Effects Of Membership Homogeneity On The Performance Of Agricultural Micro-Credit Groups In Enugu State, Nigeria

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Effects Of Membership Homogeneity On The Performance Of Agricultural Micro-Credit Groups In Enugu State, Nigeria

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PROJECT TOPIC AND MATERIAL ON EFFECTS OF MEMBERSHIP HOMOGENEITY ON THE PERFORMANCE OF AGRICULTURAL MICRO-CREDIT GROUPS IN ENUGU STATE, NIGERIA

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  • Name: Effects Of Membership Homogeneity On The Performance Of Agricultural Micro-Credit Groups In Enugu State, Nigeria
  • Type: PDF and MS Word (DOC)
  • Size: [70 KB]
  • Length: [56] Pages

 

 

CHAPTER ONE

INTRODUCTION

1.1        Background Information

Agriculture in Nigeria, a developing economy, has suffered serious setbacks due to: under capitalization, poor credit disbursement procedures, inadequacy of credit institutions to cater for the needs of the teaming population of farmers and poor loan repayment possibilities among farmers (Ugo 1973, Oshontongun 1973).

Micro credit is about providing services to the poor who are traditionally not served by the conventional financial institutions (Upton, 1997). Credit agencies are frequently classified into two groups: formal and informal (Upton, 1997). Formal institutions include banks and co-operative credit unions, while the informal agencies include non-governmental organizations (NGOs), money lenders, friends, relatives and micro credit unions.

The formal financial system in Nigeria traditionally lend to medium and large entrepreneurs, which are judged to be creditworthy, and who can provide tangible collateral. They avoid doing business with the micro entrepreneurs and their micro enterprises because the associated cost and risk due to inability to provide collateral are considered to be relatively high (Anyanwu, 2004).

Informal credit institutions are characterized by flexible small operations and they operate mostly in a circumscribed area or a specific niche of the market. They tend to deliver personal services very close to the location of the borrower. They also tend to be non-bureaucratic and much more flexible in respect of loan purpose interest rates, collateral requirements, maturity periods and debt rescheduling (Ghatak and Guinnane, 1999).

Formal financial system in Nigeria despite the government intervention by providing a multiplicity of credit institutions over the years, have proven to be inefficient and costly in the provision of financial services to the micro entrepreneurs. However, several types of informal institutions have efficiently serviced a wide variety of micro credit entrepreneurs. Micro credit institutions are mainly, Self-Help-Group (SHGs) Rotating Savings and Credit Associations (ROSCAs) and Savings/Thrift Co-operative societies (Olomola, 2000).

Micro credit is one of the major tools used to extend credit with a view to alleviating poverty of many entrepreneurs in low-income countries. In an era of global economic liberalization, micro credit is widely viewed as an intervention that address important deficiencies of financial markets in terms of serving specific needs of the poor, by providing them with credit without collateral (Stigliz and Weiss, 1981). The provision of micro credit services improves the  latent capacity of  the poor for entrepreneurship, which enables them to be more self-reliant, increase in employment opportunities, enhance household income and create wealth.

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