Microfinance banks and agro-allied small and medium scale enterprises in Ogun State, Nigeria: Prospect, performance and constraints

Abstract

Microfinance bank (MB) is currently being promoted as a key development strategy for promoting poverty eradication and economic empowerment in Nigeria. Based on this, the study examined the prospect, performance and factors affecting the financing of ASMSE by MB in Ogun State Nigeria. The entire five microfinance banks in Ijebu North Local Government Area (INLGA) of Ogun State, were used for the study. Data were collected through structured questionnaires and interview schedule. The data were analyzed using descriptive statistics such as bar chart, pie charts, frequency distribution and percentage. Results revealed that the loan schemes operated by MB differ from one bank to another. The loan schemes include micro-credit, agricultural production loan, trade and transport loan, small and medium enterprise credit, bulk purchase finance, overdraft facility, and equipment leasing. The study also revealed that MB through their various activities had affected operators’ productivity positively while some ASMSE are not favoured by MB due to some factors such as long payback period and low rate of return. However, microfinance banks interest rate and loan duration period are major constraints to ASMSE operators in procuring loan. The main factor affecting MB’s loan availability to agro-allied sub-sector was the type of enterprises embarked upon (fish farming, poultry production and piggery in that order) while food crops and tree crops enterprises were not favoured. The study concluded that sustained holistic government policies on microfinance would increase the ample scope for mobilizing micro savings and thus consequently increasing the productivity of ASMSE operators.