, the microfinance banks had to provide capital of 1 billion naira. In 10 years or so, the number of micro-lending organizations had risen to more than 7,000 (Mohammed and Hasan, 2008). The main goals of these efforts were to reduce poverty status of the people by providing them self-employment opportunities, focusing especially on access to credit facilities to enable them to establish their own business. Since banks had high stakes on the borrower’s business success, they regularly enquired about the financial aspects of their business and specifically about the use of the borrowed funds. The questions specific to microcredit program recipients that we answer in this study are: (a) did the program increase microcredit access to poor people; (b) did the program reduce poverty and improve the standard of living; and (c) did credit-constrained recipients experience increase in profitability. To answer the research question, a survey questionnaire was designed and administered to a sample of households in the Oriade local government within Osun state. The survey instrument was tested for validity and reliability. Product Moment Correlation (Pearson) method, which tests the questionnaire validity, showed a value of 0.717, which is larger than the critical value in the Pearson table at the 5 percent significant level. Cronbanch-alpha method, which is used to test the reliability of a survey instrument, showed a value of 0.564, which is larger than the benchmark value of 0.50. The questionnaire was administered to two hundred business owners who availed microfinance. This research also sheds light on the financial aspects of microcredit. Important credit characteristics include loan size, maturity date, timeliness of loan disbursement (delayed time index), and interest payments. We assess borrower characteristics and evaluate the impact of microcredit on business profits, poverty status and consumption patterns. A key finding is that access to credit has a larger effect on improving the standard of living than that of education.




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