CHAPTER ONE

1.1 Background of The Study

Microfinance bank is a semi-formal organization. It can be non-governmental or community

development initiative. It is a subset of flexible structure and system which provide a wide range

of financial and savings needs of small scale enterprises. In developing countries where top

town, formal financial institution bank failed to address the credit need off to the real sector of

the economy. (Ayanwu, 2016)

The Nigerian Microfinance Bank have come a long way, a central study has identified at (2017),

160 registered microfinance bank in Nigeria with aggregate savings worth N99.4m and

outstanding credit of 649. 1m, indicating huge business transaction in the business (Ayanwu,

2016). Institutional structure for the provision of microfinance bank credit vary and may be

government, NGO Supported, traditional or mixture of two or more of these, there those that

operate on the line of informal model. There are credit and saving association which are based on

the traditionally experience they provide saving and credit to their members.

Despite the availability of microfinance institute and establishment of microfinance in Nigeria

there are yet not established government policies and mechanisms for regulating and supervising

activities in the sector (Ayanwu, 2016).

In (2015) National Conference on microfinance was organized by the Federal Government of

Nigeria and the world bank recommended that the central bank of Nigeria to take up the

responsibility of developing an appropriate policy as well as regulator and supervisory frame

work for the operation of microfinance institution the workshop recognized that the development

of appropriate microfinance institution and by implicated through micro enterprises in Nigeria.

1
It would be observing that despite the presumed development in the Nigerian economy the

country is still largely being regarded as a developing country (Onyema, 2006). More so, it’s

industrial growth is not quite impressive. Before the emergence of formal microfinance

institutions, informal microfinance in Nigeria entails traditional informal credit and saving

practices, credit from friend and relative, government owned institutional arrangement, poverty

reduction program etc.

1.2 Statement of The Problem

The financing in most cases is normally provide to owners of business. The owners fail to

release, and realize the importance of external sources of capital in order to affect expansion in

the business, in most cases.

The establishment of microfinance bank in Nigeria provide an additional finding source to small

and medium scale business on lending basis. This is so because the microfinance banks have

grassroots orientation and greater expertise in financing small and medium scale enterprises. But

in spite of the prospect of microfinance bank in financing small scale and medium enterprises,

but there a constraint to myriad of problems ranging from managerial to them in ability to

properly evaluate wan application and improper credit risk management which has a resulted to a

high degree of unpaid debt and consequently the closure of so many microfinances in the recent

past it is against this that subject matter is seen as empirical problem north of being.

2
 1.3 Research Questions

i. What are the causes of unpaid debt in Wudil Local Government Microfinance?

ii. To what extend has Microfinance Bank assisted in providing credit facilities to small

scale business and problem hindering?

iii. What are the prospect of Wudil Microfinance in financing small scale and medium

enterprises?

1.4 Aim and Objectives of the Study

The aim of the research project is to investigate the challenges and prospect of microfinance

bank in financing small scale and medium enterprises in Wudil local government microfinance

bank, Kano state with a view to achieve the following objectives.

 To find out the causes of unpaid debt in Wudil Local Government Microfinance Bank.

 To ascertain extent at which the microfinance bank has been assisting in proving credit

facilities for rural development and problem hindering the assistance.

 To examine the prospect of Wudil Microfinance Bank in financing small scale and

medium microfinance bank.

1.5 Significance of The Study

The study would be beneficial to microfinance bank and government agency in charge or

microfinance institution and capacity building for small scale enterprises. The finding can be

used as a basis for policy formulation. The study would also contribute to the existing literature

on the challenges and prospect of microfinance bank in financing small scale and medium

enterprises. The study will also be a spring boarder for further research.

3
Secondly, this study will be relevant to other researchers because it will enable them to look into

other related areas of study, which this could not be cover. The significance of this study enable

the researcher widens their scope of knowledge in microfinance banks to financing small scale

business.

1.6 Scope and Limitation of the Study

The study covers the examination of the challenges and prospect of microfinance bank in

financing small scale and medium enterprises. The study shall cover a time from 2018 to 2020.

Due to current emphasize on industrialization of the country by the government and in order to

reduce the country’s import bills and solving the problem of unemployment that the study

focused attention on the needs for small and medium scale business and its financing the

limitation of the study for the fact that the is restricted in Microfinance and survey designed as

well as instrument of the study, it is no certain of the study is conducted on other area or other

designed and instrument is used would yield the same result other constraint from uncooperative

attitude of some respondent and other limitation include data accessibility, time etc.

1.7 Definition of Terms

 Microfinance Bank: These are small scale banks that specialize in giving loans and

mobilizing savings from small scale and medium enterprises as well as low income

earners.

 Small Scale Enterprises: A firm that in independently owned and operated on a small

scale which is not dominant in its field of operation.

4
 Medium Scale: A firms that is higher than small scale but not up to large scale

enterprises. A firm with a total capital employed of a not more than N50 Million

including working capital.

 Loan: These are advances giving to individual or lenders by financial institution.

 Bad Debt: This is a debt that cannot be discovered.

5
 CHAPTER TWO

Literature Review

2.1 Concept of Micro Finance Bank

According to the research conducted by Rajan (2013) states that the definition of micro, small

and medium scale in enterprises may vary from country to country, year to year, from period to

period and from time to time and according to the level of economic development reached in a

country. Sometimes it is defined in terms of number of workers employed and on the use of

electric power and also in terms of investment made. Despite of this, micro, small and medium

Scale Enterprise when established varies in its mode of formation, its sizes, its organizational

setup, and in its activity. The reason for this is because the type chosen by each individual

operator will depend on the financial capability to manage such enterprise. Micro, Small Scale

Enterprise forms the bedrock of the economic growth of every nation. This is because no nation

can achieve a viable economic growth and development without the establishment of micro,

Small and medium Scale Enterprise. Small Scale Enterprise has always been in the forefront of

development strategies of every nation.

The role of micro finance has been explicitly explained in economics literature especially those

that has to do with small scale businesses. Therefore, no one can pretend to analyze the topic as

new without being influence other work. Thus, perception of the literature that the researcher

possess on the subject matter and practical experience in the field of interest is paramount

important, the preconception should be accounted for and critically review as a way of

understanding how they might affect the study. This might give the researchers an idea about

how the investigated topic, appears in reality and enable him to conduct his study accordingly.

6
According to Ehigiamusoe (2006) is the supply of loans saving and other financial services to the

poor. The central bank of Nigeria (CBN) microfinance policy regulatory and supervisory frame

work for Nigeria (CBN,2005) explains microfinance as a means of providing financial

institutions; Oroye (2005) sees microfinance bank as the banking for the poor.

The center for industries research and development (CIRD) at the Obafemi Awolawo university

Ile-Ife in 1983 define small enterprises as those enterprises with total assets in capital not

exceeding N 250,000.00 and employ not more than fifty (50) full time workers.

Okoye (2005) define small scale enterprise as those enterprises with fixed assets other than land

but inclusive of the cost of investment not exceeding 500,000.00. More over for the purpose of

this study the research would view or sees small scale enterprises as those micro or cottage

enterprises which have a total investment cost of above or equal to 100,000.00 working capital.

Excluding land labor were included and annual turnover of 250,000 and above. Micro finance

bank was in unguaranteed in line with banks and others financial institution. The central of

Nigeria designed the micro finance policy regulatory and supervisory frame work for Nigeria

2005 and revised in April, 2016. Under the frame work, micro finance banking of three

categories: MFB licensed to operate as a Unit bank, and with a minimum of 20million paid up

capital for each branch. MFBs licensed to operate in a state are to operate with minimum paid up

capital of 2 billion. Other regulatory provision in clucle even spread agenda, single ownership

co-operates government and full disclosure in line with laundering act.

2.2 Historical Development of Micro Finance Bank (MFB)

Micro finance bank was developed by fried rich will high Raiffeisen and his supporters. Their

altruistic action was motivated by concern to assist the rural population to break out of their

7
dependence on money lenders and to improve their welfare from 1870, the union expended

rapidly over a large sector of the rhine province and other region of German state. The co-

operative movement quickly spread to other countries in Europe and north America, and

eventually supported by the co-operative movement in developed countries and donors, also to

developing countries. (insert CITATION/REF)

Between the 1950S governments and donors focused on providing agricultural credit to

small and marginal farmers, in hopes of raising productivity and incomes. These efforts to

expend access to agricultural credit emphasized supply feel government.

(Where u write SMEs, write it in full)

2.3 Challenges and Problems

About 80% of Small and medium enterprises are stifled because of poor financing and other

associated problems. The problem of financing Small and Medium Scale Enterprises is not so

much the sources of funds but its accessibility. Factors identified inhibiting funds accessibility

are the stringent conditions set by financial institutions, lack of adequate collateral and credit

information and cost of accessing funds. Harper believes that the capital shortage problem in the

small firm sector is partly one, which stems for the uneconomic deployment of available

resources by the owner-managers. This view was shared by Ihyembe (2015) who claimed to

have seen businessmen take loan for expansion projects only to turnaround to marry new wives,

acquire chieftaincy titles or buy houses abroad. Bruch and Hiemenz (2015) in a study of SMEs in

Asia observed that financing working capital needs was the most frequently mentioned problem.

Banks and new expressed the view that the funding problem of SMEs is primarily due to the

behavior of banks and imperfection of the capital markets.

8
 Lack of trained manpower and management skills also constitute a major challenge to the

survival of SMEs in Nigeria. According to West and Wood (2010), “…90% of all these business

failures result from lack of experience and competence.” Rogers, also added that inefficiency in

overall business management and poor record keeping is also a major feature of most SMEs;

technical problems/competence and lack of essential and required expertise in production,

procurement, maintenance, marketing and finances have always led to funds misapplication,

wrong and costly decision making.

Government has not done enough to create the best conducive environment for the striving of

SMEs, the problem of infrastructures ranges from shortage of water supply, inadequate transport

systems, lack of electricity to improper solid waste management. Nigeria’s underdeveloped

physical and social infrastructures create a binding constraint to SMEs growth, since; they

heavily rely on the inefficiently provided state infrastructures and cannot afford the cost of

developing alternatives. Socio-Cultural Problems: Most Nigerian Entrepreneurs do not have the

investment culture of ploughing back profits. Bala (2014) stated that the attitude of a typical

Nigerian entrepreneur is to invest today and reap tomorrow. Also, the socio-political ambitions

of some entrepreneurs may lead to the diversion of valuable funds and energy from business to

social waste. The problem of bias against made in Nigeria goods is significant. Most Nigerians

have developed a high propensity for the consumption of foreign goods as against their locally

made substitutes. Strategic Planning Problems: SMEs often do not carry out proper strategic

planning in their operations. Ojiako (2015) stated that one problem of SMEs is lack of strategic

planning. Sound planning is a necessary input to a sound decision-making.

Location/Economic Problems: Market stores are dominated by absentee landlords who charge

exorbitant rates. The ownership of market stores by politicians is crowding real small-scale

9
operators out of the market. The high rents charged by store owners on good locations have

forced real small-scale operators into the streets or at best into accessible places. Also, domestic

economic problems of deregulation and removal of protection as well as the global financial

crisis have been detrimental to SMEs. Poor Accounting System: The accounting system of most

SMEs lack standards hence, no proper assessment of their performances. This creates

opportunity for mismanagement and eventually leads to the downfall of the establishment

(Danmarke, 2017).

Multiple taxation: This has become a major problem especially given the role of tax

consultants and agents hired by local governments. They are often crude in their operation,

excessive in their assessment and destructive in their relationship with the production process.

They tax everything in their bid to generate revenue without considering the net effect to

household incomes and employment. Unstable policy environment: Instability in government

policies have caused some SMEs to collapse. One of such policies is that of the 1980s when

government specified that cocoa should not be exported in raw or unprocessed form after a

specified deadline. Many SMEs had to import machineries only for government to reverse this

policy. This negatively affected so many SMEs in the cocoa industry. The present high mortality

rate of SMEs in Nigeria is awful to contemplate and constitute danger to the entire economic

system. It represents serious financial pressure on the nation’s economy as well as a waste of

valuable resources. The business owner should always consider challenging situations and be

prepared to meet them with pre- planned strategies. The survival of SMEs is only possible

through a systematic analysis of the problems they are facing and mapping out appropriate

strategies of overcoming them, through a proper understanding of the business environment. For

a business to survive in unfriendly environmental conditions it should adopt a strategy that

10
utilizes its strengths to exploit opportunities while avoiding its weakness. Nwoye (2014), argued

that strategic changes might take place in a firm without initial formulations, such decision could

be informed by expansion strategy, preference to cash sales policy, innovation strategy, change

in production techniques, local sourcing or use of alternative materials, backward integration and

merger. Thus, any entrepreneur who wants to succeed must identify business opportunities, be

creative, visionary, daring, risk taking, courageous and sensitive to changes in the business

environment.

2.4 Features of Scale Business

Small scale business like any other business that is medium and large scale enterprises has it is

on features; these are:

(i) Labour Intensive Method

Small scale business is formally Labour intensive method of association and are

created by the member of the target communities wish to improve their living

standard and to generate employed/incomes.

(ii) Flexibility

small scale industries or business are flexible in their operation they adopt quickly

to various factors that play a large part in daily management, their flexibility make

then suited to constantly changing business environment.

(iii) Use of indigenous raw materials

Most of the small scale businesses uses indigenous raw materials and promote

intermediate and capital goods.

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 (iv) Localized operation

Small scale enterprises generally restrict their operation to local areas in order to

meet their local demand, and provide services that best fit their consumption and

desires.

(v) Lesser generation period

Generation is the period after which the return on investment started it is the time

between setting the business and commencement of production, small scale

business usually has a lesser generation’s period.

2.5 Role of Small Scale Business

Not every small business eventually grows to the size of large corporation. Some businesses are

ideally suited to operate on a small scale for years, often serving a local community and

generating just enough profit to take care of company owners. Small-scale businesses display a

distinct set of identifying characteristics that set them apart from their larger competitors.

1. Revenue and Profitability: Small-scale business revenue is generally lower than

companies that operate on a larger scale. The Small Business Administration classifies

small businesses as companies that bring in less than a specific amount of revenue,

depending on the business type. The maximum revenue allowance for the small business

designation is set at $21.5 million per year for service businesses. Lower revenue does

not necessarily translate into lower profitability. Established small-scale businesses often

own their facilities and equipment outright, which, in addition to other factors, helps to

keep costs lower than more leveraged businesses. (insert CITATION/REF)

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2. Employees: Small-scale businesses employ smaller teams of employees than companies

that operate on larger scales. The smallest businesses are run entirely by single

individuals or small teams. A larger small-scale business can often get away with

employing fewer than one hundred employees, depending on the business type. (insert

CITATION/REF)

3. Market Area: Small-scale businesses serve a much smaller area than corporations or

larger private businesses. The smallest-scale businesses serve single communities, such

as a convenience store in a rural township. The very definition of small-scale prevents

these companies from serving areas much larger than a local area, since growing beyond

that would increase the scale of a small business's operations and push it into a new

classification. (insert CITATION/REF)

4. Ownership and Taxes: The corporate form of business organization is not well-suited to

small-scale operations. Instead, small-scale businesses prefer to organize as sole

proprietorships, partnerships or limited liability companies. These forms of organization

provide the greatest degree of managerial control for company owners, while minimizing

the hassle and expense of business registration. These businesses generally do not file

their own taxes; instead, company owners report business income and expenses on their

personal tax returns. (insert CITATION/REF)

5. Locations: A small-scale business, by definition, can be found only in a limited area.

These companies are not likely to have sales outlets in multiple states or countries, for

example. A large number of small-scale businesses operate from a single office, retail

store or service outlet. It is even possible to run a small business directly out of your

home, without any company facilities. (insert CITATION/REF)

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2.6 Alternative Sources Funds

There are very many sources of finance for small scale entrepreneurs. some of these sources are

explained below.

1. Self funding: This is the most common sources of funds available for small scale

entrepreneurs. Most small businesses are financed from the personal savings of the

entrepreneur. Not everybody, including the lending institutions would share the vision of

the entrepreneur about his business right from inception. As such it is usually difficult for

a potential small business owner to get loans from any external sources. This makes self-

funding about the most viable option open to him. (insert CITATION/REF)

2. Credit cards: The use of credit cards to finance business activities has become a regular

thing in small businesses. This involves all sort of business transactions including capital

financing and paying off suppliers. But it is obvious that this means of financing is more

common in developed economies. (insert CITATION/REF)

3. Family: Soft loan from family members is a common source of funds for entrepreneurs.

It does not require interest charges to the entrepreneur in most cases. Where interested

payment is made, it is usually far below what is obtained when the loan is collected from

external sources such as commercial banks. In some cases, the members of the family

contribute part of the business equity. This is more often when the business is at its early

stage. (insert CITATION/REF)

4. Friends: Loan from friend is just another informal source of finance for the small

business owner. The attributes of the family source of finance also applies here.

5. Business angels: This term is used to refer to existing business owners or entrepreneurs

that invest in a potential small business start-up or even a going concern. Business angels

14
 mostly consist of experienced entrepreneurs that see a chance in an upcoming business.

They invest in the equity of the business and earned part of the ownership of the business.

Small scale business is very important in every economy for the significant role they are playing

and serving as a key player towards economic growth of nation and poverty alleviation. Some of

the roles includes:

(1) Income generation.

(2) Employment generation.

(3) Improve living standard of the people.

(4) It raised the economic growth and development potentialities of the country.

(5) It increases productivity and output.

2.7 Problem of Small Scale Business

With all the important role that small scale business play in the improvement of Nation

Levels of living, there are a lot of problems or obstacle militating against, its performance in

Nigeria, these include among others: -

1. Poor capital

2. Lack of credit facilities

3. Multiple taxation

4. Failure to adapt to changing business environment

5. Poor state of the country infrastructure

6. In consistence government policy.

7. Corruption and mismanagement.

15
Most of the problems enumerated above were related to money or credit, and this is the reason

why the research was designed to investigate the impact of micro services on the improvement of

small scale businesses in Kano and to come up with some suggestions and recommendation in

order to solve the problems of the sector to perform the functions, it is meant to perform so that

the economy of Kano State will grow.

2.8 Microfinance Bank and How It Affects Small Scale Businesses in Nigeria.

Micro finance banks are important just as outlined by central bank of Nigeria (CBN) regulatory

policy for micro finance institution (2005) as they consider majority of Nigerian population to

live in the rural areas and are generally characterized by low income, poor standard of living and

they generally engage in agricultural activities, artisan-ship and other form of small businesses

that need finding, technical and professional assistance. Micro finance bank provides credit

facilities to small scale businesses them at cheaper rate to the poor and small scale enterprises, so

as to improve their standard of living. The following MFB activities prove more importance to

small scale businesses development.

1. Micro Finance Lending: Micro finance as a form of financial institution primarily

focused on alleviating poverty through providing financial services to the poor, most

people think of micro financial if at all as being about micro credit that is lending small

amount of money to the poor. Micro finance also has border perspective which includes

insurance transactional service and impotently saving majority of the b Micro finance

institution offers and provides credit on a solidarity group lending basis with no

collateral. (insert CITATION/REF)

16
2. Group Lending: Group based lending is one of the most novels approaches of lending

small amount of money to a larger number of clients who cannot offer collateral. This

size of the group can vary but most of the group start from (4) to eight (8) members. The

group is secured by the member before acquiring the loan. Loans are grated to selected

members of the group. Most Micro finance required a percentage of the loan that is

supposed to be saved in advance which point out the ability to make regular payments

and serve as collateral. Group members are jointly accountable for the repayment of each

other’s loan and usually meet weekly to collect repayment. Group will be disqualify and

will not be eligible for further loan even if it is one member of the group that become a

defaulter. The credit wornness of the borrowers is therefore determined by the members

rather than by the Micro finance bank. (insert CITATION/REF)

3. Individual Lending: There are few conventional financial institution that provide

individual loans to low income people because poorer clients are considered higher risk

clients, due to their lack of collateral plus the Labour intensive method and the nature of

the credit hence the lack of profitability of the small credit. However, Micro finance bank

always consider given individual loan to poor clients that own small business. (insert

CITATION/REF)

4. Credit Association: Credit associations are the organizations that are formed on the basis

of financial relationships of saving and loans between its members. They accumulate

saving from its members and provide short term loan to the needed members. The

demand for loan in general exceeds the supply of saving in most rural areas credit union

or association and they are still the solitary source of deposit and credit to a group of

people unlike single individuals. Those credit unions play an important role in the form

17
 of Micro credit in the sense that Micro finance bank usually provide credit facilities to

those group because they are mostly in group since with the credit union it is more

convenient to give out credit to individuals. (insert CITATION/REF)

5. Social Collateral: Micro finance group lending with joint liability allow asses poor

individuals to replace physical collateral by social collateral system. The nature of Micro

finance lack framework for analyzing the consequences of using social collateral for

borrowing behavior and repayment. (insert CITATION/REF)

6. Soft Loan: This is a loan with a low market interest rate; it is also known as soft

financing. Soft loan provide concession such as long. Repayment period or interest

holidays and for most of the time micro finance loan are mostly Soft loans. Soft loan are

usually provided by the government to project that they think are worthwhile sometimes

in conjunction with micro finance. (insert CITATION/REF)

2.9 Theoretical Frame Work Review

Micro finance bank theory on small scale and medium enterprises was developed by Berger and

Udell (1998) and was used by Bahajide (2011) and Akande (2012). This theory was anchored on

the small business as where the financial needs and financing option change as the business grow

and it became more experience and less informative. They further suggested that forms rely on a

size/age most rely on initial insider finance, trade credit and development financial institution.

This theory predicts that as firms grows, it will gain more access to venture capital as a source of

intermediate equity and mid-term loans as a source of intermediate debt. At the final state of the

financing theory as the firms become elder, more experienced and more informative transparent,

it will likely gain access to long term debt.

18
This study anchored on financial growth theory because the theory predicts as firms grow it will

gain more access to investment capital as a source of intermediate equity, the implication of this

theory is that micro finance bank to small and medium enterprises need internal source of

finance before looked for the external found from the development and financial institution

especially bank of industry. This is because the size of the loan and lack of information on the

quality of the micro small and medium enterprise force lenders to protect their inltestiment by

demanding higher rates of return, which come in the form interest rate, and high cost of capital

of the small firm.

2.10 Empirical Literature

This section is concern with a review of empirical literature by different scholar on the impact of

micro finance bank service toward the improvement of small scale businesses the aims are to

gain more knowledge on the topic that will assist us in knowing the significant variables to be

employed in examining the impact of micro finance bank service in improving of small scale

businesses. The empirical literature would also guide in the analysis and interpretation of the

results.

Let’s begin with thee research of Abiola and Salami (2011) conducted in Oyo State which

specifically investigated the impact of micro finance bank on standard of living of hair dressers

using questionnaire in collecting data. The study reveals that there is a significant relationship

between micro finance bank efforts and standard of living of hair dressers.

Another research carried out by Suberu et al (2011) in Nigeria using simple random techniques

in selecting the small scale enterprises, the finding reveals that significant number of small scale

enterprises benefited from the micro finance institution loan even though only few of them were

19
suitable to secure the required amount needed. However, it was also found that the micro finance

institution has grown phenomenally in the last ten years. Majority of the small scale enterprises

acknowledge positive contribution of micro finance institutions loan towards promoting their

market excellence and overall economic company competitive advantage, rather than tax

incentives and financial support.

Similarly, a research conducted by Edatijae (2011) in Delta State financial small scale enterprises

using purpose sampling proved that micro finance services particularly those sponsored by

government have resulted in an increased level of credit disbursement and gains in agricultural

production and other activities, the effect were short-lived, due to the unsustainable nature of the

program.

20
 CHAPTER THREE

Research Methodology

3.1 Introduction

This chapter highlights the method and procedure employed in the collection of data and analyze

the data obtained for this study. These procedures and step are organized under the following

subheading research designed, study area, population of the study sample size and sample

techniques, method of data collection and method of data analyze.

3.2 Research Design

A research design is a plane of investigation that specifies the approach to be used for gathering

and analyzing data. In the design of this work, the research adopts descriptive and survey types

of research which enable the use of primary and secondary data. Consequently, data were used to

form aggregate which were processed and the result developed in to inferential statistical

utilization form for the measurement of the effectiveness of finding challenges and prospects of

microfinance bank in financing small scale and medium enterprises in watch local government

area Kano state.

3.3 Area of Study

The study is carried out in Wudil local government area of Kano state with its headquarters in

Wudil. The reason why we chose Wudil specifically is essentially because of the increase in the

rate business that is taking place there both small scale and medium enterprises. Wudil is one of

the oldest local government areas in Kano state, created in 1979 alongside Gaya and Rano local

government areas.

21
Wudil local government is one of the sixteen local governments in southern Kano senatorial

district. Wudil is located on the express way to Maiduguri Road along its way and also, Wudil

consist of many wards. Wudil experience source of water Channel Sea from Tiga and pass away

to Wudil this give an opportunity to the most of the people of Wudil become a farmers. Farming

is a dominant occupation in Wudil in the rainy session and irrigation.

3.4 Sample Size and Sample Techniques

Sample is a part of population drawn to observe and analyze data scientifically in order to cover

the entire population. It is difficult to observe the entire population of both staff and business

owners since one can never determine the challenge and prospects of microfinance bank in

Wudil local government microfinance bank, without the statistical data and to get the fraction of

the population to represent the whole. As such a sample size of 200 respondents will be selected

out of the population from 5 different enterprises and small scale business in which local

government area of Kano state.

Therefore 20 respondents would be selected from each business to this effect. In each business

20 businessmen are able to respond and each giving the total of (200) the reason behind this

sample size is to ensure that the sample use for the study spread across the (20) business

enterprises chosen for the study. This equally gives a good and unbiased representation and at the

same time ensures reasonable representation of the target population.

3.5 Method of Data Collection

The method of data collection employed for this study is questionnaire. A questionnaire is a

research instrument consisting of a series of question for the purpose of gathering information

from respondents and it’s the most commonly tools. Used in survey research method. A

22
questionnaire is chosen as preferred techniques of data collection for this study because it is

relatively quick to collect information, and it does not require much capital, no much effort

require from the research as verbal and standardize questionnaire made it simple to collect and

compile data.

3.6 Method of Data Analysis

The data collected using questionnaire for this study was quantitavely and qualitatively analyzed

using Descriptive Statistics. Also various tables were constructed to clearly illustrate the

percentage distribution on a set of variable obtained from the responses of the respondents.

This will create for the researcher the potency to analyze the respondent of microfinance views

concerning the challenges and prospects of microfinance bank in financing small scale business

in Wudil local government microfinance bank.

23
 CHAPTER FOUR

4.1. Data Presentation and Analysis

The main objective of this chapter is to analyze the data collected from the field using the

appropriate statistical measure. The research work is devoted to find out the challenges and

prospect of microfinance bank in financing small scale and medium enter in Wudil local

government. Frequencies, Tables and percentage were used in the analysis. The first section deal

with introduction, the second section deal with demographic data attribute of the respondents, the

third section deal with them of the study “challenges and prospect of micro finance an small

scale business in Wudil local government micro finance and lastly discussion of finding and

conclusion.

4.2. Demographic Data

4.2.1 Distribution of the respondents by sex some important demographic variable as regarded to

this study include sex, marital status, religion, age, educational qualification and income. These

variable are analyzed and presented in table containing frequency and percentage table 4.2.1

SEX FREQUENCY PERCENTAGE (%)

Male 122 61

Female 70 39

TOTAL 200 100%

The table (4.2.1) show the sex distribution of the respondents the result indicate that the majority

of the respondent are male with 122 or 61 percent and female with 39 or percent.

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Table 4.2.2 distribution of the respondent by marital status.

MARITAL STATUS FREQUENCY PERCENTAGE (%)

Single 126 63

Married 50 25

Divorced 13 6.5

Widow 11 5.5

TOTAL 200 100%

Table 4.2.2 Show that majority are single with 63 percent and 25 percent are married, 6.5 percent

are divorced and 5.5 are widowed. Since the majority of respondent is single, thus given them

the knowledge of financing small scale business in a microfinance bank.

Table 4.2.3 distribution of the respondent religion.

RELIGION FREQUENCY PERCENTAGE (%)

Islam 125 62.5

Christianity 70 35

Traditional 5 2.5

Other NIL 0

TOTAL 200 100%

Table 4.2.3 shows that Islam religion takes the highest percentage of 62.5 or 125 followed by

Christianity with 70 or 35 percent with traditional religion with 2.5 percent in the area. It can be

observed that Islam is the dominant religion in the area.

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Table 4.2.4 distribution of the respondent’s age.

AGE FREQUENCY PERCENTAGE (%)

16 – 26 30 15

27 – 35 54 27

36 – 45 82 41

46 – 55 23 11.5

56 – above 11 5.5

TOTAL 200 100%

The above table 4.2.3 shows that the highest responses percentage is 41 percent which is within

the range 36 – 45 years of age who create and own the business followed by 27 percent consist

of assistance in the running of a business and 15 percent are teenager who are coming to teach

11.5 and 5.5 percent are manager of business who are control and monitoring they show that the

majority of the respondent are adult who are engaged in business and enterprises and they have

more in the business and the process of finding a loan from microfinance in order to expand their

business.

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Table 4.2.5 distribution of the respondent by qualification.

QUALIFICATION FREQUENCY PERCENTAGE (%)

Primary school certificate 20 10

Senior secondary school 22 11

N.C.E/Diploma 78 39

Degree/HND 70 35

Masters 10 5

TOTAL 200 100%

Table 4.2.5 shows the distributions of respondent’s qualification it is obvious that N.C.E/diploma

consist the highest number of the business men with 78 or 39, HND/degree consist of 78 or 39

percent of the population followed by senior secondary school leaver with 22 or 11 percent and

primary school 20 or 10 and masters with 10 or 5 these indicate that the majority of the

respondents are N.C.E/diploma.

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Table 4.2.6 income distribution of the respondents.

INCOME FREQUENCY PERCENTAGE (%)

Below 10,0.000 10 5

10,0000 – 125,000 75 37.5

125,001 – 150,000 112 56

150.001 – and above 3 1.5

TOTAL 200 100%

The above represent the monthly income of the respondents the largest population takes income

of 125001 – 150,000 which the present 56 percent while those within 100, 0001 – 125000

seconded with 37.5 percent. Those earning below 100, 000 are 5 percent and those with on 150,

0001 and above have 1.5 percent from the above table it can be seen that those within 56 percent

are more in population then the rest of the categories.

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Table 4.2.7 respondent on requirement of the microfinance bank before giving a loan

VARIABLE FREQUENCY PERCENTAGE (%)

Must be a customer 82 41

Not necessary a customer 11 5.5

Collateral 54 27

Group leading 30 15

Other 23 11.5

TOTAL 200 100%

From the above table 4.2.10 respondent said that you must have an account before giving a loan,

(54) for collateral followed by group leading with (30) and (23) for other that none specify and

(11) for opinion on not necessary to be a customer.

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4.3 To find out the causes of unpaid debt in Wudil Local Government Microfinance Bank.

Table 4.3.1 Respondent’s opinion on the causes of unpaid debt in Wudil microfinance bank.

VARIABLE FREQUENCY PERCENTAGE

Low profit 126 63

Small size of market 11 5.5

High cost of production 50 25

In adequate skilled manpower 13 6.5

TOTAL 200 100%

The table shows the responses from the respondent on low profit that a business man gain in his

business takes a higher frequency and percentage of 63 and 126 frequencies on courses of unpaid

debt to microfinance bank, this is followed by high cost of production which is 25 percent and

6.5 for in adequate skilled manpower and lastly the nature or small size of market with took 5.5

percent.

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4.4 To ascertain extent at which the microfinance bank has been assisting in proving credit

facilities for rural development and problem hindering the assistance.

Table 4.4.1 respondent’s opinion on does microfinance assist in providing credit facilities to

small scale business and problem hindering.

RESPONSES FREQUENCY PERCENTAGE (%)

Yes 200 100

No Nil 0

TOTAL 200 100%

From the above table all the respondents agree that microfinance bank assist in providing credit

facilities to small scale business in Wudil local government micro finance bank and the problem

hindering. Since the primary work of micro finance bank is to give a loan to small scale business

and still the problem encountered for the repay of debt. By this we understand that microfinance

faces more challenges from his customer during the period of repaying the loan.

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Table 4.4.2 Respondent opinion on the problems encountered by businessmen in obtaining credit

facilities from microfinance.

VARIABLE FREQUENCY PERCENTAGE (%)

High interest 30 15

Corruption and miss management 50 25

Failure to adopt changing business. 20 10

Poor infrastructure 11 5.5

Poor sufficient capital 24 12

Inconsistency of government policy 45 22.5

Multiple taxation 20 10

TOTAL 200 100%

From the above table we understand that the opinion of the respondents is that “corruption and

miss management of microfinance bank staff become the most challenging problem of small

scale and medium enterprises when they apply for a loan with (25) percent and inconsistency of

government policy became the second with (22.5) followed by high interest of banking with (15)

percent then failure to adopt changing business and multiple taxation with rate opinion of

respondent (10) respectively and poor infrastructure with 5.5.

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4.4 Discussion of Findings

The challenges of microfinance on the first opinion can be caused by bad debt which affect by

low profit gaining by business men, secondly from the research conducted it prove that

microfinance bank assist in providing credit facilities to small scale business and problems

hindering on the repay bank of loan the research work found that interest rate charged by

microfinance bank is high, this makes it difficult for small scale business to easily access the

loan. The study also found that some conditions to be followed before access to the loan which is

the applicant must be a costumer in a bank in addition to landed properties and among other in

order to grant them any service.

The implication of the study above is that small scale business owners and microfinance bank

faces a major challenges and problems. It allowed to continued may leads to many of them

choosing their investment or business unless something very urgent is done by the government to

address the problem through government intervention from federal, State and Local government.

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 CHAPTER FIVE

Summary, Conclusion, Recommendations

5.1 Summary

The study aimed at investigating the challenges and prospects of microfinance bank in financing

small scale and medium enterprises in Wudil local government micro finance bank area of Kano

state the finding of the research was summarized in order to draw meaning full research as well

as conclusion and recommendations.

The respondent age where examine to be mostly between the age of 36 – 45 years this mean that

the occupation and obtaining loan is mostly gained by the youth. And the research is mostly

respondent by male with 122% and 78% for female this indicate that the business and acquiring a

loan is mostly by male.

Furthermore, most of the respondent view that they have low level of education. This suggest

that the business does not require educational status.

The research reveal that the business and the bank experience problems identified the business

owners high cost of power and lack of financial advice and also in accessing the bank service

this are: High interest rate, difficulties in accessing the bank loan, small size of market, in

adequate skilled manpower, low profit.

However, the study shows that the respondents agree that microfinance bank assist in providing

credit facilities to small scale business people a loan in a bank as loan they are customers of that

bank. 82% agree with that.

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5.2 Conclusion

This study aimed finding the challenges and prospects of microfinance bank in financing small

scale and medium enterprises in Wudil local government area of Kano state. It was concluded

that the first opinion can be caused by bad debt which affect by low profit gaining by business

men. Secondly, from the research conducted it proves that microfinance bank assist in providing

credit facilities to small scale business and problem hindering on the repay bank of loan, the

research work found that interest rate charged by microfinance bank is very high, this makes it

very difficult for small scale businesses to easily access the loan and it also found that some

conditions to be followed before accessing the loan which is the applicant must be a costumer to

the bank and landed all properties in order to grant them any services.

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5.3 Recommendation

Based on the finding of the study discussion and conclusion presented above the following

recommendation are put in place for discharging the challenges of microfinance bank in

financing small scale and medium enterprises.

1. Record of each people who collect the bank loan should be kept in the bank safely federal

government state and local government should provide the adequate infrastructural

facilities and social amenities, this will assist the small scale business to improve better.

2. The management and administration of microfinance bank should reduce the interest rate

on their loan able facilities.

3. Government should provide a granting tax holiday or tax period to new established firms

and small scale enterprises government both state and federal should provide an incentive

to small scale business

4. The federal and state government should sustainably increase their capital expenditure for

development of industrial layout

5. The government should make thing possible for small scale business to assist them to

advertize and display their product to different market in the country and outside in order

to protect them against foreign competition.

6. Government should provide a special industrial development and financial institution for

small scale business e.g Bank of industry (BOI)

7. Entrepreneur courses should be made available at any form of business so that improve

their skill and knowledge on a business e.g. seminar, workshop. e.t.

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(Where are the References?)

37