Challenges of Microfinance Access in Nigeria: Implications for Entrepreneurship Development

Ogujiuba Kanayo; Fadila Jumare; Stiegler Nancy

Authors

Ogujiuba Kanayo Research Division, National Institute for Legislative Studies, Abuja-Nigeria Department of Statistics and Population Studies University of Western Cape, Cape Town-South Africa
Fadila Jumare Research Division, National Institute for Legislative Studies, Abuja-Nigeria
Stiegler Nancy Department of Statistics and Population Studies University of Western Cape, Cape Town-South Africa

Abstract

Small and Medium Enterprises (SMEs) are increasingly being accepted as valuable platforms to create jobs and improve livelihoods. The Nigerian government has enacted favorable laws and regulations on contracts, leasing, and corporate tax to encourage the development of SMEs. Nonetheless, many entrepreneurs in Nigeria cannot access loans given the high levels of poverty. The paper argues that microenterprise finance cannot be financially viable because small loans are too costly to administer and the profits from such lending too meager to permit profitability. Based on content analysis of available literature, it is found that microfinance institutions have collapsed in Nigeria due to poor loan quality, default in loan repayment, high transaction costs, widespread delinquency, and management deficiencies. Given these challenges, the paper recommends savings by microfinance institutions and measures from successful initiatives from countries such as Indonesia and Bangladesh. These will enable microfinance institutions to be self-sustaining and to increase outreach.

DOI: 10.5901/mjss.2013.v4n6p611