Micro Finance in Nigeria: Problems and Prospects

Abstract

This paper set to provide an overview of microfinance in Nigeria and
examine its problems and prospects. The data collected form secondary
sources, were analysed descriptively. The microfinance scheme holds a lot of
prospects for the Nigerian economy as it is expected to empower of Low-
Income Earners, reduce poverty, generate employment, among others.
However, the paper observed that among the problems faced in the micro
finance industry are inadequate finance, high risk, heavy transaction cost,
mounting loan losses, low capacity and low technical skills on micro
financing. As a result of some of these problems, some micro finance
institutions in Nigeria have collapsed. Consequent upon the problems noted,
the following recommendations given, among others, are: the supervisory
authorities should enforce standards so as to address the issue of poor
management of funds meant for credit disbursement, the capital base of
micro finance institutions should be strengthened in order to mobilize
domestic savings and promote banking culture among low-income groups
and the issue of private participation should seriously be encouraged.