November 23, 2015


It is unusually observed that the concept of microfinance today is the world fastest growing market technology and the most effective economic model ever contrived by man. It is more appropriate to poverty stricken climes and redistributionist societies offering reliable salvation dividends complete with robust financial innovation required to empower extremely impoverished people of the world .It is basically maneuvered not only for grass root empowerment but also for development of sustainable income generating projects thereby uplifting the living standard of the abject citizenry .And in many cases so to say help the poor build wealth and exit poverty . According to Grameen [1966] ‘it is the right of the poor.
Initially the objective of the study was to target the industry in its pristine form and make comprehensive analysis in comparison to global practices. However it was found out that a growing body of relevant researches and existing literature abound which are hereby reviewed in this piece in a vigorous analysis resting the earlier resolve .The paper is divided into 4 sections After the introduction or the background the concept of microfinance falls under sections 11 .Section 111 discusses or takes a cursory look and analysis of the top leading global institutions in the industry. And section 1V concludes and touches or exhumes the local environment in Nigeria and its challenges and untapped potentials. However these sections are spread into several chapters for convenient and elaborate readership
Microfinance is the provision of financial services to the poor the unbankable and the low income households without access to formal financial institutions[Conroy ,2003] Besides being banking to the poor its progammes are broad based which make loans accessible to the poor and savings mobilization are endorsed especially for advanced [MFIs] in addition to other financial services are provided to micro enterprises and SMEs needy businesses
Nevertheless of all the sectors of microfinance micro credit is a foremost element and a leading component in the industry opening up the economy of the underprivileged and a new lease of life for the marginalized communities and economically active poor.
According to Wikipedia micro credit specifically refers to small loans to the unemployed to poor entrepreneurs and to those living in poverty who are considered unbankable .It is a unit of microfinance which is the provision of a broader range of financial services to the poor It is also the extension of informal credit to the micro entrepreneurs. This helps them engage in productive venture .It has been touted as the last panacea for poverty alleviation in some countries .It succeeded immensely being a largely driven private sector initiative and avoided being extremely politicized and consequently has also outperformed all forms of development lending [Abolo,2001]
Given the unwillingness of the formal financial institutions and the poor innovation of the sector which tends to be reluctant to micro enterprises citing too much transaction costs associated with micro loans processing or the unreliability of MSMEs dubbed as high risk .A new market for micro credit was developed where the risk of default processing and other administrative expenses for business start up are manageable
Micro lending is a more effective complementary means to financial intermediation and a viable alternative to traditional practice of economic development .It empowers both individual and community for sustainable growth and development.
Its sets of principles are different from general financing or credit such as employment generation trust building micro entrepreneurial capacity building micro entrepreneurial initiative development socialist development lending and a strategic tool for socioeconomic development .Micro lending empowers the individual which has a multiplier effect as they contribute economically to the development of the communities they live over the long haul .It is also a saving grace to the lab our market as formal sector large sized companies ‘ decline .
Women have been vital resource a predominant focus and increasing priority of micro credit institutions and agencies worldwide. Women loans are repayment proof nearly freed of default and more beneficial to the family than loans to men and have more socioeconomic impact while bridging gender inequality gap. They are a good credit risk asset managing credit more efficiently invest income towards family welfare .They also benefit higher social status as they develop capacity to provide increasing sources of family income .Experience has also shown that of the 1. 2billion poor people worldwide women are in the majority and are responsible for the upbringing of tomorrow ‘s children .The consequence is that the poverty of women usually affects more humanity than it seems figuratively which leads to physical and social underdevelopment of their children laying foundation in stark negligence for tomorrow’s mass poverty .
An increasing number of Microfinance institutions [MFIs] are beginning to focus on women borrowers – truly the world worst poor people .SKS microfinance Promujer Nemaste Direct LAPO in Nigeria and the Grameen Foundation among others currently emphasize on the predominance of women in the socioeconomic arena and informal sector market economy.
1. Those that lack collateral
2. Individuals with no steady employment
3. Lack of client verifiable credit history
4. Extension of micro loans and clients are unbankables.
5.Encourage grass root empowerment
6.Execute self employment projects and boost micro entrepreneurial development.
7. The target is largely the informal sector.
According to Wikipedia micro credit as a financial innovation originated from Bangladesh where it has succeeded in liberating the extremely impoverished local peoples mainly the unbankables enabling them exit poverty and build wealth and generate capital through self empowerment and sustainable income generating projects .Its success today has largely encouraged the adoption of micro credit technology into mainstream banking and attempt was made to reclassify this league [unbankables] for the very first time as pre bankable.
With this reclassification it is increasingly gaining ground and credibility in the mainstream finance industry and various micro credit projects were contemplated by large finance organization as reliable source of future growth .When it was begun by ACCION and GRAMEEN in its modern incarnation in the mid-70s as a pilot projects only a very few gave it a chance of survival let alone its nascent or burgeoning global institutional appeal .It is the industry of now and the future the next big thing the last hope of the underprivileged and the ideology of market communalism.-the building block to Marxist homeland.
With the scathing remarks of the 1970s hardly dying away humanity had entered a new dawn and eventual potential relief for the less privileged was found as the industry evolved . The concept of micro credit can be traced back to portions of Marshall plan in the immediate post world war 11 the middle of 20th century .Some sources also link it back to the mid-1800s and the writings of abolitionist/legal theorist LYSANDER SPOONER who was a crusader of the benefits of numerous micro loans to the poor for entrepreneurial activities as a way to alleviate
Poverty .The New York Providence Fund is another tested historical source. All put together are launching pad to the incarnation and burst of the post -70s .
There are historical differences between the ancient and modern concept of micro credit as expatiated .But the origin of the ancient started in Egypt where the ancients had found a means of buying now and paying later [creditisation]and the Egyptian equivalent of the term ‘charge it ‘came into being .When the Greeks came along a bit later with their belief in the worth of an individual citizen freeman became an exalted thing . That someone can be trusted in all aspects of life even commercial transactions influenced credit economy and the use of micro credit began to spread .The Romans came later and were only their followers established procedures for this budding market Which evolved as micro loans setting penalties for default or failure to pay .
Therefore this indicate that socialist lending began before capitalist lending and a proof that the ancients started micro credit and the entire credit market and provided a means of recording transactions laying down laws and establish man ‘s right to go into debt using the laws to regulate debtor[poor] – creditor [MFIs] relationship. Although it persisted through the millennia but the practice was heavily resisted due to its inadequate perusal as an incentive for egalitarian market economic building until fairly recent times. By the turn of 20th century when lending was well developed transcendent growth in science and modern theories beginning from LYSANDER’S among others it regained Pre eminence .though at a very slow pace until the 1970s of the YUNUS and ACCION
The industrial revolution [1770-1914] could not have been possible without micro credit and the evolution of the works of cottage factories during the period s such as the pin manufacturing shops noted by Adam Smith-[the exponent of laissez faire and classical economics ] could not have been possible without it and a contributory factor to Anglo Saxon or Germanic civilization .

Professor Alexander Geshenkron in a comparative study conducted ‘Economic Backwardness In Historical Perspective ; A Book Of Essays [1962] England ‘ . He noted the success of industrial revolution in England rested largely on the success of SMEs which require little capital to operate in addition to founder’s specialized entrepreneurship . As an economy categorized as moderately developing Germany also flourished during the period through them
And depended heavily on the Banking sector for their success . Likewise the quantum leap by Japanese economy during the similar period presented a more remarkable picture of the power of these wealth machines to support her phenomenal development prior to World war 11 .The secret behind this economic miracle according to Professor Yamamuva was simply cultivated by phenomenal growth in commercial lending to micro enterprises .This was made possible through the great Zaibatsu – an equivalent of modern development banking model . Today the world sole super power the United States followed similar universal pattern of mass development For instance Banks in Louisiana were noted to have relied heavily on SMEs as engine of growth and so heavily financed them for purposes of economic welfare of the Nation ‘s citizens It is the same logic everywhere .The developing countries also after independence have pursued and implemented similar policies to no avail .owing to socio psychological self imposed barriers


With the emergence of roaring 70s pragmatic microfinance has come to stay much touted as the last panacea in the eradication of mass poverty and empowerment of the poor around the world .Beginning with micro credit or micro lending has come to include a broader range of value - added services [ credit savings micro insurance micro housing micro leasing etc] Originally according to Enugu Forum [ 2006] it is based on traditional forms of community financing amalgamating ideals of traditional finance and development assistance – a sort of socialist lending has grown to become a household name in the territories of Africa Latin America and Asia The microfinance movement evolved in the early 1980s.and Bangladesh and Bolivia were noted as major protagonists at the forefront of the movement which has gained increasing patronage over the last 20 years from multilateral agencies [ donor ] international financial institutions [IF Is] and commercial bankers flocking to the business.
Getting down to the brass tacks it is to be noted that the long standing boom in the industry cannot be possible without micro insurance It is the lynchpin of successful micro credit projects oriented towards the sustainability of this venture especially undertaken in a sensitive and responsive economy .Simply put micro insurance is the provision of grass root insurance services as a basic strategic tool to securitize the micro and small businesses from alarming corporate mortality in an economy According to experts its services provide a lasting solution against unpremeditated mortality common among MSMEs especially those trading with microfinance credits .
Evidence of checkered antecedence abound in the nation’s history in which concerted efforts were made by successive administrations in the empowerment of the people through various micro credit projects and several poverty alleviation progammes Although each of this scheme Started well initially but fizzle out along the line closing shops while the target masses returned to their former poor state Their essence was to serve these unbankables and marginalized MSMEs .Insurance experts have noted that the schemes did die a natural death due to lack of insurance .Consequently could not provide a lasting solution to intended suffering masses .BETTER LIFE FOR WOMEN INITIATIVE and NAPEP were prominent samples .This ignorance has ravaged the country for along time both public and private sector have wasted millions of lives that could have been saved .
With the incursion of microfinance banks [MF Bs] the problem has persisted haunting ignorant depositors patronizing their services where unsecured micro credit is the order of the day .Educating the masses on the method to insure their deposits seem not to be their immediate priority .The policy makers and industry operators perhaps are ignorant of the implication and increasing corporate mortality in the country .The schemes practitioners are only interested in putting down a condition for accessing funds that are at best not truly insured failing to save the future of the funds .
Insurance businesses in the country are basically metropolitan based and hardly any awareness being created in the countryside .As the formal sector insurance industry potential businesses and market decline the level of awareness has refused to grow .Those who care about grass root limit their attempts to life products which is usually comprised of long gestation period not attractive and affordable to the peasants with no surplus funds to throw round or at best concentrated on third party motor insurance .They believed the grass root poor or common man has no muscle to flex around or pay much premium in comparison to former market size (Nwoji, 2008). Hardly a few concentrated efforts on grass root penetration even though they claim to do so .This is vital because the poor need insurance more than the privileged considering the over 148million un served potential market .in the country .
According to experts micro insurance is the solution to the failure of micro and small businesses especially those with micro credit from MFIs It ensures sustainable capacity building both for the institution [supplier] and the target audience in the long run .In Nigeria today more than 90 percent do not have any form of insurance Hence it offers a reliable medium to address this huge gap and deplorable cultural barrier that separates the nation from development market .Daniel[2009] also concluded it is characterized by low premium low coverage limits and sold as typical risk pooling and marketing arrangement are usually designed for low income people concentrating on marginalized grass root businesses not served by mainstream typical social or commercial insurance companies
Ojinaka [2009] argues that it is more profitable than all industrial risks put together. It is very cheap pose fewer problems than the traditional insurance in addition to the fact that the poor cannot instigate claims. To avoid failure of micro insurance projects it suggests group bonding based on societies bodies unions and associations as precondition for success .This distribution channels will be prime movers compounded with appropriate regulation monitoring and enforcement. Its sustainability would translate into sustainability of micro credit projects in the long run preserving capacity building .
Micro insurance follows simple marketing arrangement For every micro credit project to be undertaken it should be attached .For instance where money is given to a borrower for a motor cycle or a sowing machine insurance package could be included using the distribution channels. It is a form of security and not a luxury the study noted .The road to sustainable economic growth can be harnessed through this practice liberating our people from mass poverty and sustain wealth creation capacity. The strategy will take care of mass market the petty traders farmers SMES and not saturated top market
Few companies that have tested the virgin market can testify to its growing appeal and profitability. In 2009 the Group managing director of Mutual Assurance Akin Akinbiyi affirmed this potential That his company main product was micro insurance He concluded that with total income of 1.3billion naira coming from the sector in 2008 alone covering policies worth 100,000 naira and per capital premium payment stood at100 naira .While it also paid over 300 million naira during the period as brokerage fees and commission on businesses in the sector .It is a promising experience that refocused the business as he pledged never to run after government account again.
Not only will it grow the economy it will also potentially combat crime violence theft and prevents slums through development finance insurance .It can also prevent frequency of losses
boost competitiveness and life expectancy bridge gender inequality protecting education employment generation sanitation influenced population control and parade intimidating corporate profitability as in the case cited above .Unfortunately Nigeria is a non starter in the business compare to other advanced countries of Europe and Asia .The role of micro insurance is to build capacity nurture sustainable social development maneuvered to eradicate mass poverty transforming the dividends of successful micro credit project into dividends of our nascent democracy .
In Nigeria today our communities are lying dormant being heavily humiliated and annexed by mass poverty .Thousands of micro insurance companies will be needed .For instance in Sierra Leone about 15 insurance companies are currently operating .Whereas Ijebu Ode Local Government in Ogun State has none presently which is the same size by population density as the 3million people in sierra Leone if not more .Not to talk of Alimosho local government formerly the largest local government in Africa before it was broken off into 6 local development Authorities Many countries on its own Even after the split the Ikotun -Igando LCDA alone is roughly the same size as Singapore and bigger than Equatorial Guinea Mauritius Sao Tome put together and some states in the federation We are yet to see one single insurance company located there ,let alone a micro starter .The market potential is as huge as the market ignorance
Besides micro credit trade and micro insurance other sectors in the market include micro housing micro leasing Micro health micro industry micro leisure micro banking and development finance a new innovation of Development Finance Group [DIG] .All this can be noted in the advanced microfinance market [ AMM]of Asia etc.
With the new microfinance technology recently advanced by Microfinance Africa [MIFA] undoubtedly the world first potential microfinance rating bureau specifically focusing on highly untapped African market The entire world microfinance market had been reclassified as Advanced Grey Market [AGMMs] They are advanced but certainly a grey market .Given the magnitude or enormity of mass poverty bedeviling the territories of Asia andLatinAmerica .Excluding the OECD Club the rest of the world are classified as Blockbuster Grey Market [BGMMs] .That is un developed microfinance market of the world . Even in the advanced market some 10 percent poverty levels were found in the 90s [also AGMMs].The grey market of Africa Middle East parts of Asia and Latin America is highly extreme and a blockbuster in that regard .We know the strategic benchmark is usually mass poverty ravaging more than 80 percent of world population should we use UNDP Poverty profile as calibration and not World Bank ineffective poverty line concept
The entire formal market size institutions and models can easily be reclassified repackaged and imbibed into lower cadre microfinance market where suitable to enable the market diversify risk spread and serve the complex needs of the economically active poor while keeping undiluted the ideals of structural microfinance . .This is naturally expedient thing to do and must be fully adhered. Given the fact that the size of the existing market institutions at a given period determines the adequacy proportion of development capacity and sustainable practice vital to harness sustainable mass poverty relief and possibly eradicating the menace especially where microfinance neokeynesian [MNKs] ethics are imbibed by state political will
This needs a good development planning .Many Institutions can be nurtured such as micro- finance hedge funds[MHFs/MIHEFs] microfinance investment banks[MIBs] and houses[MFHs] microfinance discount houses[MIDIHOs/MDHs] micro venture capital [MVCs] community sovereign wealth funds[COSOWEFs] private wealth fund [PWFs] micro asset managers [MAMs] micro mutual fund [MMFs] private equity microfinance corporation/shops [PEMS] and micro investment security institutions[MISIs] and a host of others have been advanced by [MIFA]as a means to spread wealth .This is more suitable for territories with large informal sector which often constitutes 70-80 percent of the economy A nation can then have dual financial system adding the micro financial system to serve the huge informal market albeit better with grass root oriented laissez fairer regulations and micro prudential standard that are affordable to the microfinancial markets Most informal sectors if not all are heavily un served and similarly underserved even with the effort of informal institutions tirelessly providing inefficient services .The above institutions would serve in the micro financial credit markets .
According to [MIFA] in Nigeria alone they are to cut across the nation’s entire 97,000 economically passive communities .With a good political backing the nation can create wealth worth more than the U.S current G.D.P[15trillion dollars/2009 prices] prior to the maturity of Vision2020 and poverty can be eradicated in a decade or even less –It is an effective model one to tame the evils of inflation that the Keynesians and the monetarists and the entire macroeconomists have struggled in vain after over the last 30 years or more .But we seem not to believe our intellectual power desecrated in favor of western models [i.e. outdated neoliberalism] that could not spread wealth to the impoverished nations and the potential of our population market[POM] which is the major criteria in this micro-metric redistributionist dual financial model .
Should China adopt this dual micro financial model how much wealthier will she be in terms of GAPco-efficients [not GDP] and then making efficient GDP size in the long run since it has a very large poverty market and population market respectively. Nigeria can even be far richer than she does in this regard if we consider the untapped wealth of her natural wealth the POM size and making money from the export of this service to the rest of the developing territories where the model actually fit in the same way as the British export her financial services indisputably as the best in continental Europe Not left behind the full exploitation of her highly untapped technology base and optimization of 60 percent of her arable land lying moribund it can indeed be a world superpower while exploiting the mystique of her ancient esoteric knowledge system like the IFA oracle in the Yoruba land among other untapped esoteric religious power spread nationwide fully exploited and turned into science like the Anglo-Americans
Truly speaking in the World League of Microfinance Nations [WLMNs] no top market nor the middle market is found .That could be extreme We may come down to the level of poly-myopism in the industry and classify the noted markets as both top and mid-ranged while the least Developed Microfinance Nations [LDMNs] or territories are non-starters mainly in the Microfinance Dark ages. Their grades are sensationally hyper-critical and objectively over sensitive using the menace enormity as measurement criteria and highly unprejudiced.
The neomarxist free market envisaged to rival neoliberalism presently and even though through its instrumentality is far older than neoliberalism has no global structure .With the rise of Bretton Wood treaty United Nations was formed in 1944 and named by FDR .The World Bank and the IMF followed thereafter spreading the tentacles across the globe .Hence a global structure was created based on the Keynesian ideology and by the late 70s to early 80s Adam Smith free market principles gained renaissance through neoliberal exponents Milton Freidman and Fredrick Von Hayek The rise of globalization was added plus to western powers profiting immensely from its inequity .On the hand the antiglobalisation protesters worldwide unfortunately protesting at the cost of their lives have no voice which neomarxism brought as relief to their salvation door .It is expected to cover world poverty market—approximately 80 percent of world population .To erect structure for elusive equalitarian globalization they also need a voice –the international macro financial architecture to complement the effort of global mainstream market
WLMNs is equivalent to U.N. OR can be called United Nations For Macro finance [ UNFORM /UNFM ].

During the industrial revolution or Lysander’s period around 1800 J.B. SAYS a French economist observed that an entrepreneur is the one that shifts resources out of an area of lower yield into a more profitable avenue parading higher productivity and greater yield .But Says hardly mentioned who an entrepreneur is
Centuries after the coinage by Says there had been total confusion about the emerging terminology The definitive appeal was highly vague and ambiguous It is not exactly clear whether a trader or a businessman who hardly create something new is an entrepreneur neither does he create a new satisfaction nor a new demand
Today it seems to include every tom dick and Harry in the business Is that so
Although the neoclassical economist introduced the word into our lexicon the coming of Joseph Schumpeter did more than locate the place of entrepreneurship in the economic analysis Corroborating Lysander’s to a larger extent Schumpeter once described the role and impact of combining credit plus new means of income production flows .This is regarded as ‘ fundamental phenomenon of economic development ‘ and the process known as enterprise is noted as the soul of human material progress . Factors influencing this practice such as cultural development [dominant values] , human capital availability , institutional development and policy choices according to [Utomi,2008]. are fundamental resources available to leadership for the prosperity of their nations. Any abrasion against these ideals better explains why nations are poor .
Unknown to the study More worrisome is the fact the ability of even leadership is heavily constrained in an ocean of ignorant follower ship or where objective follower ship is grossly lacking This would certainly bounce back as unbearable burden on the former and could truncate earlier golden effort .Entrepreneurial revolution will be very hard to attain in the developing territories unless a certain level of information democracy is first attained . This promotes mass enlightenment as the very first requirement of advanced economies .The reason is clear; objective follower ship often makes the work of ordinary leadership more effective . How so wise to follow this ideal which has distinguished the poor nations from the rich and mighty .Information democracy provides institutional incentives for the development of Utomi development factors [UDF] does not need an effective leadership where objective follower ship the very first requirement that could potentially nurtures the former is seriously lacking or ill which can only capitalize capital underdevelopment. Since they control the natural forces that throw up incentive to nurture this leadership effectiveness it holds the ace for rapid capital development of vastly underdeveloped nation . Therefore the relative proportion of information democracy existing in a socio- economic system determines the size of a nation ‘s development capacity
The truth is that only enlightened follower ship can demand for development It is a fundamental phenomenon of socioeconomic development that catalyses entrepreneurial development as the very soul of human material progress .The submission also is that only robust socioeconomic system can nurture maintain sustain and safeguard virile economic system as a platform for entrepreneurial revolution Building up cottage industry from the scratch into a multinational is made possible by such Para macro- economic efficiency. Once social value is created economic value where created and possible can then be sustained and leveraged for capital development [not sustainable development ] to build which is the last stage in the development cycle. market. If indeed this process ‘enterprise ‘ is the soul of human material progress information free market as a social enterprise is the very soul of social material progress .Value innovation can truly be cultivated by it which is the primary function of an entrepreneur .
A micro entrepreneur was identified as the steam engine of industrial revolution The strategic impact of this revolution which was nothing less than the promotion of economic freedom and was first made possible by art of social freedom [information democracy] promoted by the Renaissance [1300-1600] Although a leading exponent of monetarism professor Milton Friedman once noted that without economic freedom there can be no political freedom Circumstances over the last 500years of western civilization has proven otherwise that social freedom is the totality of all freedom brands in the face of ever elusive cultural freedom underpinning the institution of liberty and that without intellectual freedom there can be no spiritual freedom and without spiritual freedom also there can be no intellectual freedom .Also without intellectual freedom there can be no economic freedom and without economic freedom there can be no political freedom. This formed the auto –freedom art of social enterprise or what is called the Great Charters Of Liberty [GCL] functioning according to noted equation which provide a virile framework for a robust socioeconomic system .Inability to liberate the auto-run device of this art has often dampen development zeal in the developing countries market greasing the cycle of counter-development trap imbroglio boosted by the separatist league and then the elusive search for mass development and entrepreneurial revolution perennially persisted in vain.
Utomi [2008] once noted why is high value enterprise not so easily pursued by a lot of interested individuals that really desired to make huge profit .This is not really linked to risk or unpredictable outcomes per say but the realm of this socioeconomic system is structurally beleaguered perpetually alienating the nation from potential development density that might take centuries to nurture and recover .Therefore the cost implication of development forgone accumulated over time multiply as mass poverty truncating the effect leverage of development market policy choices and successive institutional legacies without remorse
The practice of microfinance today in Nigeria has been fraught with structural indignities. Unmanageable credit risk steep interest rates increasing repayment defaults strategic market deleveraging and lack of national disposable data resources are symptomatic evidence of poor performance and lack of national micro financial system .Even where the risk or noted defects are avoided the entrenchment and optimization of the system is another matter The climate noted above must be created for any successful microfinance projects to be cultivated They formed the principles of socioeconomic microfinance that will ensure a sustainable and conducive platform for its cultivation launching entrepreneurial revolution in the long run. These are background principles not related to the industry but a necessity for its success . And Upon this framework the fundamental principles of microfinance can be successfully launched . It not only determines the quality of the practice but also strengthens and multiply its socioeconomic impact .In the microfinance developed territories or advanced grey market besides OECD Club this is grossly lacking or less exploited which fully explains why poverty is still very high there Besides India which unluckily has extensive population market Bangladesh and Bolivia are a poor sample of the industry general problem and the ailment of microfinance usual ineffectiveness and market insensitivities . Policies and institutions have been a colossal failure due to this challenge that took half a millennium for the Anglo Saxon to battle which can only be prevented by resolving the identified socioeconomiasis .The dichotomy between the rich and poor nations was linked to this factor .It is both internally and externally imposed and no matter how they try it keeps strangulating every projected future development agenda from attainment in the territories.

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