THE IMPACT OF MICROFINANCE BANKING ON SMALL SCALE ENTERPRISES IN NIGERIA
CHAPTER ONE
INTRODUCTION
BACKGROUND OF STUDY
According to Ehigiamusoe, (2000), microfinance has been regarded as the effective strategy for human development. As a development tool, microfinance recognizes, that availability of capital on affordable terms is vital to efforts aimed at enhancing income generating capacity of the poor. The assumption is that the poor known what to do to improve their socio-economic condition and what is required is capital. It is however believed that the structure, operational procedures, and policies of the formal financial operators constrain the flow of capital is micro and medium scale enterprises. Demand for tangible collateral, extensive documentation and complex operational procedures, are often identified as the limiting features of the formal financial market. However, these constraints could be overcome by a measure of flexibility on the part of the banks.
Microfinance in principle regards, the existence of poverty arising from the denial of the poor of affordable financial services. In practice however, it attempts at dismantling these constraints. According to Ehigiamusoe (2000), the emergence of microfinance practice is regarded as a respond to the exclusion of the small entrepreneur from formal financial system. Microfinance service represents one of the most of effective tools for economic empowerment. The effectiveness of microcredit can be demonstrated thus;
A poor widow cultivates cassava, her output is constraints by the high cost of the hired labour and dwindling soil fertility. Her condition of poverty is sustained if she has no access to affordable credit facility. She could increase output with hired labour, purchase more cassava sticks for planting and fertilizers with increased output, she eventually breaks into the virtuous cycle of prosperity (Ehigiamusoe, 2000).
Accessing the impact of microfinance can be approached through an assessment of the social – economic relevance of its prime target-micro and medium scale enterprises. These enterprises are central to economic growth and poverty alleviation by providing job opportunities for a large number of persons over the years. Microfinance institutions in developing countries (Nigeria)  have delivered huge sum of money through an array of responsive micro financial products and enterprises development services.
Microfinance has aided he enhancement of small scale business and also avoids using of money lenders. An evaluation report of lift above poverty organizations (LAPO) in 1977 reveals that 94% of respondents reported increase in level of income, while  59.7% of respondents reported over 100% of such rise.
1.2    STATEMENT OF RESEARCH PROBLEM
    The objective of any business organization whether big or small is basically to make profit, to do so, the business organization has to put in some capital from where it can generate such profit. Small scale business organization cannot provide the whole of such capital which makes them dependent on microfinance banks. Over the years, unemployment has been a crucial problem in that, the level of poverty has increased thereby affecting the growth of the economy.
    In view of the above, the study seeks to provide answers to the following research questions;
Does microfinance bank have any impact on small scale business in Nigeria?
Does microfinance bank contributed to poverty alleviation in Nigeria?
Is there reduction in unemployment rate as a result of the activities of microfinance banks?
1.3    OBJECTIVES OF THE STUDY
    In developing countries like Nigeria, it is common to find small scale business operators all over the place. The purpose of this study is:
To examine the impact of microfinance banks on small scale business in Nigeria.
To find out if microfinance banks have contributed to poverty alleviation in Nigeria and how?
To find out the extent to which microfinance banks has been able to reduce unemployment in Nigeria.
1.4    RESEARCH HYPOTHESES
1.     Microfinance banks have impact on small scale business in Nigeria
2.     Microfinance banks contribute to poverty alleviation in Nigeria.
3.    The presence of microfinance banks bring about reduction in unemployment rate.   
1.5    SIGNIFICANCE OF THE STUDY
Though microfinance banks emerged as a result of the recapitalization policy of the Central Bank of Nigeria. The study will enlighten the small scale business operator about microfinance banks in Nigeria. It will also be of benefit to government because, it will reduce the problem of unemployment in the country. The need to carryout a research work on microfinance banks and its impact on small scale business in Nigeria will play an important role in the economic growth and development of Nigeria. It will also be relevant to the academia as it will provide relevant data for future research in this field. It will also be useful to the unemployment as it will guild them through the procedure of securing loans from microfinance banks.
1.6    LIMITATION OF THE STUDY
    The research encountered some constraints in the course of the study, these did not only constitute difficult to the study, but also affected the scope of the study. The following are the major constraints.
 Inadequacy of Material: This was a major constraints during the course of this research work. There were inadequate materials available for the topic, hence microfinance studies in this part of the world are very few coupled with poor record. Where material are available, accessibility becomes difficult, hence the consideration of one microfinance bank as a case study (LIFT MICROFINANCE BANK).
Finance Constraints: The researcher being a student could not secure enough fund to carry out the research work. The high cost of fares to materials destination and acquiring journals drastically affected the quick completion of this study.
Time: This constraints became significant as academic exercise coupled with the project research work constituted great huddle to the researcher. The time availability in the midst of the tight schedule was not enough to carryout a comprehensive analysis of all microfinance banks.
1.7    SCOPE OF THE STUDY
    The scope of the study will entail a detailed study on the contribution of microfinance banks, to the development of small scale business in Nigeria, West Africa and some advanced countries of the world i.e how it has affected the small scale business.
    It will also take an insight to see the involvement of the bank in the management of small scale business. And also to what extent it has alleviated poverty, provides employment and improves economic growth.