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CONTRIBUTIONS OF MICROFINANCE AGENCIES TO WOMEN

ENTREPRENEURS’ DEVELOPMENT IN AKURE, ONDO STATE

AKINSANYA, SOFIAT ADEOLA


EMT/12/0484

NOVEMBER, 2017
CONTRIBUTIONS OF MICROFINANCE AGENCIES TO WOMEN
ENTREPRENEURS’ DEVELOPMENT IN AKURE ONDO STATE,
NIGERIA.

AKINSANYA, SOFIAT ADEOLA


MATRIC NO: EMT/12/0484

A PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE


REQUIREMENTS FOR THE AWARD OF BACHELOR OF
TECHNOLOGY (B.Tech) DEGREE IN ENTREPRENEURSHIP

SUBMITTED

TO

A PROJECT SUBMITTED TO THE DEPARTMENTTHE DEPARTMENT OF


ENTREPRENEURSHIP MANAGEMENT TECHNOLOGY, SCHOOL OF
MANAGEMENT TECHNOLOGY
THE FEDERAL UNIVERSITY OF TECHNOLOGY, AKURE, ONDO STATE
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF
BACHELOR OF TECHNOLOGY (B. Tech) DEGREE IN ENTREPRENEURSHIP
MANAGEMENT TECHNOLOGY

NOVEMBERDECEMB

ER, 2017.
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CERTIFICATION

This is to certify that this research work titled “Contributions of Microfinance Agencies to Women

Entrepreneurs' Development in Akure Ondo State, Nigeria was conducted by AKINSANYA,

SOFIAT ADEOLA with matriculation number EMT/12/0484 of the Department of

Entrepreneurship Management Technology (EMT), School of Management Technology (SMAT),

the Federal University of Technology Akure (FUTA), Ondo State.

This project research is being submitted in partial fulfilment of the requirement for the award of

Bachelor of Technology (B.Tech) degree in Entrepreneurship Management Technology in the

Federal University of Technology Akure Ondo State, Nigeria.

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AKINSANYA, SOFIAT ADEOLA Date
EMT/12/0484

----------------------------------- -----------------------------------
MR. AYEDUN, T. A. Date
Supervisor

----------------------------------- -----------------------------------
DR. ASEKUNOWO, V. O. Date
Ag. Head, Department of Entrepreneurship

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DEDICATION

This project research is dedicated to Almighty God the most beneficent and most merciful for

giving me the grace and strength needed to complete this project.

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ACKNOWLEDGEMENT

I acknowledge the generosity and mercies of God throughout my five year stay in this institution

as nothing starts and end without his permission. I appreciate his ever flowing goodness and

countless mercies ever, I pray he continues to be with me throughout my entire duration on earth.

My sincere appreciation goes to my Supervisor, Mr. T.A. Ayedun, for his love, advice and support

throughout this project. God bless you for the time and resources you sacrificed for the success of

this project. I acknowledge my Head of Department, Dr. V.O. Asekunowo and my amiable

lecturers, Dr. A.D. Dada, Mr. W.K. Ladanu, Mr. E. Olowofeso, Dr. (Mrs.) O. Ehinmowo, Dr.

(Mrs.) H.O. Akinremi, Mrs. D.F. Oke, Dr. (Miss) Akinlade, Mrs. A.O. Ale, Dr. D.B. Ilori and to

the non-academic staff, Mrs. P. Oluwalaanu, Mrs. J.F. Duyilemi and Mr. O. Fasan for their

supports. God bless you all.

I express my profound gratitude to my parents Mr. and Mrs. Akinsanya, my siblings Abdul-salam

and Abdul-kabir for their unconditioned love, moral, spiritual and financial support. I could not

have made it this far without you all.

Finally, I wish to extend my sincere gratitude to my friends and all that has contributed to the

success of this project, Ubby, Taiwo, Bilqees, Tochy, Dewumi, Amina, Lawrence, Lolade,

Mayowa, Esan-Bola, Balikis, Toye. With a grateful heart, I say THANK YOU.

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TABLE OF CONTENTS
CERTIFICATION 2iii
DEDICATION 3iv
ACKNOWLEDGEMENT 4v
ABSTRACT ............................................................................................................................... 10xi
CHAPTER ONE: INTRODUCTION ..................................................................................... 111
1.1 Background to the Study.................................................................................................. 111
1.2 Statement of the Problem ................................................................................................. 144
1.3 Research Questions .......................................................................................................... 155
1.4 Aim and Objectives of the Study ..................................................................................... 166
1.5 Research Hypotheses ....................................................................................................... 166
1.6 Significance of the Study ................................................................................................. 166
1.7 Scope of the study ............................................................................................................ 177
1.8 Operational Definition of Terms ...................................................................................... 188
CHAPTER TWO: LITERATURE REVIEW ...................................................................... 2010
2.1 Conceptual Review ........................................................................................................ 2010
2.1.1 Concept of Microfinance ........................................................................................ 2010
2.1.2 Design of Microfinance .......................................................................................... 2313
2.1.3 The Economics of Microfinance .................................................................................. 2414
2.1.4 Structure of microfinance agencies in Nigeria ............................................................. 2515
2.1.4.1 The Formal Microfinance ................................................................................... 2616
2.1.5 Roles of Microfinance Agencies/Institutions ......................................................... 2819
2.1.5.1 Credit Services .................................................................................................. 2819
2.1.5.2 Enterprise development services........................................................................ 2919
2.1.5.3 Savings Mobilization....................................................................................... 2919
2.1.6 The Challenges of Microfinance Institutions ......................................................... 3121
2.1.7 Concept of Entrepreneurs ....................................................................................... 3222
2.1.8 Concept of Gender Entrepreneurship ..................................................................... 3222
2.1.9 Challenges and Obstacles Facing Women Development ....................................... 3424
2.1.10 Constraints to Women Entrepreneurship................................................................ 3525
2.2 Theoretical Review ........................................................................................................ 3727
2.2.1 Microfinance Theory .......................................................................................... 3828
2.2.2 Identity Empowerment Theory ........................................................................... 3828

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2.2.3 The Harvard Framework .......................................................................................... 3929
2.2.4 Williams’ Theoretical Model of Women’s Empowerment ...................................... 3929
2.2.5 Microfinance credit lending models ................................................................... 3929
2.3 Empirical Literature Review ............................................................................................... 4232
2.4 Summary and Gaps ........................................................................................................ 5242
CHAPTER THREE: METHODOLOGY ............................................................................ 5343
3.1 Research Design............................................................................................................. 5343
3.2 Study Area ..................................................................................................................... 5343
3.3 Population of the Study.................................................................................................. 5444
3.4 Sample Size and Sampling Technique........................................................................... 5444
3.4.1 Sample size................................................................................................................... 5444
3.4.2 Sampling Techniques ................................................................................................... 5545
3.5 Method of Data collection ............................................................................................. 5545
3.5.1 Primary Data ................................................................................................................ 5545
3.6 Research Variables......................................................................................................... 5646
3.7 Model Specification and Measurement of Variables ..................................................... 5646
3.8 Method of Data Analysis .................................................................................................... 5646
CHAPTER FOUR: RESULTS AND DISCUSSION ........................................................... 5747
4.1 ANALYSIS OF OBJECTIVES ..................................................................................... 5747
4.1.1 Analysis of Objective 1: To examine the level of relationship that exists between
microfinance agencies and women development in Akure Ondo State. ............................... 5747
4.1.2 Analysis of Objective 2: To examine the extent of access to loans on women
entrepreneurs’ development. ................................................................................................. 6151
4.1.3 Analysis of Objective 3: To find out the financial constraints militating against the
development of women entrepreneurs .................................................................................. 6354
4.2 TESTING OF HYPOTHESIS ....................................................................................... 6654
H01: There is no significant relationship between women entrepreneurs’ development and
microfinance activities. ......................................................................................................... 6755
H02: Access to loans has no significant effect on women entrepreneurship development ... 6856
4.3 Demographic Characteristics of Respondents ............................................................... 6957
4.3.1 Age distribution of respondents.............................................................................. 6957
4.3.2 Distribution of respondent by marital status........................................................... 7058
4.3.3 The Educational Level of Respondents .................................................................. 7258

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CHAPTER FIVE: SUMMARY, RECOMMENDATIONS AND CONCLUSION .......... 7564
REFERENCE .......................................................................................................................... 7867
APPENDIX 1 ........................................................................................................................... 8271

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LIST OF TABLES
Page
Table 2.1: Empirical Framework 50-51

Table 4.1: Frequency of Respondents access to loans 62

Table 4.2: Financial constraints militating against women development 62

Table 4.3: Pearson Correlation analysis of microfinance activities and women development 64

Table 4.4: Distribution of Respondents responses by microfinance group, purpose of

loan, supplementary services and years of operation 72

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LIST OF FIGURES

Page

Figure 2.1: Conceptual Framework 37

Figure 3.1: Map of Akure South 54

Figure 4.1: Level of relationship between MFAs and women development 59

Figure 4.2: Distribution of Respondents by Age 67

Figure 4.3: Distribution of Respondents by marital status 68

Figure 4.4: Distribution of Respondents by Academic Qualification 69

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ABSTRACT

This research investigated the contributions of microfinance agencies to women entrepreneur’s


development in Akure, Ondo State. The study examined the level of relationship between
microfinance activities and women development; examined the extent of access to loans on women
entrepreneurs’ development; identified the financial constraints militating against women
entrepreneurs’ development. The study employed survey research design and a sample size of 191
micro-entrepreneurs was purposively drawn from the number women micro-entrepreneurs in
Akure. The data for the study were obtained primarily from a well-structured questionnaire on one
hundred and ninety-one (191) respondents. The data obtained were analysed using both descriptive
and inferential statistical techniques. The descriptive statistics include frequency counts, standard
deviations, means and percentages; the inferential statistics used was regression analysis and
Pearson correlation which were used to test for hypotheses. The Pearson correlation result revealed
a positive correlation coefficient of (r = 0.232) between microfinance activities and women
entrepreneurs development. The result indicated that the p – value was 0.001 level of significance
at n=191, p < 0.05 implying that the model is significant thereby rejecting the null hypothesis that
microfinance activities has no significant effect on women entrepreneur’s development. From the
analysis of the data obtained from the field, it was observed that microfinance activities has
significant but weak relationship with women entrepreneurs’ development. Results from the
regression analysis reveals that access to loans has a positive influence on women development.
R=0.251, R2=0.063 or 6.3%. The R2 value of 6.3% revealed that 6.3% of the variation in women
development is explained by variation in access to loans. The study concluded that inadequate
funds management skills is a major financial factor militating against women development as they
are unable to effect loan accumulation. The result found that microfinance activities is very low
and therefore recommended that microfinance should increase their activities and participation
among women in Akure, Ondo State, Nigeria.

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CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Microfinance is one of the key tools to entrepreneurship development in the world especially in

developing countries, to fight poverty most especially among women (Esteve, 2004; Harris, 2009;

Mayoux, 2000; Sarumathi & Mohan, 2011). It is an undisputable fact that the contribution of

microfinance to entrepreneurship activities is increasing being recognized as a primary engine to

economic growth. Microfinance agencies support existing micro-entrepreneurs and potential

entrepreneurs by giving them financial services in form of credit and savings. The credit provided

by microfinance agencies helps increase adoption of new and sophisticated technology for

expanding the enterprise, improves income of the entrepreneurs and reduce poverty. Microfinance

institution aims to provide credit to the poor who have no access to commercial Banks. This

institution receives financial support from western donors, Non-Governmental Organizations

(NGO) or commercial banks who lends to microfinance institutions below market interest rates.

Entrepreneurs add value through the commercialization of new products, the creation of new jobs

and the building of new firms by combining existing resources with innovative ideas. Microfinance

plays important role in improving women decision making by contributing to economic activities

and encouraging women to initiate their own micro-enterprise for supporting their family and

making them financially and socially empowered (Mayoux, 1999).

Women are an integral part of the society and as such society cannot develop without their

contribution. Empowering women entails granting them their rights to education, health, job

opportunities, decision-making power, and eliminating wrong value systems and oppressive

beliefs in society (Zoynul & Fahmida, 2013). Determining women development has to do with

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increase in assets, their working capital, financial literacy, participation in the labor force and

decision-making processes which hence, reduces poverty and significantly enhance their

contribution to national income and the development of their countries as a whole. In order to

support the women in their attempts to vanquish poverty, several governments in Nigeria have

initiated a series of empowerment programmes. Some of these programs include Peoples’ Bank,

Family Economic Advancement Programme (FEAP), Better Life for Rural Women (BLRW) and

Poverty Alleviation Programme (PAP). Despite these programs, they have failed to address the

empowerment and poverty reduction among the Nigerian women (Awojobi, 2013).

Development and empowerment of women is one of the very important issue in developing

countries. As women constitute to the vital part of society, her status and participation in decision

making as well as economic activities is very low. In a record by the united nation for women, it

reported the followings , 53% of women work in vulnerable employment, women get 70-90% of

the men’s income in big countries; women represent 9% in the construction sector, 12% in

engineering, 15% in business and finally 24% in production. Putting resources into poor women’s

hands while promoting gender equality in the household and in society results in large

development payoffs. Microfinance has been promoted as a powerful tool to empower women

because of the link between gender and poverty. The United Nation (UN) State of World

Population 2008 report states that three-fifths of the world's billion poorest people are women and

girls, and the U.N. Development Program has estimated that women own just one percent of the

world's wealth. Accordingly, microfinance services tailored to assist the poor end up benefiting

women, expanding women’s opportunities in public works, agriculture, finance and other sectors

accelerate economic growth, helping to mitigate the effects of current and future financial crises.

(World Bank, 2011).

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Women micro-entrepreneurs are mostly engaged in “traditional” activities which have low

turnover. Traditional economic activities such as street food vendors, tailoring, table- tops markets

in front of their houses or on the road sides which sell an assortment of items such as vegetables,

candy and charcoal. Due to gender ideology, most of the women consider Micro-Small and

Medium Enterprises (MSMEs) initiatives as a supplementary activity to enable their families to

survive even if it is the primary source of household income. Women micro-entrepreneurs have

been constrained by limited access to financial services from formal financial institutions due to

the small business sizes and circumstances under which the women’s businesses operates

(Mbillinyi & Shundi, 2002).

Finnegan, Howarth and Richardson (2004), commented that women entrepreneurs suffer from

significant material constraints due to unhelpful attitudes arising from society’s negative attitudes

towards women in business. It has been acknowledged that in poor economies, women are more

likely to be constrained credit wise and also have limited access to the wage labour market

(Cartwright, Khandker, & Pitt 2006). The formal financial institutions regards micro-enterprise as

high- risk with insignificant collateral Thus, most microfinance agencies attempts to pay more

attention to female clients with the hope of empowering them (Mayoux, 2001). It is expected that

targeting microfinance programs towards women empower them in various aspects of their lives.

More so, women are considered to be good credit risks and thus are less likely to misuse any credit

they receive (Supriya, 2008).

Since the inception of microfinance agencies in Nigeria, governments sees micro lending as a cost

effective way of building an enterprise culture, enhancing domestic economic capacity, and

reducing both unemployment and transfer payments (Anaro,2006 & Evans,1996 ). The assumption

that microfinance reduces poverty and empowers women has been a contentious issue in the

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academic and the public domain. The validity of the claim that microcredit empowers women

through poverty reduction has been questioned (Schicks & Schmidt, 2010). The protagonists who

are supporting the assumption that loans from micro-finance institutions empower women are

(Asemelash, 2003; Heshemi et al., 1996; Holvoet, 2003; Hunt & Kasynathan, 2002; Montgomery

& Weiss 2005, and Taha, 2012). However, there are those with pessimistic views on the positive

correlation between microfinance and women’s empowerment (Creevet, 1994; Goetz & Gupta,

1996; Rahman & Mayoux, 1999; Vengroff & Creevet, 1994;). The purpose of this study is to

contribute to the growing literature on microfinance in developing countries. This research looked

at the contributions of microfinance agencies to the development of Women entrepreneurs in

Akure South LGA of Ondo state, Nigeria. It also looked to the effect savings and credit co-

operative societies and microfinance loans have on entrepreneurial success of women.

1.2 Statement of the Problem

Most of the businesses in developing countries lack access to basic financial services that would

help them manage their assets and generate income. For a number of years, women have been

marginalized by being denied opportunities for financial support for their businesses such due to

a lack of collateral and other reasons including deep rooted traditional cultural barriers and existing

social norms (Rwebangira,1996). The mobilization of women’s groups who guarantee each other

in order to access loans have raised interest in whether there is a close correlation between credit

and women development.

70% of the world’s poor are women and yet, traditionally, women are disadvantaged in accessing

credit and other financial services. Accessing loan from micro-credit agencies in Nigeria has been

one of the major constraint affecting the development of women in entrepreneurship. Since most

traditional financial systems require physical collateral worth more than the amount of loan

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requested. As a result of high interest rates from commercial banks, high rate of illiteracy, women

have always been facing financial problem for the development of their business (karuga, 2013).

According to Kato and Kratze (2013) women in developing countries are denied access to credit

facilities from conventional banks because they lack quality education. As a result of this, they do

not have the specific skills to manage their work. In addition, most conventional banks in Africa

deny women loans because of lack of collateral. It also argued that because of the profit motives

of some of the microfinance institutions they deny women who do not have the collateral for loans.

Lastly, Women entrepreneurs in developing countries lack training and entrepreneurial process is

a vital source of developing human capital as it plays a crucial role in providing learning

opportunity for individuals to improve their skills, attitudes and abilities (Brana, 2008; Cheston &

Kuhn, 2002 & Shane, 2003). Taking cognizance of the peculiar situations of most women in

developing countries in terms of poverty, low educational levels and other societal discriminations

(Porter & Nagarajan, 2005; Roomi & Parrot, 2008) as well as training which is a very important

factor for women entrepreneurs as it would provide the skills and experience needed for business

(Akanji, 2006; Cheston et al., 2002 & Kuzilwa, 2005).

1.3 Research Questions

i. Does microfinance activities contributes to women entrepreneurs’ development?

ii. What are the extent to which accessibility to loans influence women entrepreneurs

development?

iii. What are the financial constraints militating against the development of women

entrepreneurs in Akure Ondo State?

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1.4 Aim and Objectives of the Study

The major aim of this study was to examine the contributions of microfinance agencies to the

development of women entrepreneurs in Akure Ondo State with a major focus on Micro and Small

enterprise in Akure South LGA. Other specific objectives of the study were to:

i. examined the level of relationship between microfinance activities and women

development

ii. examined the extent of access to loans on women entrepreneurs’ development.

iii. found out the financial constraints militating against the development of women

entrepreneurs in Akure, Ondo State.

1.5 Research Hypotheses

The following research hypothesis was tested in this study;

Ho1: microfinance activities has no impact on women development

Ho2: access to loans has no significant impact on women entrepreneurs’ development

1.6 Significance of the Study

The study provided vital information on microfinance which may help regulators and policy

makers like Central Bank in formulating policies and establishing bill for microfinance sector and

advancing prudence in management of informal finance organizations and other microfinance set

ups. It will help finance engineers and consultants to understand vital factors when formulating

financial packages designated for persons with low incomes and women in general.

The study has highlighted the importance that entrepreneurship has brought to the country and

uncovered specific issues that women entrepreneurs face with particular emphasis on access to

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credit and strategies for improvement. It will also help new and growing women entrepreneurs to

know the constraints they are likely to face and how they can handle them.

Furthermore by identifying features of microfinance capital market intermediaries can be able to

design optimal investment channels for their clientele. NGO‟ s, capital ventures and donors to

micro credit enterprises might find this study useful in establishing policies and channels through

which concept can be applied by medium scale enterprises in order to enhance funds accountability

and effectiveness.

Lastly, given the limited knowledge in the same field, this study will be of great significance to

the researchers that seeks to increase their knowledge on the relationship between Microfinance

and women development

1.7 Scope of the study

This study covered the contribution of microfinance agencies to women development, focusing on

women micro-entrepreneurs in Akure, Ondo State. Akure is the capital of Ondo state. Akure has

an estimated population of approximately 484,798 (five hundred thousand) people in which

177,716 of the total population are female and 307082 are male (2006 census). The study also

looked to the effects and contributions Savings and Credit Co-Operative Societies (SACCOS) and

microfinance loans have on enterprise success, specifically for females as a way to combat the

struggle with poverty. At the outset of this research, the researcher was able to find out how

microfinance contributes to women development particularly in Akure South Local Government

Area (LGA) of Ondo state.

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1.8 Operational Definition of Terms

Microfinance: Microfinance is the provision of a broad range of financial services such as

deposits, loans, payment services, money transfer and insurance to poor and low income

households and their micro and small enterprises. Microfinance does not only cover financial

services but also non-financial assistance such as training and business advices.

Microfinance Institutions

A microfinance institution is an organization, engaged in extending micro credit loans and other

financial services to poor borrowers for income generating and self-employment activities. An

MFI is usually not a part of the formal banking industry or government. It is usually referred to as

a NGO (Non-Government Organization).

Microfinance Bank (MFB): this refers to any company licensed to carry on the business of

providing microfinance services such as savings, loans, domestic fund transfers and other financial

services that economically active poor, micro-enterprises and small and medium enterprises need

to conduct or expend their businesses.

Cooperative Society: According to the International Co-operative Alliance (ICA), a cooperative

society is an association of people that come together to pool resources together to engage in

business or economic activities for the purpose of improving their welfare.

Micro- credit: Disbursement of small or soft loans meant for rural development.

Micro-enterprises are defined as those enterprises employing between 1.-9 employees.

Small enterprises are those enterprises employing between 10-49 employees (ILO, 2003).

Entrepreneurship is defined as a process which involve discovery, evaluations and exploitation

of opportunities. Entrepreneurship can be regarded as self- employment of any sort. It is the

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process of designing a new business that is a star-up company offering products, process or

services. An entrepreneur is an individual that perceives a new business opportunity and makes

decision to exploit the opportunity in order to utilize resources and maximize profit.

Women Entrepreneurs: The concept of women entrepreneurship is defined as women productive

activities, particularly in industry, empower them economically and enable them to contribute in

overall development. Women entrepreneurs are women who think of a business enterprise initiate,

organize and combine the factors production operate the enterprise and undertake risks and handle

economic uncertainty involved in running a business enterprise.

Informal financial institutions: They are traditional microfinance institutions that provide access

to credits for rural and urban low-income earners. Example, rotating savings and credit association,

self-help groups, co-operative societies.

Microfinance policy: is a regulatory guidelines on micro credits that help to promote monetary

stability and sound financial system.

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CHAPTER TWO

LITERATURE REVIEW

The literature review focused on three main areas namely; conceptual, theoretical and empirical

review of literature. The researcher to found adequate definition of variables, characteristics of the

concepts. Relevant theories related to the variables under study were also reviewed based on their

origins and proponents. This chapter reviewed past empirical works by various scholars in line

with the variables of the study as well as the objectives of the study which would give a reader a

wider perspective on the contribution of micro-credit institutions to the lives of women

entrepreneurs.

2.1 Conceptual Review

This aspects examines the definition of the basic concepts and terms that are central to this research

as defined by scholars and stakeholders.

2.1.1 Concept of Microfinance

The concept of microfinance institutions and its operations emanates from the model of the

Grameen Bank in Bangladesh founded by the prestigious Nobel peace prizewinner who was

celebrated as the founder of the most successful microfinance institution in the world with the

highest number of registered members and borrowers and the highest effective repayments rate

(Kavitha & Ramachanddram, 2007). The founder of microfinance popularized the concept of

microfinance as he believed that “peace prevails only when hunger is quelled” (Shetty &

Veershekharappa, 2009). He started Grammeen Bank in 1976 in the outskirts of Chittagong

University campus in the village of Jobra, Bangladesh with only a meagre amount of $27 as loan

and made it a target to grant loans to the poorest of the poor. Microfinance has emerged as a

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fundamental part of the new development paradigm, described by the phrase “participation and

development.”

Microfinance is the act of providing whole range of financial services such as deposits, loans,

payment services, money transfers and insurance to poor and low-income households and their

micro-enterprises. The term microfinance does not only mean the extension of small loans to

disadvantaged people, it further includes different types of small products and financial services

such as saving, insurance, micro leasing. The term microfinance has its root in microcredit which

has been evolved in latest decades, it is considered to be one of the new tools used for poverty and

unemployment mitigation in various developed and developing countries. Despite the short

experience of microfinance institutions in this industry, it is believed that considerable social,

economic and political changes have been done to the women microfinance clients in the country.

Sehrawat (2011), defines microfinance as a financial service provided by financial institutions to

the poor which may include savings, credit, insurance, leasing, money transfer, equity transaction,

to meet their normal financial needs like life cycle, economic opportunity and emergency.

Armendariz and Labie (2011) defines microfinance as the practice of providing financial services

on a small scale to people who cannot access the usual banking services. They are usually small

loans given to clients on the low- income economic category who cannot acquire loans due to lack

of collateral.

Dhandapani (2009), microfinance as extension of small loans to the poor, especially women to

start their business, invest in self-employment works with aim to increase their income and

standard of living. Nagayya and Rao (2009), microfinance refers to entire range of financial and

non-financial services including skill acquisition and entrepreneurial development of poor

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From the various definitions given so far, it becomes clear that there is no universally acceptable

definitions of the term microfinance. This is due to the variation from country to country or region

to region with each definition being according to the economic circumstances that exists in various

economy.

Robinson (2001) asserted that microfinance schemes usually lend small short-term loans to very

poor micro entrepreneurs. Loan repayment is usually guaranteed by group members collectively

and access to future credit or loans is contingent on successful repayment. Hence peer monitoring

and the prospect of subsequent larger loans act as strong incentives for repayment. Offering

financial services to poor people in developing countries is expensive business. The cost is one of

the biggest reason traditional banks do not make small loan. The resources required for a small

loan is the same for big loan. MFI also have big personnel and administrative costs.

Literally, Microfinance Institutions (MFIs) are financial institutions that offer financial and non-

financial products and services to the poor active that would otherwise not have access to the

services from the formal financial institutions. Therefore, microfinance is the provision of financial

services to the poor who are traditionally not served by the conventional banks. These financial

services includes credit, savings, payment services and micro-leasing. The features that distinguish

microfinance from other forms of formal financial products and services are; smallness of loan

advanced and savings collected; absence of asset based collateral and simplicity of operations. The

microfinance users seek funds from MFIs and invest them into future opportunities in this way

they enhance their income level and also become self-employed instead of searching employment

opportunities somewhere else. For the purpose of this study, micro-credit, microfinance, small

loans and credit will be used interchangeably with respect to micro financial services.

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2.1.2 Design of Microfinance

In this study, the researcher intends to focus on two specific types of microfinance; savings and

credit co-operative societies and receipt of loans from a Microfinance Bank (MFB).

Savings and Credit Co-operative Societies (SACCOS) are widely seen to have potential to impact

on development and poverty reduction (Birchall, 2008). They make an important contribution to

sustain economic growth and to making markets function better for poor people such as women.

Co-operatives are one way of organizing a group for financial support mostly used more in rural

areas, they offer financial accessibility to those that do not have it (Ellis, 2007). In most developing

countries, rural areas are also the most impoverished and in need of credit opportunities. Co-

operatives promote savings responsibly, create access to credit, and encourage increased

community values. People involved form a loyal union, where each individual contributes

resources and is able to apply for loans from the group funds (Armendariz & Morduch, 2010).

SACCOS are a suitable organizational frame work for accelerated rural development and are

useful instruments for the mobilization and sensitization of rural women about agricultural

innovations and rural development (Okwoche, 1998). Women all over the world embrace the idea

of co-operative formation because they realize its importance in increasing their credit worthiness

and placing them in a position of strength to support income generating activities out of their

pooled resources. Okwoche (1998) observed that women co-operators are between 31 and 50 years

of age, implies that there is a predominance of middle aged women entrepreneurs.

The use of co-operatives has been extremely beneficial as it creates a sense of loyalty to the

community and defaults are therefore low (Ellis, 2007). Co-operatives also generally offer other

financial services, which could include educational classes and transportation services (Sizya,

2001). These services work towards breaking the poverty cycle and creating active participants in

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the economy. Loans from microfinance banks, on the other hand, are typically directed towards

individuals who can apply for a loan through a microfinance institution by following processes

similar to those of a regular banking institution. Randhawa and Gallardo (2003) found that

microfinance institutions were more prevalent in better-developed regions such as cities. The

differences between co-operatives and loans from microfinance banks is essential in understanding

what role they may play in the success of female entrepreneurs.

2.1.3 The Economics of Microfinance

Today, Yunus’s revolutionary idea of microfinance has spread worldwide and affects economies

of all types, yet some institutions remain hesitant to lend to people who have little to no collateral

to offer. Microfinance has thus prompted international research, which seeks to understand the

operations and impact of institutions that focus on lending to the poor. The high utility resulting

from loans encourages developing economies to focus their resources to the poor because it will

increase not only the utility of money for individuals, but also the overall production of the

economy (Armendariz & Morduch, 2010).

Additionally, Yunus argues that lending to the poor results in high repayment rates due to a greater

incentive to repay. In particular, Yunus rejects the traditional arguments that lack of collateral and

resources decrease a poor person’s ability and motivation to repay a loan (Ray, 1998).

Microfinance institutions (MFIs) found the cooperativeness to be essential in incentivizing

repayment. If people rely on a community, one person’s failure to repay a loan affects the entire

group, creating a social incentive to repay. In addition, some argue that because the poor have such

limited access to credit, their incentive to repay is actually much higher because defaulting results

in even less access to alternative credit (Ray, 1998). These theories validate lending small loans to

the poorest people. Co-operative efforts, when successfully implemented, also provide evidence

24
that lending to the poor is beneficial. Literature suggests that co-operatives, or group lending is an

extremely effective way to implement microfinance. Therefore, moneylenders are less likely to

see risk associated with these groups not only because there are multiple people to take

responsibility, but there is also the social incentive discussed earlier that increases repayment rates.

2.1.4 Structure of microfinance agencies in Nigeria

The structure of microfinance agencies in Nigeria comprises of formal and informal organizations

Microfinance was introduced in Nigeria in 2005 after a recommendation from the World Bank.

The informal associations that operate traditional microfinance in various forms and provide

savings and credit services to theirs members are found in all the rural communities and urban

centers in Nigeria (Otu, et al, 2003 cited in Anyawu 2004). For instance, in Yoruba land (Western

part of Nigeria) the informal microfinance arrangements are called “Esusu” and “Ajo”, while in

Igbo land (Eastern part of Nigeria) it is called “Etoto” and “Adashi” in Hausa land (Northern part

of Nigeria).

Formal microfinance was developed in Nigeria around 1981 as the activity of non-governmental

organizations such as Lift Above Poverty Organization (LAPO), Country Women Association of

Nigeria (COWAN), etc. whose major objectives center on community development. Microfinance

agencies were established to promote self-reliance, self-esteem and make financial services

accessible to large segment of the potentially productive Nigerian population which has little or

no access to financial services. Recently, there are many microfinance agencies operating within

state and local government. These operating units aims at enhancing gender disparity and

improving women’s access to financial services (Iheduru, 2002)

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2.1.4.1 The Formal Microfinance

In Nigeria, credit has been recognized as an essential tool for promoting micro and small

enterprises (MSEs) to achieve sustainable growth and development, financial empowerment of

rural areas, which invariably are the repository of the predominantly and active poor in the society

that constitute most of the micro-entrepreneurs (Olaitan, 2005). Government had in the past

initiated series of publicly financed micro-rural credit programmes and policies targeted to the

poor with the intention to enhance the flow of financial services to Nigeria’s rural areas (CBN,

2005). These governments’ programmes and initiatives are:

I. Small Scale Industries Credit Schemes (SCICS)

II. Agricultural Credit Guarantee Scheme Fund (ACGSF)

III. Nigerian Agricultural and Cooperative Bank (NACB)

IV. The Family Economic Advancement Programme (FEAP)

I. Nigeria Industrial Development Bank (NIDB)

Nigeria Industrial Development Bank (NIDB) was originally known as Investment Company of

Nigeria (ICON). It was constituted in 1964 as the successor to a large British owned investment

company of Nigeria. On inception, the bank was to provide credits to industrial enterprises

especially medium and large-scale businesses. it was a prominent national development finance

institution in Nigeria and was the major buyer and seller of the Lagos Stock Exchange.

Mandate:

To provide NIDB with a portion of about 20% of the total foreign exchange resources needed to

finance industrial projects and to facilitate NIDB’s external resource mobilization efforts.

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II. Small-Scale Industries Credit Scheme (SSICS)

In 1971, the Federal Military Government set up the small industries development program to

provide technical and financial support for the Small and Medium Scale Enterprises (SMEs), that

led to the creation of the Small Industries Credit Fund(SICF) which was formally launched as the

Small-Scale Industries Credit Scheme (SSICS) in the third national development plan 1975-1980.

III. Nigerian Agricultural and Co-operative Bank (NACB)

Nigerian Agricultural and Co-operative Bank (NACB) was established in 1973 to help in the

development of the economy through providing agricultural aids as well as assisting farmers and

co-operative societies. The Nigerian Agricultural and Co-operative Bank (NACB) is now known

as Nigerian Agricultural Co-operative and Rural Development Bank (NACRDB). NACRDB was

established in 2000 following the merger of Nigerian Agricultural and Co-operative Bank

(NACB), The Peoples Bank of Nigeria (PBN) and the Family Economic advancement Program

(FEAP).

IV. Bank of Industry (BOI)

Bank of Industry (BOI) is a product of the merger of three development financial institutions; the

Nigerian Bank for Commerce and Industry (NBCI), the Nigerian Industrial Development Bank

(NIDB) and the National Economic Reconstruction Fund (NERFUND). The merger was carried

out by the Federal executive council in January 20000 which targets an effective harmonization of

the resources of all three institutions for effective use in areas earmarked for industrial

development. As follow-up to the initial creation of BOI, President Olusegun Obasanjo formally

launched the new Bank of Industry on 17 May, 2002 which started operations with an initial capital

of 50billion.

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V. Agricultural Credit Guarantee Scheme Fund (ACGSF)

The Agricultural Credit Guarantee Scheme Fund (ACGSF) was established by Decree No.20 of

1977 and started operations in April, 1978. Its original share capital and paid p capita; were N100

million and N85.6 million respectively. The Federal Government holds 60% and CBN holds 40%

of the shares. In order to reverse the declining trend several innovations and products were

introduced under the scheme such as: The self- help group linkage banking, the trust fund model

and interest draw bank.

VI. National Economic Reconstruction Fund (NERFUND)

The National Economic Reconstruction Fund (NERFUND) was established by Decree No. 2 of

1989 to act as a catalyst towards the stimulation of the rapid rise of real production enterprises in

the country. NERFUND was specifically mandated to provide long/medium term loans to

entrepreneurs through commercial/merchant banks for industrial growth of Nigeria. For the

delivery of these services, the institution focused on its vision, mission and mandate as stipulated

by its decree. The grand objectives are to increase the quantum of goods and services available for

local consumption and export, provide needed employment, expand our production base and add

value to the economy.

2.1.5 Roles of Microfinance Agencies/Institutions

2.1.5.1 Credit Services

Evidences from literature show that adequate credit aids entrepreneurship performance (Gatewood

et al., 2004; Kuzilwa, 2005; Lakwo, 2007; Martin, 1999; Ojo, 2009; Peter, 2001). The result of

such credit assistance to entrepreneurs, especially women, is often seen in improved income,

28
output, investment, employment and welfare of the entrepreneurs (Kuzilwa, 2005; Lakwo, 2007;

Martin, 1999; Peter, 2001).

2.1.5.2 Enterprise development services

MFIs provides cost efficient microfinance coupled with knowledge and information services that

raise human capacity and organizational capability and create open access to markets resulting in

more productive loans. MFIs provide skill development services, business training, marketing and

technology services to their clients based on their occupation which helps them use their resources

more productively.

2.1.5.3 Savings Mobilization

In the past, microfinance focused almost exclusively on credit; savings were the "forgotten half"

of financial intermediation. Today savings mobilization is seen as a major force in microfinance.

The importance of savings mobilization has been highlighted in several papers in the context of

microfinance. Few analyses have been shaped in order to take an in-depth look at the savings

mobilization strategies, which are employed by various institutions and are then compared to the

results (Wisniwski, 1999). Deficiency of savings facilities creates problems at three levels: at the

individual level, at the level of the financial institution; and at the level of the national economy.

At the individual level, the lack of appropriate institutional savings facilities forces the individual

to rely upon in-kind savings, such as the savings in the form of gold, animals or raw materials, or

upon informal microfinance approaches such as Rotating Savings and Credit Associations

(ROSCAs), Self-Help Groups (SHGs), Accumulating Credit and Savings Associations (ASCAs),

direct borrowing from friends and relations or money-keepers. These alternative informal savings

facilities do not guarantee the combination of security of funds, ready access or liquidity, positive

real return and convenience, which are the basic requirements or necessity of a depositor.

29
The individual’s loan is designed for clients who have specific needs beyond the group lending

model. There are usually restrictions regarding what the money should be used for. Micro savings

is a possibility to save money without minimum balance, it allows people to retain money for

future use or for unexpected costs. Micro insurance gives the entrepreneurs the chance to focus

more on their core business which drastically reduces the risk affecting their property, health and

working possibilities. Micro leasing enables entrepreneurs of small business who cannot afford to

buy at full cost can instead lease equipment, agricultural machinery or vehicles. Money transfer is

another microfinance product, a service for transferring money, mainly overseas to family or

friends. Money transfer without opening current accounts are performed by a number of

commercial banks through international money transfer systems such as Western Union and

money grams.

The non-traditional formalized microfinance Institutions (MFIs) are operating side by side with

the informal services. The financial services provided by the MFIs in Nigeria includes savings,

credit and insurance facilities. The stated objectives of the MFIs obtained through the survey

exercise as summarized as:

i. To improve the socio-economic conditions of women, especially those in rural areas

through the provision of loan assistance, skills acquisition and financial literacy.

ii. To build community capacities for wealth creation among enterprising poor people and to

promote sustainable livelihood by strengthening rural responsive banking methodology.

iii. To eradicate poverty through the provision of microfinance and skill acquisition

development for income generation (Simon, 2009)

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2.1.6 The Challenges of Microfinance Institutions

Literature reviewed identified several challenges in microfinance which are as follows: The

challenges are on the part of needy people and microfinance institutions. Concerning needy people;

they take money from the informal money lenders at high rate of interest, due to charging of high

rate of interest they cannot return their debts in proper time, there is a lack of knowledge and

insufficient & improper information. This situation is not limited up to only rural area but also

belongs to urban area. While on the part of Microfinance Institutions the problem of high cost in

services, recovery problems, lack of effective guidelines are the major challenges (Articlesbase,

2011).

Ogbho and Nwachukwu, (2008) highlighted some other challenges militating against microfinance

institutions which are as follows:

i. Non-productive loans and procedural delays for productive loans: Since most of the poor and

needy are illiterates and prefer loans for consumption rather than productive purposes,

majorly the poor find it hard to get loans sanctioned for taking up economic activities, even

if they want to. The borrowers are asked to furnish some documents and collateral security

against loan sanctioned, contrary to the directives of the government.

ii. Inflexibility and delay: The rigid systems and procedures for sanctioning loans and

disbursing them to the beneficiaries result in a lot of delay in time for the borrowers which

de-motivate them.

iii. Social obligation, not a business opportunity: They believed that microfinance has been seen

as a social obligation rather than a potential business opportunity.

iv. Lack of training: In most cases, it has been found that members of a group take up a certain

economic activities for their substance which are not preceded by relevant training.

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2.1.7 Concept of Entrepreneurs

The word entrepreneur originated from the French word “Entreprendre”, and the German verb

“Untunehmen” both of which means to undertake (Afonya, 1999). In oxford dictionary an

entrepreneur is defined as one who organized, manages and assumes the risk of a business

enterprises. A thorough understanding of how SMEs grow is an important issue because, according

to Berger and Udell (1998) and Radovic (2007), small and medium-sized enterprises provide the

engine for economic growth for many countries. Nongovernmental organizations around the world

are now creating and implementing projects to encourage entrepreneurship as a pathway out of

poverty.

2.1.8 Concept of Gender Entrepreneurship

According to United Nation Industrial Development Organization (2001) the concept of women

entrepreneurship is defined as women productive activities, particularly in industry, empower them

economically and enable them to contribute in overall development. There is a strong business

case for promoting women’s economic development, entrepreneurship and enterprise. As a result

of gender inequalities, women remain to some degree in all parts of the globe-untapped economic

resources and underutilized economic assets (Landes, 2003). Many projects specifically target

women in third world countries (Radovic, 2007).

According to Ong (2008), in 2006, the International Finance Corporation (IFC) made its first line

credit dedicated to women by providing funding to Nigeria to help ease access to credit. IFC (2007)

supported Ong’s statement by showing that IFC and World Bank Group activities include the

launch of women’s banking programs in developing countries. The World Bank Group shows that

women often benefit more than men from business enabling environment reforms as their

businesses tend to have more problems. To address this issue, the gender and growth assessment

32
tool was developed in Uganda, Kenya, Tanzania and Ghana. The World Bank Group started the

Gender Entrepreneurship Markets. Gender Entrepreneurship Markets (GEM) aim to help better

leverage the untapped potential of women in the emerging markets. Its activities are structured

around three main goals namely; increasing access to finance for women, adding value to IFC

investment projects and addressing gender barriers in the business-enabling environment.

Examples of countries benefiting from Gender Entrepreneurial Monitor include Guatemala,

Pangaea, Mexico and Nigeria (IFC, 2007).

Gender difference still exist since in rural areas and sub urban areas in Africa and some parts of

the world, culture and values emphasizes women's role to be in the kitchen and producing children

and men's role is to work hard to feed, cloth, provide home and improve the standard of living of

their family. Males do not help with household chores whereas with western culture and values

both men and women work at the same time help each other with household chores and make

effective decisions to better their lives. This is because western women are empowered both

financially and in all aspect of their lives. Women are normally not involved in decision making,

especially, women who are illiterate or semi-literates and financially unstable.

Once women are able to access microloans, it bridges the gap between the women and their male

counterparts as they are able to take part in decision making in the communities in which they live.

In the realm of self-confidence and self-esteem, the feedback from the International Fund for

Agricultural Development (IFAD) for bridging gender difference has been very positive.

Microfinance has gone a long way in empowering women. In order to achieve continuous benefit

and also sustainability in microfinance as well as empowering women, there is a need to innovate

various products in microfinance to eliminate bottlenecks for ordinary women to access credit to

be empowered more.

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2.1.9 Challenges and Obstacles Facing Women Development

Literature reviewed identified several challenges in microfinance which are as follows: The

challenges are on the part of needy people and microfinance institutions. Concerning needy people;

they take money from the informal money lenders at high rate of interest, due to charging of high

rate of interest they cannot return their debts in proper time, there is a lack of knowledge and

insufficient & improper information. This situation is not limited up to only rural area but also

belongs to urban area. While on the part of Microfinance Institutions the problem of high cost in

services, recovery problems, lack of effective guidelines are the major challenges (Articlesbase,

2011).

Many challenges have been reported in different studies conducted by the Social Fund for

Development and Other Gender Studies. The researcher further adds his own point of view to these

challenges. The major challenges can be illustrated in the following points:

i. The existence of very conservative lending practices which hinders the possibility of

women to obtain loans and contribute to the improvement of their household standards of

living.

ii. The demand for collaterals and guarantees for loans extension hampers the development

of the home based conventional activities and restrict the growth of business.

iii. Improper use of group approach to support women empowerment economically and

socially results into the loss of the opportunity to more social change over women.

iv. The religious attitude towards conventional lending limits the possibility of women to

apply for loans from microfinance institutions.

v. The negative perceptions of the society’s members especially in northern and middle cities

against women who want to start their own businesses restrict and demotivate them to

34
apply for loans. The lacks of marketing skills, knowledge about the market and marketing

activities lead to losing the amount invested in the enterprise.

vi. Absence of proper technical training and support to women making them rely mainly on

their relatives or experts in the field.

vii. The extension of very small loans does not really serve the purpose of the women clients

especially if it needs long period of time to graduate from one loan to another.

viii. The very high interest rate creates fear in women regarding the ability to repay it back

which lead to not applying for the loan.

ix. The graduation of loan level from one to other is very slow.

2.1.10 Constraints to Women Entrepreneurship

The entrepreneurs of micro and small enterprise (MSEs) not only create income and employment,

but they also generate wealth and contribute to the welfare of a Nation’s population in the long

run. MSEs in developing countries are however confronted with several drawbacks and challenges

that they have to overcome in order to operate successfully. Major obstacles include access to

finance (Arthur, 2003), legal constraints and lack of security and collateral. In order to strengthen

the position of MSEs, both financial and non-financial constraints, need to be addressed if the

entrepreneurs are to improve their performance and hence contribute more meaningfully to society.

According to UNIDO (2003), constraints related to women development include: access to formal

training, lack of skills and managerial expertise, lack of formal schooling, limited access to

property rights, limited access to credit, excessive government regulations, lack of information on

prices, markets and viability of the products and lastly, fewer market opportunities due, for

instance, to non-compliance to international standards.

35
However, women entrepreneurs are far from a homogeneous group. Qualitative research

descriptions of women who own micro as opposed to small or growth-oriented enterprises suggest

at least three distinctive profiles (UDEC, 2002; Richardson et al., 2004).

I. Women who operate in the micro-enterprise sector tend to have lower education, are less

formal, have little prior work experience, and are initially driven into self-employment by

economic necessity.

II. Women who operate small enterprises (with more than five employees) tend to be better

educated (at least the secondary or diploma level credentials), are more likely to have had

previous management experience or prior enterprises, are likely married to husbands who

support their entrepreneurial undertakings (often lending them the start-up capital for their

enterprises), and in many cases grew up in entrepreneurial families where they were

exposed to business from an early age. This means that their level of exposure to

entrepreneurial skills, business dealings and networks, as well as self-confidence, is much

greater than for the micro-enterprise group.

III. Women with medium and large enterprises are more likely to have grown up in an

entrepreneurial family; to be university educated and travelled; have experience working

in a large corporation or a previous venture; to be married to a supportive and successful

husband, and have munificent networks. Thus, they have more of the assets and resources

necessary to start and grow businesses. Indeed, overall it can be seen that women face many

obstacles and constraints (Richardson, Howarth & Finnegan, 2004)

36
MICROFINANCE AGENCIES

Microfinance Activities

WOMEN
Access to Loans DEVELOPMENT

Financial constraints

Figure 2.1: The Conceptual Framework


Source: Researcher’s Conceptual Model, (2017)

2.2 Theoretical Review

According to Kato and Kratze (2013) women in developing countries are denied access to credit

facilities from conventional banks because they lack quality education. So also, conventional

banks in Africa do deny women loans because of lack of collateral. It also argued that because of

the profit motives of some of the micro-finance institutions they deny women who do not have the

collateral for loans. In the 1990s, micro-finance institutions intensified their patronage women

clients because of the insinuation that women are prudent with their resources and they hardly

default in loan repayment compared to the men. Furthermore, the United Nations (UN) in 2005

initiated the international year for micro-credit for the promoting of financial inclusion for woman

(Awojobi, 2013). This aspect looks at the various relevant theories of entrepreneurship. The basic

theoretical frame work of this study is the significance of microfinance to women entrepreneurial

development.

37
2.2.1 Microfinance Theory

The first wave of theoretical work on microfinance formulated by Greg Fischer and Maitreesh

Ghatak focused exclusively on joint liability. The term joint liability can be interpreted in several

ways which can be lumped under two categories. First, under explicit joint liability, when one

borrower cannot repay her loan, group members are contractually required to repay in her stead.

Such repayments can be enforced through the threat of common punishment, typically the denial

of future credit to all members of the defaulting group or by drawing on a group savings fund that

servers as collateral. Second, the perception of joint liability can be implicit, that is, borrowers

believe that if a group member defaults, the whole group will become ineligible for future loans

even if the lending contact does not specify this punishment. One form in which this can happen

is if the microfinance organization itself chooses to fold its operations when faced with

delinquency.

2.2.2 Identity Empowerment Theory

Under this theory, women who are empowered can be able to commit with a meaningful nature.

In addition, they can undertake activities that are both effective and goal-oriented. At the same

time, the identity empowerment theory assumes that an empowered woman is able to comprehend

strengths and weaknesses associated with her past and present life while coping with relationship

conflicts (Boraian, 2008). He argued that this theory delineates different levels through which

women must participate before getting empowered. At therapeutic or manipulators level, a lot of

importance is placed on mass campaigns such as those targeted at improving women literacy

levels. The second level is where participation takes a token form. At this level women are

introduced into income generating program. Here, there is a lot of information exchange,

collaboration and consultations.

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2.2.3 The Harvard Framework

This theory recognizes four gender equality levels. These are: access, welfare, participation and

control. Under welfare, the theory states that women are not only supposed to receive material

benefits but also take part in development efforts. In the access level, women need to access credit,

land, wage employment and educational opportunities. Participation requires women to take part

and include men in the making of decisions both at the family and public level. Control level is

the ultimate where women who are empowered can take an active role in all developmental affairs

(Boraian, 2008)

2.2.4 Williams’ Theoretical Model of Women’s Empowerment

A theoretical model of women’s empowerment was developed by Williams (2005) in rural

Bangladesh. For this purpose he used the work of Hashemi and Schuler (1993) and Kabeer (1999),

which gave important insights for the development of model. Kabeer (1999) identified three main

elements of empowerment, which are agency, resources and achievements. The economic, human

and social resources are supposed to be preconditions for empowerment and “exercise of power,

or agency, in the presence of resources is the process of empowerment”. The outcomes are gained

in the form of achievements, by combining resources and agency. The casual sequence of

England’s (2000) model involves economic resources and norms by others and these preconditions

interactively affect the use of power and also directly affect the achievements (Afzal 2009).

2.2.5 Microfinance credit lending models

There are various categories of microfinance credit lending models as discussed below:

2.2.5.1 Group lending model

This is one of the most novel approaches of lending small amount of money to a large number of

clients who cannot offer collateral. Its basic philosophy lies in the fact that short coming and

39
weakness at the individual level are overcome by the collective responsibility and security afforded

by the formation of group of such individuals.

2.2.5.2 Individual lending model

This is a credit lending model where loans are given directly to the borrower by the microfinance

agency. It does not include the formation of groups, or generating peer pressure to ensure

repayment. This model does not need any group to formulate policies guiding microfinance

lending as micro loan is provided directly to the individual (Bank, 2014).

2.2.5.3 Saving and Credit Cooperative Societies Model

Saving and credit cooperative societies are most common financial cooperatives in both

developing and developed countries. The major purpose/objective is to provide small loans to poor

farmers or small entrepreneurs. In this model borrower must first be a shareholder of the society.

It is unique member driven, self-help financial institution. Members have a common bond and

membership is open to all who belong to the group, regardless of race, religion or colour.

2.2.5.4 Rotating Savings and Credit Associations Model

These are formed when a group of people come together to make regular cyclical contributions to

a common fund, which is then given as a lump sum to one member of the group in each cycle

(Bank, 2000). According to Harper (2002), this model is a very common form of savings and

credit. He states that the members of the group are usually neighbours and friends, and the group

provides an opportunity for social interaction and are very popular with women. They are also

called merry-go rounds or Self-Help Groups (Fisher & Sriram, 2002).

2.2.5.5 Village banking model

These are community based credit and saving association. Typically consists of 25 to 50 low

income individuals who seek to improve their lives through self-employment activities. Initial loan

40
capital for the village bank may come from an external source, but the members themselves run

the Bank; choose their members, elect their own leaders, establish their own by-laws, distribute

loans to individuals and collect payments and services (Grameen Bank, 2000). The loans are

backed by moral collateral; the promise that the group stands behind each loan (Global

Development Research Centre, 2005).

2.2.5.6 Grameen model

Emerged from the poor focused grass roots institutions; Grameen Bank was started by Mohammed

Yunnus in Bangladesh and adopted the following methodology: A bank unit is set up with a field

Manager and a number of bank workers; group of five prospective borrowers formed, in the first

stage, only two of them are eligible for and receive loan; there is a substantial group pressure and

in this sense collective responsibility of the group serves as a collateral on the loan.

2.2.5.7 Akhuwat Microfinance Model

The Akhuwat microfinance model is a unique model whose inspiration stems from the concept

that Muslims are brothers, and shall help each other. The model is based on the concept of

community solidarity where services are offered through places like mosques and churches, the

most visited places for members of the community. Akhuwat provides individual or family loans

without collateral on the basis of qard hasan. Social collateral where the community guarantees

the borrower, is the basis for extending financing under this model. However, to cover the

management cost, Akhuwat secures funds from civil society along with borrowers contributing to

the fund. Borrowers’ contribution to the fund is purely voluntarily. The community brotherhood

philosophy encourages borrowers to contributes, indirectly inducing them to save. This

contribution fund along with some donation is used to cover the administration cost.

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2.3 Empirical Literature Review

Microfinance when properly positioned and implemented leads to accelerated growth of

entrepreneurial skills evidence abounds in various empirical literature in support of this statement.

Mayoux (2000) argues that to maximize the contribution of microfinance to women development

requires equity in access to all micro financing.

A study was conducted by Nader (2008) by testing a hypothesis; “microcredit is positively linked

to women's socio-economic wellbeing in Cairo”. She argued that microcredit has become

imperative to alleviate poverty and to improve families’ wellbeing and the results also confirmed

that microcredit is strongly linked with children's education, income and assets. So it also provides

support to the topic that microfinance contributes to women development, especially their

inclination towards family wellbeing and children education.

A study was conducted in Bangladesh to identify the factors that influence women's empowerment

as a microcredit borrower, as it diverted researchers’ attention and they give importance to it since

its inception in mid-1970s, Yunus identified that “age, education levels of women and levels of

income are significant factors that influence women empowerment”. This study also confirms that

although MSFI has impact on women’s lives but there are other factors as well that are associated

to women that affect their decision making ability and some of these will be examined in present

study.

The results of another study conducted by Noreen (2011) showed that “women empowerment is

considerably influenced by age, education of husband, father inherited assets, marital status,

number of sons alive and microfinance”. Moreover it was also found that when loans were used

by females, it resulted in better outcomes as compared to where loans were used by male family

members. It was proposed that education facilities and family protection should be provided to get

42
better outcomes, so these suggestions can used for future considerations. But in contrast to it, the

findings of a study conducted by Jayaweera (2010), in context of education and empowerment in

Asia, revealed that because of economic and social constraints that prevail in society education

has not been able to confront social class differentiation that increases gender inequality in the

family, labor market and society. The relationship between education and empowerment has

nuances that are revealed in the contradictions in macro data and in the more insightful studies of

gender inequality in qualitative studies.

According to Ana (2007), the challenges of microfinance banking in Nigeria can be categorized

into the following: lack of awareness of the existence of microfinance institutions, lack of trust by

the people themselves who believe that Microfinance Banks are just like the unregulated financial

houses; the low literacy level of micro entrepreneurs; preference for gifts by the poor people rather

than economic empowerment; inability of the microfinance banks to attract investors; insufficient

support from government and related stakeholders; competition rather than cooperation from the

deposit money Banks and lack of sufficient manpower.

Kabeer (1999) who reflects on the ability of a woman to make strategic life choices when she did

not have the opportunity to do so before. Her paper describes the three interrelated indivisible

dimensions of women empowerment namely resources, agency and achievements which are vital

in the process of empowering women. Further the idea of choice that a woman can now exercise

is further qualified by referring to the condition of choice, its content and consequences. Hence

an attempt at understanding the woman at the individual level is sought here.

Another equally interesting research tries to explain women empowerment as a process is by

Mayoux (2009). The inter linkages as identified by her is explained as a series of “virtuous

43
spirals”. In her work she explains that when a woman gets access to the finance, she can either

start her own economic activity or invest in existing activities. This can directly increase her

income and bring about potential increase in her assets. Alternatively, she could use the finance

for her household well-being such as better food for the family or better education for her children,

which results in increasing her status in her family. A combination of women’s increased

economic activity and increased decision making in the household over a period of time could

make her socially and politically active. She could thereby be a positive contributor to change in

society. Hence from individual empowerment through micro finance it is potentially possible that

she make make significant contributions by increasing her visibility as agents of economic growth

and economic actors in policy decisions.

Contribution of MFIs to the development of small enterprises in Dar-es Salaam urged that the

overall performance of MFIs in Tanzania is poor and only few of them have clear objectives, or

strong organization structure. Also lack participatory ownership and many are donors driven. Their

operational performance demonstrates low loan repayment rates and their capital structures are

dependent on donor or government funding (Kolongo, 2010)

However, Johnson (2004) states that having women as key participants in microfinance projects

does not automatically lead to empowerment, sometimes negative impacts can be witnessed. She

refers to increased workloads, increased domestic violence and abuse. This leads her to ask a

crucial question of whether targeting women is just an efficient way of getting credit into the

household, since women are more likely than men to be available in the home, attend meetings, be

manageable by field staff and take repayment more seriously, even if they do not invest or control

the loan themselves? Or on the other hand, if such targeting is fully justified on the grounds of

enhancing gender equity. She claims the answer is probably somewhere between the two

44
alternatives. She argues that MFIs must analyses both the positive and negative impacts their

interventions are having on women, and that MFIs need to work with men to help pave the way

for a change in attitudes to women’s enhance contribution to the household.

Littlefield, Murduch and Hashemi (2003) state that access to MFIs can empower women to become

more confident, more assertive, more likely to take part in family and community decisions and

better able to confront gender inequities. However, they also state that just because women are

clients of MFIs does not mean they will automatically become empowered.

Mlowasa (2010) in his study on role of MFIs in improving the economic status of women in

Tanzania urged that: MFIs provides small loans to their clients, creates employment opportunities

and capacity building to borrowers by offering different skills such as use of loans,

entrepreneurship and managerial skills. Also the Government of United Republic of Tanzania

(URT) initiate a special Fund called JK Fund to meet the challenge of poor capital base for small

entrepreneurs and hence building the national economy.

According to Kuzilwa (2005) in his study on the role of credit for small business success, a study

of the National Entrepreneurship Development Fund in Tanzania urged that there are several

factors that influence the success of entrepreneurs. Among them is the micro-credit financing,

which significantly contribute to the success of entrepreneurs. Chami (2010) disclosed that

Microfinance Institutions (including donor and Government programs and schemes) have been in

existence even before the financial sector reform, but they have remained weak due to a number

of factors. Including the following: NGOs providing microfinance services have continued to

depend on donor funds for their operations instead of building their own internal capacity; NGOs

45
and other microfinance schemes operate under different laws which render it difficult to monitor

them and develop common standards.

Rao, Venakatachalam and Joshi (2012), studied women micro-entrepreneurs in India. The study

used a questionnaire to identify the challenges faced by women entrepreneurs in Coastal

Karnataka, India. The women entrepreneurs in the study were classified into four categories of

success based on the profit generated. The results indicated that success of women enterprises

depends on the formal education and the training received. Most the women entrepreneurs

surveyed were married women who feel confident in running and expanding the business with the

support from the family members. The work-life balance was not given priority as the challenge

in establishing or diversifying the business. The important challenges faced by women

entrepreneurs in establishing and growing the business were access to finance, finding the skilled

labor and increased competition. Women entrepreneurs also rated the assistance in business

planning as a crucial factor for the success of any business growth and expansion. The challenges

faced by women entrepreneurs need to be addressed by the educational institutions especially in

terms of business planning and inculcation of managerial skills.

Moreover, Sizya (2001) suggests co-operatives facilitate self-employment through member owned

and operated industrial enterprises. He introduces the idea that working as a co-operative also

creates business skills required for entrepreneurial activities, which cannot be attained solely

through receiving a microfinance loan. On the other hand, Madajewicz (1999) and others argue

the costs to the group may be greater than the overall benefits. While the cost of record keeping

normally falls to the banks, within group lending it falls directly to the co-operative. This creates

an extra cost for members, one that may eventually become more burdensome than helpful.

46
A study by Carter and Cannon (1992) on women has also revealed that women have problems

raising start-up for business than men and that women encounter credibility problems when dealing

with bankers. Similarly, the ‘Women Entrepreneurs’ summit hosted by the Organization for

Economic Cooperation and Development (OECD) held in 1997, accessibility to credit facilities

was raised as a problem for the promotion of women entrepreneurship and business advancement.

Thus, supplying credits to small and micro-enterprises is important for the reasons that: First, it

has to do with market imperfection where banks do not favour lending to small enterprises. In

offering credit to small enterprises, market imperfection will thus be minimized since banks will

now favour lending to small enterprises especially, women in the promotion of gender equity

(Fosu-Mensah, 2003). Again, they favour the development of private sector, the promotion of

women and the implementation of community development by private initiative and they help to

reduce poverty and contribute to a fairer income distribution. In a workshop held in Dares salaam,

1997, the participants observed that many women suffer human rights abuse because of their

economic weakness. Ms Nambuo added that it is often a product of their comparative lack of

educational opportunities so reinforcing their women’s rights might include challenging traditions,

ensuring that education is available, providing legal help and making business capital available

(Commonwealth report, 2001). Increasing evidence shows that not only women are

overrepresented among the poorest people but are also more likely than men to spend their incomes

on the welfare of children and dependents. Therefore, poverty reduction programmes which target

women are likely to be more effective.

Armendariz and Morduch (2010) point out a large difference between group lending and individual

lending. They explain that micro lenders that focus on individuals typically grant loans to

borrowers that are better off to begin with. They typically target those with slightly more collateral

47
in order to take on less risk. Moreover, individual micro lenders are found to have fewer female

clients due largely to the fact that women are typically less financially well off than men. This

suggests that women would be better off with access to group lending or co-operative societies.

Observation and empirical research finding is that few women are in the formal sector

employment. On the contrary, many women are absorbed in the informal sector employment and

some research findings state that about 91% of Ghanaian women are self-employed ((Fosu-

Mensah, 2003). The attractiveness of the informal sector is due to its flexible entry requirements,

attitudes and cultural norms. They do not need to produce any educational certificate and working

hours are flexible. It has again revealed that many women find it difficult to get their enterprises

sustained and besides, many who have the potential to start such businesses find it difficult to

access credit (UN report 1998). Many occasions they have to rely on money-lenders, pawn brokers,

and credit associations, friends, relatives, suppliers and shopkeepers for a start-up. While these

avenues offer flexibility of access, repayment schedules can be costly and discriminatory. Very

often borrowers are unable to pay back debts and end-up having to sell their small holdings,

household goods and personal belonging and join the poor and the deprived women (Fosu-Mensah,

2003). Fosu-Mensah, further cited, ILO (1998) as saying that recent studies in Philippines,

Bangladesh, Trinidad and Tobago have confirmed the lack of capital especially in the start-up

period as the problem most often mentioned by women entrepreneurs. The study also reveals that

formal financial institutions have been less receptive to female entrepreneurs. The collateral

requirements, disbursements procedure, the time and resources necessary to visit the banks and the

discriminatory banking culture virtually exclude women clients.

48
2.3.1 Factors that influence access to micro credit

Available literature shows that access to micro credit is influenced by several factors. These

include; income, education, size of business, type of business, membership of economic

association, family size, etc. Ayamga et al. (2006) observed that family size positively influence

the decision to participate in micro credit schemes. Women in groups are likely to have access to

micro credit than those who do not belong to any group Armendariz and Morduch (2005) and Kah

et al (2005). It has been observed in empirical literature that households and individuals with low

income especially in developing countries have difficulty accessing credit (Arvai & Toth, 2001;

Benito & Mumtaz, 2006; Crook, 2001; Crook & Hochguertel, 2005; Del-Rio & Young, 2005;

Magri, 2002; Thaicharoen et al., 2004).

Akram et al. (2008); Benito and Mumtaz (2006); Crook (2001) and Thaicharoen et al. (2004); hold

the view that age is a significant micro credit constraint. Also, Arvai and Toth (2001); Ayamga et

al. (2006) and Thaicharoen et al (2004); in separate studies observed that, formal education

significantly influence participation in micro credit schemes. The perception of income class has

positive relationship with probability of access to micro credit. Benito and Mumtaz (2006); Del-

Rio and Young (2005); and Magri (2002), concluded that income levels influence individuals’ and

households’ decisions to source micro credit either for investment or consumption purpose

49
Table 2.1: Empirical Framework

S/N AUTHORS TITLE FINDINGS

1 Vetrivel & The role of microfinance in rural development The findings showed that

Kumarmanglam (2010) the poor needs access to

credit and they borrow

from local money lenders

at exorbitant interest rates

due to lack of access to

formal financial

institutions.

2 William Ablorh (2011) Microfinance And Socio-economic Access to microfinance

Empowerment Of Women: A Case Of can empower women to

Opportunity International Savings And Loans become more confident,

Clients. more assertive, more likely

to take part in family and

community decisions and

better able to confront

gender inequities

3 Mlowasa, V. (2010) The role of MFIs in improving the economic MFIs provides small loans

status of women in Tanzania to their clients, creates

employment opportunities

and capacity building to

borrowers by offering

50
different skills such as use

of loans, entrepreneurship

and managerial skills.

4 Kirobo Kinoo (2013) The role of MFIs in development of women It was found that

entrepreneurs in Zanzibar: A case of women supplementary services

entrepreneurship development trust fund attached to microcredit

(WEDTF) in urban west region of Zanzibar. such as saving, trainings,

group formation plays

important role towards the

development of women

entrepreneurs in Zanzibar.

5 Mayoux Linda (1997) Microfinance & Women's Empowerment. A The study found that the

Briefing Paper prepared for Micro Credit impact of microfinance

Summit, Washington, February 1997 programs on women is not

always positive. Women

that have set up enterprises

benefit not only from small

increases in income at the

cost of heavier workloads

and repayment pressures.

Source: Researcher 2017

51
2.4 Summary and Gaps

Research has been done generally on women entrepreneurship and women co-operators by Brush,

C. (1992), Carter & Rosa, 1998 Lemmon, G. (2012) and Schumpeter (2011). The Gaps to be filled

include outcome and contributions of all microfinance agencies to women that covers the increase

in business assets, social influence, full range of economic and psychological results of women

entrepreneurs development interventions, evidence for or against the hypothesis that support

women-led business leads to better performances and a more widespread distribution of benefits,

strategies or methodologies that enable women entrepreneurs to transition their businesses from

informal to formal economy, strategies or methodologies that increase women entrepreneurs‟

control over productive resources and decision making at the household level, strategies that

ensure policy and program developers take into account women’s needs in micro small and

medium entrepreneurships promotion, (Thaonguyen, 2012). This study filled a research gap by

studying the contributions of microfinance banks and Savings and Credit Co-operative Societies

on performance of female owned micro-enterprises in Akure.

Most of the studies discussed above showed that there was a myriad of constraints that women-

micro-entrepreneurs face in accessing finance (credit facilities) for starting and/or expanding their

businesses. These can be put into three categories: internal factors, socio-cultural constraints and

policy constraints. Little has been conducted on constraints women entrepreneurs encounter in

accessing finance (credit facilities) for starting or expanding their businesses.

52
CHAPTER THREE

METHODOLOGY

This study examined the contributions of microfinance agencies to the development of women

entrepreneurs in Akure, Ondo State. This chapter discussed the methodology with which the

research work was carried out. This includes the research design, research population, sample and

sampling technique, research instruments, data collection techniques and method of data analysis.

3.1 Research Design

In conducting this study, survey research design was used through administration of structured

questionnaires. A research design is simply the framework or plan for a study used as a guide in

collecting and analyzing data (Churchill, 2007). The function of a research design is to ensure that

the evidence obtained enables the researcher to effectively address the research problem as

unambiguously as possible.

3.2 Study Area

The study was conducted in Akure, Ondo State, Nigeria. Akure is a city located in the south-

.western part of Nigeria. It is the largest city and capital of Ondo State. It lies approximately on

latitude 700 15” North of the Equator and Longitude 500 15” East of the Greenwich Meridan.

Akure is a medium –sized urban center and became the provincial headquarter of Ondo State in

1939. It also became the Ondo State and a Local Government headquarters in 1976. As at 2015,

Akure had an estimation population of approximately 556,300 people which was 0.305% of total

Nigeria population. If the growth rate is +4.64%/year Akure’s population in 2017 would be

approximately 609,165 thousand.

53
Figure 3.1: Map of Akure South
Source: Google Map

3.3 Population of the Study

The population of this study focused on the women micro- entrepreneurs situated in Akure South

Local Government Area of Ondo State. The population of a study refers to a complete set of

elements (persons or object) that possess some common characteristics defined by the sampling

criteria established by the researcher (Msabila & Nalaila, 2013).

3.4 Sample Size and Sampling Technique

3.4.1 Sample size

A sample size is a subset of the target population from which inference can be made (Kothari,

2008). The choice of methods to be used to determine a sample depends on several factors such as

representativeness, the diversity of the target population and researcher’s preference. Since the

target populations of women micro-entrepreneurs in Akure is diverse, a sample size of 200 women

micro-entrepreneurs in Akure metropolis was purposively selected. The reason of having this

sample was because of the deemed large number of women entrepreneurs in the Akure, as well as

54
a need of getting a good number of responses. This was done with the aim of ensuring accessibility,

easy management and cost reduction on data collection by the researcher.

3.4.2 Sampling Techniques

The Sampling Techniques Methods provide a range of methods that enabled the researcher to

reduce the amount of data that needs to be collected by considering only data from sub groups

rather than all possible cases or elements. The researcher used the following sampling techniques:

Simple random and purposive samplings as explained below:

3.4.2.1 Simple random sampling technique

The researcher used simple random sampling technique for the women entrepreneurs who have

received microcredit services any microfinance agencies.

3.5 Method of Data collection

The researcher used primary method of data collection. Primary data collection methods used

include questionnaires, interviews and observations while secondary data was used by the

researcher to support the research study, documentary review such as reports, newspapers, books,

internet /website.

3.5.1 Primary Data

3.5.1.1 Questionnaires Method

The researcher used the questionnaires method through the administration of well-structured

questionnaire. The researcher collected the raw data from the women micro-entrepreneurs who

benefited from various micro-credits. The questionnaires administered by the researcher to the

sample of 200 small scale women entrepreneurs in Akure, Ondo State, Nigeria. This enabled the

researcher to explore all aspect related to topic of study, that is “The contributions of microfinance

agencies to the development of women entrepreneurs in Akure, Ondo State”.

55
3.6 Research Variables

The study looked at microfinance activities, women development, access to loans financial

constraints militating against women development. The parameters used include loan accessibility,

education, self-influence and business growth. That is, in the assumption of this study was that

micro-finance institutions contributes in facilitating the growth of women entrepreneurs by

providing them with the loans as capital and other trainings to ensure the cash flow is maintained

to repay the loan.

3.7 Model Specification and Measurement of Variables

Y= f(x)

X= Independent Variable

Y = Dependent variable

X= Contributions of Microfinance Agencies

Y = Women Development

Y = f(x1, x2, x3,… x4)

3.8 Method of Data Analysis

The data collected from the field survey was subjected to inferential statistics and also descriptive

statistics such as graphs, percentage table and charts which will be used for the analysis of the

research questions. Inferential statistics which include correlation analysis and linear regression

analysis will also be used. The statistical packages for social science (SPSS) will be used in

analyzing the questionnaire. Data was summarized, analyzed and interpreted as per research

objectives.

56
CHAPTER FOUR

RESULTS AND DISCUSSION

This chapter focused on the findings, data analysis and discussions which all together answers

objectives of the study in examining the contributions of microfinance institutions to women

entrepreneurs’ development. Out of two hundred (200) copies of questionnaires that were

administered on the respondents, one hundred and ninety-nine (191) were regarded valid for the

study which gives 95.5% of the total sample size was used for the analysis.

4.1 ANALYSIS OF OBJECTIVES

4.1.1 Analysis of Objective 1: Examining the level of relationship that exists between

microfinance agencies and women development in Akure Ondo State.

Research Question 1: Is there any relationship between women development and microfinance

agencies?

Results of the findings of this study revealed that 30.4% strongly agreed to the awareness of

microfinance activities, eighty-eight (88) of the total respondents representing 46.1% agreed to the

awareness of microfinance, thirty-two (32) of the respondents partially agreed to the question

under investigation. However 2.1% disagreed of being aware of microfinance activities and 4.7%

strongly disagreed to this position. This suggested that majority of the respondents were aware of

microfinance activities.

Information gathered from respondents on how micro-credits from microfinance banks and

cooperative societies have impacted women in their development and enterprise growth shows that

thirty-eight (38) of the respondents which represent 19.9% strongly agreed, seventy-four of the

respondents representing 38.7% agreed to this position and seventy-three (73) of the respondents

57
representing 38.2% partially agreed that micro-credits have impact on women development. This

emphasized the findings of Stevenson and St-Onge (2007) that if women are equipped with the

necessary resources, capital, skills and opportunities to start their businesses, this would ensure the

growth of their enterprises. However, only three (3) of the respondents representing 1.6%

disagreed with this position and also (3) of the respondents representing 1.6% strongly disagreed.

Figure 4.1 revealed respondent’s answers on microfinance, as an effective tool for women

development in which one hundred and five (105) of the respondents representing 53.9% of the

total sample size strongly agreed that microfinance is an effective tool for women development,

sixty-two (62) of the respondents representing 32.5% agreed that microfinance is an effective tool

for women development while, twenty-six (26) of the respondents representing 13.6% of the total

sample size partially agreed to this position. However, there was no response from respondents

who disagreed or strongly disagreed that microfinance is an effective tool for women development,

this implies that all the respondents agrees that microfinance is an effective tool for women

development. This corroborated the findings of EsteveVolart, (2004), Harris,(2009), Mohan,

(2011), Mayoux, (2000) who found that microfinance is one of the key tools to entrepreneurship

development in the world especially in developing countries, which helps in development and

empowerment especially among women.

Furthermore, it was found that respondent’s answers on how women has benefited from

microfinance agencies, seventy-seven (77) of the respondents representing 40.3% of the total

sample size strongly agreed that they have benefited from microfinance agencies, ninety-nine (99)

of the respondents representing 51.8% agreed that they have benefited from microfinance

agencies, while, ten (10) of the respondents representing 5.2% of the total sample size partially

agreed to this position.

58
Forty-five (45) of the total respondents representing 23.6% strongly agreed that microfinance

activities has helped increased their self-confidence and participation, one hundred and one (101)

of the total respondents representing 52.9% agreed with this position, forty-five (45) of the

respondents partially agreed to the question under investigation. However there were no response

for disagreed and disagreed.

agencies and only one (1) strongly disagreed. This emphasized the submission of Sehrawat, (2011)

that microfinance agencies provides financial services to women which may include savings,

credit, insurance, leasing, money transfer, equity transaction to meet their normal financial needs

like life cycle, economic opportunity and emergency.

59
60

50

40

30

20

10

0
microfinance
women increased self
Awareness of Impact of is an effective
benefits from confidence
Microfinance micro-credit tool for
microfinance and
Institution on women women
agencies participation
development
Strongly Agree 30.4 19.9 53.9 40.3 23.6
Agree 46.1 38.7 32.5 51.8 52.9
Patially Agree 16.8 38.2 13.6 5.2 23.6
Disagree 2.1 1.6 0 2.1 0
Strongly Disagree 4.7 1.6 0 0.5 0
Strongly Agree Agree Patially Agree Disagree Strongly Disagree

Figure 4.1: Level of relationship between microfinance institutions and women development.
Source: Researcher’s Field Survey, 2017.

60
4.1.2 Analysis of Objective 2: Examining the extent of access to loans for women

entrepreneurs’ development.

Research Question 2: What is the extent to which accessibility to loans influenced women

entrepreneurs’ development?

The data received from the respondents on the impacts of loan on women development showed

that one hundred and fifty-nine (159) of the respondents representing 82.3% strongly agrees that

the loans from microfinance agencies has increased their business growth and assets, twenty-nine

(29) of the respondents representing 15.2% of the sample size agreed that the loans acquired from

microfinance agencies has contributed to their business growth and assets while only one (1)

respondent representing 0.5% of the sample size partially agreed that loans have impact on their

business growth, Contrarily only one (1) of the respondents representing 0.5% of the sample size

disagreed with the position and also one (1) strongly disagreed that loans have an impact on their

business growth and assets.

Data from the respondents on ease of access to micro-credits revealed that twenty-five (25) of the

respondents representing 13.1% of the sample size strongly agreed that it is easy to get financial

support from microfinance agencies, one hundred and twenty (120) respondents representing

62.8% of the total sample size, while twenty-seven (27) of the respondents representing 14.1% of

the total sample size partially agreed that it is easy to get financial support from microfinance

agencies. On the other hand, eighteen (18) of the respondents representing 4.4% of the sample size

disagreed with this position and only one (1) strongly disagreed that it is easy to get financial

support from microfinance agencies.

The data received from the respondents on how flexible terms and conditions for accessing loans

showed that forty-nine (49) of the respondents representing 25.7% strongly agreed that terms and

61
conditions for accessing loans are flexible, eighty-four (84) of the respondents representing 44%

of the sample size agreed that terms and conditions for accessing loans are flexible while thirty-

eight (38) respondent representing 19.9% of the sample size partially agreed to the question under

investigation. However twenty (20) of the respondents representing 10.5% of the sample size

disagrees with the position and no respondents answered strongly disagree to the question.

As shown in table 4.1, eight (8) respondents representing 4.2% strongly agreed that the interest

rate charged on loans from microfinance agencies is adequate, one hundred and thirty-three (133)

of the total respondents representing 69.6% agreed that the interest rate charged on loans from

microfinance agencies is adequate, thirty-six (36) of the respondents partially agreed to the

question under investigation. However eight (8) representing 4.2% disagreed that the interest rate

charged on loans from microfinance agencies is adequate and six of the respondents representing

3.1% strongly disagreed to this position. This findings can be supported on the basis that most of

the respondents belong to co-operative societies where interest rate charged on loans is very

minimal in order to encourage and support the women in their business. This was corroborated

with the findings of Nelson, Candace and Walsh (1992) that as women come together to form a

co-operative group enterprise, they provide many services to themselves and to their members,

such as loan services through the credit and savings co-operatives and government agencies at low

and affordable interest rates.

62
4.1.3 Analysis of Objective 3: To find out the financial constraints militating against the
development of women entrepreneurs

Research Question 3: What are the financial constraints militating against the development of

women entrepreneurs in Akure, Ondo State?

The data received from the respondents on the financial constraints militating against women

development showed that majority (74.3%) of the respondents disagreed that borrowing conditions

of microfinance agencies are cumbersome, 12% of the respondents agreed that the borrowing

conditions are too cumbersome, few (6.8%) of the respondents partially agreed to this position

while 4.7% of the respondents strongly agreed that the borrowing conditions are cumbersome and

2.1% of the respondents strongly disagreed. From the result shown above, it was discovered that

the condition for obtaining loan is less stringent. This implies that, microfinance institutions have

63
been able to fulfill its objective of lending to the poor and ensuring easy access to financial services

for the poor.

Majority (60.2%) of the respondents strongly agreed that inadequate funds management skills

affects loan accumulation, fifty-five (55) of the respondents representing 28.8% agreed that

inadequate funds management skills affects loan accumulation, seven (7) of the respondents

representing 3.7% of the total sample size partially agreed that inadequate funds management skills

affects loan accumulation. On the other hand, four (4) of the respondents representing 2.1% of the

sample size disagreed with this position and ten (10) strongly disagreed inadequate funds

management skills affects loan accumulation

Data received from respondents on the repayment period on loans showed that eighty (80) of the

respondents representing 41.9% of the sample size agreed that repayment period is adequate, sixty-

seven (67) of the respondents representing 35.1% of the total sample size partially agreed to the

question under investigation, while twenty-five (25) of the respondents representing 13.1% of the

total sample size partially disagreed that repayment period is adequate. On the other hand, few

(7.9%) of the respondents strongly disagreed with this position and four (4) strongly agreed

repayment period is usually adequate.

Information gathered from the respondents on how level of education affects women on access to

loans and development showed that one hundred and nine (109) of the respondents representing

57.1% of the sample size disagreed that level of education has no effect on their access to loan,

sixty (60) of the respondents representing 31.4% of the sample size strongly disagreed that level

of education has no effect on their access to loan and development. However fifteen (7.9%) of the

respondents partially agreed that level of education has effect on women development and seven

(7) representing 3.7% also agreed that level of education has effect on women development.

64
Data received from respondents on the question huge collateral is required in getting finance

support from microfinance agencies showed that ninety (90) of the respondents representing 47.1%

of the sample size disagreed that huge collateral is required in getting finance support from

microfinance agencies, seven-nine (79) of the respondents representing 41.4% of the total sample

size partially strongly disagreed to the question under investigation, while eight (8) of the

respondents representing 4.2% of the total sample size partially agreed that huge collateral is

required in getting finance support from microfinance agencies. On the other hand, few (5.8%) of

the respondents strongly agreed with this position and three (3) strongly agreed that huge collateral

is required in getting finance support from microfinance agencies. In addition, the analysis of the

data obtained in this study indicates that the procedure of obtaining loans from MFAs is easier

than conventional banking because there is no requirement of collateral to take the loan from MFIs.

This emphasized the findings of Alfred (2013) that MFAs promotes the loan accessibility among

women as the requirements and conditions to obtain loan are less stringent in comparison to loans

given by the banks especially on the issues regarding collateral and interests rates. With this

women have opportunity to rise in business earn income and hence grow as businesswoman

improving their life and their families.

Result of the findings showed that inadequate funds management skills is a major financial factor

militating against women entrepreneur’s development in Akure, Ondo State

65
Table 4.2: Financial constraints militating against the women entrepreneurship development

Financial constraints N Minimum Maximum Mean Std. Deviation

The borrowing conditions are


191 1 5 2.43 .903
too cumbersome

Inadequate funds
management skills affects 189 1 5 4.37 1.036
loan accumulation

Repayment period
191 1 5 3.17 .961
satisfaction
Level of education is
considered when issuing 191 1 4 1.84 .718
loans

Huge collateral is required


in getting financial support 191 1 5 1.79 .887
from microfinance

Source: Researcher’s Field Survey Result, 2017.

4.2 Test of Hypotheses

This section dealt with the testing of the hypotheses associated with the research work. For the

purpose of this study. The a priori expectation was based on 5% (0.05) level of significance of the

ordinary linear square calculated value of (X2) less than the critical value. In order to test for the

hypotheses of this research, Pearson Correlation was used to test for hypothesis one while simple

linear regression was used to test Hypothesis two

66
4.2.1 Results of Hypothesis One

H01: There is no significant relationship between women entrepreneurs’ development and


microfinance activities.

The Pearson correlation result revealed a positive correlation coefficient of (r = 0.232) between

microfinance activities and women entrepreneurs development. The result indicated that the p –

value was 0.001 level of significance at n=191, p < 0.05 implying that the result is significant

thereby rejecting the null hypothesis that microfinance activities has no significant effect on

women entrepreneur’s development. The result showed that there is a weak relationship between

microfinance activities and women development i.e. microfinance agencies has very weak impact

on women development due to the fact that most of the women respondents belong to cooperative

societies, thereby neglecting the patronage of microfinance institutions This tends to confirm the

findings of Katz (2008) and corroborates with the finding of Norwood (2005), that micro credit

has no real impact on improving the status of the poor and women enterprises.

Table 4.3: Table of Pearson moment correlation for relationship between women
entrepreneur’s development and microfinance activities

Microfinance Women
Activities Development

Pearson Correlation 1 .232**


Microfinance Activities Sig. (2-tailed) .001
N 191 191
**
Pearson Correlation .232 1
Women Development Sig. (2-tailed) .001
N 191 191

Source: Researcher’s Field Survey, 2017

67
4.2.2. Result of Hypothesis Two

H02: Access to loans has no significant effect on women entrepreneurship development

Results from the regression analysis from regression table revealed that access to loans had a

positive influence on women development. R=0.251, R2=0.063 or 6.3%. The R2 value of 6.3%

revealed that 6.3% of the variation in women development is explained by variation in access to

loans. Access to loan is therefore a weak predictor of women development. The value of R2

indicated that access to loan by women entrepreneurs is assumed to be an issue of concern. Since

only 6.3% of the variation in women development is explained by the variation of access to loan.

This negates with the findings of Armendariz and Morduch (2005) who found that women who

have access to loans are developed and women in groups are likely to have more access to micro

credit than those who do not belong to any group. These findings contradicted the observations

made by Al-Hassan and Bambangi (2006); Akudugu and Gbene (2005); Fletschner (2006) that

though women are micro creditworthy, they do not have access to micro credit. Contrary to that,

women who are able to repay their micro credits (micro creditworthy) do have access to micro

credit. It may be assumed that as a result of the fact that most women prefer to deal with

cooperative societies rather than microfinance institutions, having access to loan from MFIs

therefore becomes a challenge.

The variable regressed against Women Development is:

X= Access to Loans

It was revealed that the variable from the regression table has a positive value which revealed a

positive impact on women development. Therefore, the regression model could be expressed as:

Y = K + B1X1 + ei

Y = 4.196 + 0.251FS + 0.50

68
The result revealed a weak significant impact of access to loans on women entrepreneurs’

development. The result indicated that the p – value was less than the value of significance, that

is, p < 0.05 implying that the model is significant thereby rejecting the null hypothesis that access

to loans has no significant effect on women entrepreneur’s development in Akure Ondo State.

Table 4.4: Model Summary


Model R R Square Adjusted R Square Std. Error of the
Estimate
1 .251a .063 .058 .500
a. Predictors: (Constant), Ease of Getting Financial Support

Model Unstandardized Standardized t Sig.


Coefficients Coefficients
B Std. Error Beta
(Constant) 4.196 .174 24.161 .000
1 Ease of Getting Financial
.160 .045 .251 3.560 .000
Support
a. Dependent Variable: Women Development

4.3 Demographic Characteristics of Respondents

This part described the general characteristic of respondents involved in the study. It explained

characteristics like age, educational level and marital status when the study was conducted

4.3.1 Age distribution of respondents

The frequency of age distribution among the respondents of different age bracket were carried out

in order to gain insight among women with various ages. 41.9% of the total sample of 191

69
respondents are between the ages of 30-39 years, 78 respondents representing 40.8% of the total

sample were between the ages of 40-49 years. 11% of the sample is between the ages of 20-29

years and 1 respondents represent 0.5 of the total sample population was above 60years of age.

This shows that most of the female respondents are in their active age (ages of 30-39 and 40-49)

and have potential for growth and development, ability to engage in business activity and also

borrow funds from the microfinance agencies. This corroborated the findings of Okwoche (1998)

who observes that women co-operators are between 31 and 50 years of age, implies that there is a

predominance of middle aged women entrepreneurs. The response of the respondent are presented

in figure 4.2 below.

80

70

60

50

41.9%
40
40.8%

30

11%
20

5.8%
10

0.5%
0
20-29 years 30-39 years 40-49 years 50-59 years 60 years and above

Figure 4.2: Distribution of Respondents by Age


Source: Researcher’s Field Survey, 2017.

70
4.3.2 Distribution of respondent by marital status

The marital status as shown in Figure 4.3 shows that majority (89.5%) of the respondents were

married, few (8.4%) were single, 1.6% were divorced and 0.5% were widowed. Majority of the

respondents were married women, this showed that women with household responsibilities were

matured enough, most likely to secure loans and engage with their daily entrepreneur activities.

This means that the married entrepreneurs have the spirit of self-help and mutual help spirit at the

family level to cope the environment. According to Duvendack et al., (2011) credit is successfully

targeted to women, it may benefit women specifically by enhancing their status and empowerment.

180

160

140 89.5%

120

100

80

60

40
8.4%
20
1.6% 0.5%
0
Single Married Divorced Widowed

Figure 4.3: Distribution of Respondents by Marital Status


Source: Researcher’s Field Survey, 2017.

71
4.3.3 The Educational Level of Respondents

Figure 4.4 shows that 45% of the respondents has SSCE qualification, 44% has OND qualification

and 11% has HND/BSC qualification. While there was no respondent who had MSc degree and

PhD qualifications. This implies that women’s participation in micro-entrepreneurial activities was

partly influenced by low levels of education, which stimulated the development of women’s

competency including entrepreneurship. This findings emphasized the study of Lugalla (1995),

who commented that due to the fact that most women have a low education, they tend to be

engaged in the activities which need minimal skills. This finding also supported the findings of

Kibas (2001), who indicated that the majority of micro-enterprises are conducted by people who

have low education. Asiamah et al., (2007) mentioned that micro enterprises are dominated by

people with little or no education. The level of education also to some extent determines the kind

of micro enterprise one can engage in. The situation on the ground seems to support the assertion

that a great number of people who engage in micro businesses are basically illiterates or have low

level of education. Majority of the respondents have basic education and perhaps this accounted

for why majority of them were into petty trading and do not keep proper books of accounts of their

businesses.

72
11%

45%
44%
SSCE/GCE
OND/HND
HND/BSC

Figure 4.4: Respondents Academic Qualification


Source: Field Survey, 2017
SSCE-Senior School Certificate Examination, GCE- General Certificate Examination,
OND-, Ordinary National Diploma, HND-, Higher National Diploma, BSC- Bachelor of
Science

4.3.4 Microfinance Group of the Respondent

Findings from the study showed that 152 (79.6%) respondents out of 191(95.5%) of the sample

size population of female respondents belong to a cooperative society and 39 respondents of the

population which makes it 20.4% of the sample size belong to microfinance bank. The responses

of the respondents are presented in table 4.3.

4.3.5 Business Type

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Data received from respondents on their business type indicated that 88% of women micro-

entrepreneurs are sole owners of their business while 12% are running a partnership business

mostly with relatives. This showed that women want to be in a business where they have fully

control (sole proprietorship) or partnership, possibly with their husband’s support.

4.3.6 Purpose of loan

Data from respondents on purpose of loans showed that, 58.6% of the total population collected

loans for the purpose of expanding their business venture, 24.1% use the acquired loan as working

capital to run the business, 15.2% use the loan to start a new business and 2.1% use the loan to run

other personal expenses like child welfare, household expenses, health care. The responses of the

respondents are presented in table 4.3.

4.3.7 Years of Operation

Table 4.3 showed that 47.1% of the micro-entrepreneurs women have their business operation

ranging between 6-10 years, 25.1% have been in operation within the age 1-5 years, and 10.5%

within the years of 11-15 years and 11% have been in operations 20years and above. This implied

that women micro-entrepreneurs have enough experience to run their business. This implied that

majority of respondents had 1-5 years of experiences and therefore satisfactory experiences to the

field of entrepreneurship and hence to be good entrepreneurs because experiences is a good teacher

4.3.8 Supplementary services

Majority (50.3%) of the respondents selected savings to be the supplementary services derived

from microfinance agencies, few (13.1%) of the respondents got insurance on goods as a

supplementary service from microfinance agencies. 3.2% of the respondents represented other

supplementary services attached to microfinance products. However, sixty-four of the respondents

representing 33.5% got training services from microfinance institutions. Majority of the

74
respondents declared that they accessed with saving facility from the microfinance agencies. This

implied that savings services are valuable mechanisms for women in terms liquidity management

through accessibility to cash, rate of returns, security and divisibility of savings, reduce the

financial cost of lending and secure a sustainable funds source; while on the other side savings are

vital and attractive source of MFIs funds because can be easily obtained with lower cost.

Table 4.3: Respondents responses to microfinance group, purpose of loan, supplementary


services and years of operation

Microfinance group Frequency Percent


Microfinance banks 39 20.4
Cooperative societies 152 79.6
Total 191 100.0
Purpose of loan
To start a new business venture 29 15.2
To expand existing business venture 112 58.6
Working capital 46 24.1
Others 4 2.1

75
Total 191 100.0
Supplementary services
Savings 96 50.3
Training 64 33.5
Insurance 25 13.1
Others 6 3.2
Total 191 100.0
Years of operation
1-5 years 48 25.1
6-10 years 90 47.1
11-15 years 20 10.5
16-20 years 12 6.3
20 years and above 21 11.0
Total 191 100.0
Source: Researcher’s Field Survey, 2017.

CHAPTER FIVE

SUMMARY, RECOMMENDATIONS AND CONCLUSION

The aim of this research is to explore the contributions of microfinance institutions to women

development and the circumstances under which microfinance can help the poor women out of

their poverty situation.

CONCLUSION
76
RECOMMENDATION

From the study, the following suggestions are devised to make microfinance more effective as a

tool for women empowerment and poverty reduction.

1. The design of products and services should also be made flexible to reflect the needs of the

poor. As was found out by this study that microfinance banks is most directed to income

generating activities, or delivered to those who have existing businesses, street trade or

physical collateral. It should also be directed to service enterprise.

2. The credit delivery mechanism (group lending with a weekly repayment schedule) can be

effective in reaching a large number of small producers but cannot reduce poverty on large

scale. This suggests that microfinance products and services should be best tailored to the

diverse needs of the poor people and the poor should not be looked at as a homogeneous group

of people. Products should as well be contextualized taking into account rural-urban

differences

3. To sum it up, microfinance is not a `magic» bullet for poverty reduction and the increasing

government's and aid agencies' emphasis on microfinance as a panacea to poverty may be an

over simplification of the matter.

4. MFIs should adapt existing training programs and set up entrepreneurship training such as

account management, marketing strategies and financial literacy training.

77
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FEDERAL UNIVERSITY OF TECHNOLOGY, AKURE
SCHOOL OF MANAGEMENT TECHNOLOGY
DEPARTMENT OF ENTREPRENEURSHIP MANAGEMENT TECHNOLOGY
BACHELOR OF TECHNOLOGY IN ENTREPRENEURSHIP MANAGEMENT
TECHNOLOGY

Dear Respondent, This questionnaire is meant to find information on the Contributions of some

selected Microfinance agencies to the development of women entrepreneurs in Akure LGA

of Ondo State. The information collected will be used for academic purpose only and your

response will be treated in highest degree of confidentiality.

Please, kindly respond to the following questions freely by answering the questions to the best of

your knowledge.

Thank you for your cooperation.

Akinsanya, Sofiat A.
08108638034
SECTION A: PERSONAL INFORMATION OF THE FEMALE RESPONDENTS.

Instruction: Please tick neatly as applicable √

1. Age: 20- 29 years 30 – 39 years 40 - 49 years 50 – 59 years

60 – 79 years

2. Marital Status: Single Married Divorced Widowed

3. Educational qualification: SSSE/GCE OND/HND HND/BSC

MSC PhD

82
SECTION B: PROFILE OF THE BUSINESS ENTERPRISE

4. Business type: …………………………

5. Years of operation: 1 - 5years 6 – 10 years 11- 15 years

16 - 20 years 20 years and above

6. Source of initial capital for your business: Personal saving Friends and relatives

Loans from MFAs Loans from commercial bank

SECTION C: MICROFINANCE AGENCY

7. Which Of The Following Microfinance Group Do You Belong To?

Microfinance Bank Corporative Societies others, Specify ……………

8. What is your major purpose of the loan or credit: To start new business venture

To expand the existing business venture working capital

9. What are the supplementary services attached to microcredit product did you get?

Savings Training Insurance Others, Specify...............................

SECTION D: RELATIONSHIP BETWEEN WOMEN ENTREPRENEURS AND

MICROFINANCE AGENCIES

Please tick one box as appropriate in the scale of 1-5

(1= Strongly Disagree (SD), 2= Disagree (D), 3= partially Agree (PA), 4= Agree (A),
5= Strongly Agree (SA).

83
5 4 3 2 1

SA A PA D SD

1 I am aware of Microfinance Institutions

2 Small credit and loans from microfinance


institutions and corporative societies has
helped significantly to reduce the level of
poverty among women.
3 I believe microfinance is an effective tool for
women development
4 I have benefited from microfinance agencies
5 Microfinance has help increased self-
confidence and participation of women In
economic activities

SECTION E: EXTENT OF ACCESS TO LOANS AND WOMEN DEVELOPMENT

Please tick one box as appropriate in the scale of 1-5

(1= Strongly Disagree (SD), 2= Disagree (D), 3= partially Agree (PA), 4= Agree (A),
5= Strongly Agree (SA).
5 4 3 2 1

SA A PA D SD

1 It is easy to get financial support from


microfinance agency
2 Terms and conditions for accessing loans are
flexible
3 Interest rate on loans from MFAs is adequate

4 I get amount requested for

5 Loans from microfinance agencies has helped


increase my business assets and growth

84
SECTION F: CONSTRAINTS

Please tick one box as appropriate in the scale of 1-5

(1= Strongly Disagree (SD), 2= Disagree (D), 3= partially Agree (PA), 4= Agree (A),
5= Strongly Agree (SA).
5 4 3 2 1

SA A PA D SD

1 The borrowing conditions are too cumbersome

2 Inadequate funds management skills affects


loan accumulation
3 Repayment period is usually adequate

4 Level of education is considered when issuing


loans
5 Huge collateral is required in getting financial
support from microfinance agency

Any other comment and advices to promote entrepreneurship among women in Akure LGA of

Ondo State.........................................................................

Thanking you very much for your cooperation.

85