TABLE OF CONTENTS

Title page                                                                i

Approval page                                                         ii

Dedication                                                               iii

Acknowledgements                                                 iv

Table of contents                                                    vi

Abstract                                                                  x

CHAPTER ONE

INTRODUCTION

1.0   Background of the study                                1

1.1   Statement of the problem                              6

1.2  Purpose of the study                                       8

1.3   Research question                                          9

1.4   Statement of Hypothesis                                10

1.5   Theoretical Framework                                  11

1.6  Significance of the study                                12

1.7  Scope of the study                                          13

1.8   Limitations of the study                                 14

1.9   Definitions of terms                                        14

CHAPTER TWO

LITERATURE REVIEW

2.1   Introduction                                                    16

2.2   Concept of Oko Micro-Finance Bank             25

2.3  The record of Micro-Finance Bank                 27

2.4  Importance of credit to the Development

of the Rural Communities                              35

2.5  Micro-Finance Bank offer a number of credit

delivery schemes                                            40

2.6   Products and Services                                    41

2.7   Summary of Literature review                       42

CHAPTER THREE

RESEARCH METHODOLOGY

3.1  Design of the study                                         44

3.2  Area of the study                                            44

3.3   Population of the study                                  45

3.4   Sample/Sampling Techniques                       45

3.5   Instrument for data                                        46

3.6  Reliability and Validity of the instrument     46

3.7   Distribution and retrieval of the instrument    47

3.8  Method of data analysis                                 47

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS

4.1   Personal Data                                                49

4.2   Data presentation                                          53

4.3   Analysis of research questions                       53

4.4   Testing of hypothesis                                      58

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1   Summary of findings                                      63

5.2   Conclusion                                                      64

5.3   Recommendation                                            65

References                                                      67

Appendix I: Letter of Respondents                 70

Appendix II: Questionnaire                            71

CHAPTER ONE

Introduction

1.0  Background to the Study

A major development issue facing many developing countries has been the need to reduce the scale and depth of poverty among the growing population. Chandy and Gerts (2011) estimate that there were about 878.2 million people living below the poverty line in the year 2010. Of this number over 700 million live in rural areas. African has 369.9 million population or proportion of poor people the elimination and reduction of poverty is a key concern of development thinkers and practitioner (Coyle, 2007; Ifrpi, 2008).

The beginning of the 1970’s saw attention general towards improving the wellbeing of the rural poor who formed the majority of the population in developing countries, many governments and international and local agencies shifted their attention and channeled their resources towards development of rural area. This idea was motivated by the intention of reducing the levels of unemployment, increasing access to public goods and services by the development of rural population and more particularly, lowering poverty and overcoming income inequalities in most developing and least-developed countries according to brad show (2006), the explanation of poverty may be structural, personal, social or economic according to (Burgess & Pande, 2002). In the fight against poverty it is believed that the introduction of banks in rural areas enhance the livelihood of the rural dwellers. It is assumed that intervention will change human behaviors and practices in a way that will lead to the achievement of desired outcome.

According to (Van Santen, 2010) said that financial services for the poor have also been proven to be a powerful instrument for reducing poverty, enabling poor people to build assets and increase incomes, and reducing vulnerability to economic stress and shocks the idea of establishing micro-finance banks in Nigeria was initiated under the former head of state general Ibrahim Babagida in 1990 the   idea was to mobilize funds and sensitize people on the need for development particularly those in the rural areas. The micro-finance becomes effective on the 16^th day of July 1991 with the Inauguration of the National Board for Micro-Finance Bank implementation committee and subsequent opening of the first Micro- Finance Bank in the country at Althen which was located in Kaduna state. Since then there had been major efforts at improving the understanding of Nigeria about the objectives and modalities of establishing micro-finance bank.

Many communities have established their own Micro-Finance Bank, already the country is having about 1,450 Micro-Finance banks as at the end of December 1999. Stood at N200m mostly is currently form of cash bank, balance loan e.t.c of the One Hundred and Five Bank Licensed before February 2004 about 52 fifty two have share capital of between N500,000 and N1million. Twenty seven banks, between N1billion and N3billion loan and advance range from 500,000 to 5.8million in zone. Over 20 micro-finance banks have asked to be allowed to increase their share capital to N1million while far ones are requesting to raise their share capital to N5million banks like Ibeto Micro-Finance Bank, Oganiru Micro-Finance Bank and so on have already assests worth over N10million each. As a mark of growth, so many micro-finance banks had qualified for a board matching loan repayment over a period of five years. The loan is being given to those banks that have met the condition of submitting the return for the first three months, board resolution requesting the loan and an understanding by the board of directors to guarantee the loan.

In 1993 precisely, there was a boom on establishing of Micro-Finance Banks, which then was regarded as the last hope of the rural dwellers, this encouraged customers to deposit and granting loan to rural dwellers thereby developing rural areas through investment by the rural people, it was within this period that Oko Micro-Finance Bank was registered with the National Board of Micro-Finance Banks. Oko Micro-Finance Bank has a staff strength of between 15-20 a share current capital of about N700,000 to N1million and numerous customers which are mainly students of the Federal Polytechnic Oko. Their function includes to lend loans to their customers, to help in export financing.

1.1  Statement of the Problem

Micro-Finance Bank could be powerful strategy or instrument among several others, for alleviating poverty in general and rural poverty in particular in developing countries. Although many developing countries, such as African have scored relative successes in using micro-finance bank as an instrument for alleviating poverty in general, and rural poverty in particular, it has not been so for many other developing countries.

Most of the micro-finance programs operated in these countries have left the so-called beneficiaries in debts. In a similar vein, most organization involved in providing micro-finance service, including government institution, co-operatives and Non Governmental Organizations (NGOs) have in most cases performed very poorly. High rates of non-repayment of loans by clients have on several occasions led to the collapse of micro-finance institutions. Notwithstanding this, micro-finance has continued to gain popularity among rural developers as a visible tool for improving rural agricultural practice and the diversification of economic activities of small- holder farming householders.

Lack of adequate loan funds, inadequate institutional capacities, poor coordination, little or no participation of the beneficiaries in the planning of micro-finances programs, lack of effective training programs for the both beneficiaries and operators of the programs are some of the reasons behind the ineffectiveness of micro-finance as a strategy for alleviating rural poverty in developing countries.

1.2  Purpose of the Study

The main objective of this study is to critically examine how micro-finance can be used as an effective instrument or strategy to reduce the high level of poverty in the rural areas of respective developing counties especially in Africa. The researcher have to look at the Nigeria situation.

1. To examine how micro-finance institutions operate in selected rural settings in the country.
2. To analyze the strengths, weaknesses, opportunities, and threats of micro-finance institutions in the selected region.
3. To access the problems encountered by micro-finance service consumers, in the rural areas.
4. To investigate and analyze the types and nature of micro-finance service provided in selected rural settlements in the country.

1.3  Research Questions

1. How does micro-finance institution operate in selected rural settlings in the country?
2. What are the problems encountered by micro-finance service consumers in the rural areas?
3. Does micro-finance bank alleviate poverty in general and in rural developing countries?
4. What are the strengths, weaknesses, opportunities and threats of micro-finance institutions in the selected region?

1.4  Statement of Hypothesis

The following hypotheses were designed to guide the study:-

H₀:   Micro-Finance Bank does not help in the development of rural areas.

H₁:   Micro-Finance Banks help in the development of rural areas.

H₀:   Oko Micro-Finance Bank is not aimed at increasing the level of per capital incomes of Oko Community.

H₁:   Oko Micro-Finance Bank is aimed at increasing the level of per capital income of Oko community.

1.5  Theoretical Framework

Past studies on diffusion theory have shown strong influence of the awareness of idea and innovation by a member of the community in which it spreads to all other members of such community. Also is the influence of distance on diffusion process which shows that a further away member of the society may not be aware of the innovation or ideas from the source on time unlike some one else to the source. Thus, this theory depicts an application to development of rural areas through self-help projects by the process of social contract through spatial ranges and dimension and field of influence. A member of the community through     community unions and association in most cases, the expansion and diffusion process is most applicable in development of rural areas through self-help projects in which ideas, innovation and communication spread spatially and temporarily until increasing members of individuals in the society become aware of the need for self-help project for development of rural areas.

1.6  Significance of the Study

On the completion of this study, it is hoped that it will be useful and profitable to the Micro-Finance Banks executives, students and the researcher in particular together with the rural people since Micro-Finance Bank is seen as poor man’s bank. To the management of the Micro-Finance Bank, it will help them to know the areas of services they are performing well as those areas that needed improvement in development of rural areas. To the students more of those in public administration will also use it as a guide for literature review in carrying out more research work on the topic. to the rural dweller’s the idea of micro-finance bank will enlighten them on the need to bank their money no matter how small which will help to combat the number of loses/stolen being encountered by these ones. The idea will also encourage savings in the rural areas.

1.7  Scope of the Study

The study would concentrate on the role of Micro-Finance Banks in the development of rural areas a study of Oko Micro-Finance Bank in particularly including the staffs of Federal Polytechnic Oko and staffs of Micro-Finance Bank Oko.

1.8  Limitations of the Study

Financing:     During this study there was limited finance in producing questionnaires and also going to other micro-finance banks around together information.

Time:              It was a problem combing the research work with other activities and assignment of the semester.

Data Collection: It was a problem collecting data because of the busy schedule of staffs in the bank.

1.9  Definition of Terms

Roles: Is a set of connected behaviour rights, obligations, beliefs, and norms.

Rural Areas: are areas which are not town or cities they are often farming or agricultural areas.

Development: the processes of economic and social transformation that is based on complex cultural and environmental factor and their interactions. It is also a process of adding improvements to a parcel of land, such as grading, subdivision, drainage, access, roads utilities.