The Relevance Of Microfinance Cooperative Enterprise Development: A Case Study Of Imo State Cooperative Finance Association Limited (ISCFA)

Project and Seminar Material for Cooperative Economics and Management (CEM)

The Relevance Of Microfinance Cooperative Enterprise Development: A Case Study Of Imo State Cooperative Finance Association Limited (ISCFA)


Against the background of severe and high incidence of poverty in Nigeria, the past Nigeria governments have established institution to ameliorate and alleviate this un-presented poverty in the land.

Among the institutions established by the previous administrations are as follows. Operation Feed the Nation (OFN) of Gen. Obasanjo 1979, Green Revolution of Shehu Shagari, 1982, Structural Adjustment Programme (SAP) of Gen Babangida 1985, Better Life Programme (BLP) of Dr. Mrs. Mariam Babangida, Agricultural Credit Guarantee Scheme fund. Etc, these programmes were aimed at boosting the agricultural production of the citizenry and raising the standards of living of the people.

In spite of all these moves it has been discovered that most small scale enterprises and medium business organizations which cooperative organization belong to, do not have access to adequate financial service.

To this end, the CBN, on 15th of December 2005, launched a Micro Finance Policy which is also aimed to enhance and boost economic activities of small business.

In this work or study, I shall consider the all importance of microfinance, and how it promotes the activities of cooperative businesses.

Table Of Contents

Preliminary Page(s)

  • Cover page
  • Title Page
  • Approval page
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of content

Chapter One

1.0 Introduction

  • 1.1 General Overview of the Study
  • 1.2 Statement of the problem
  • 1.3 Objective of the study
  • 1.4 Scope of the study
  • 1.5 Hypothesis
  • 1.6 significance of the study
  • 1.7 limitation of the study
  • 1.8 Definition of terms

Chapter Two

2.0 Literature Review

  • 2.1. Introduction
  • 2.2. Microfinance defined
  • 2.3. Microfinance activities
  • 2.4 Microfinance institution
  • 2.5 Microfinance institution banking in Nigeria
  • 2.6 Microfinance & co-operative as framework for development enterprise
  • 2.7 Conclusion

Chapter Three

3.0 Research Methodology

  • 3.1 Introduction
  • 3.2 Research design
  • 3.3 Sampling design
  • 3.4 Method of data collection
  • 3.5 Procedure of processing data

Chapter Four

4.0 Presentation and Analysis of Data

  • 4.1. Introduction
  • 4.2 Presentation of data
  • 4.3 Analysis of data
  • 4.4 Decision for test of hypothesis
  • 4.5 Sample size

Chapter Five

5.0 Summary, Conclusions and Recommendations

  • 5.1. Introduction
  • 5.2 Summary of Finding
  • 5.3 Conclusions
  • 5.4 Recommendations
  • Bibliography
  • Appendix
  • Questionnaire

Chapter One

1.0 Introduction

1.1 General Overview Of The Study

It has been estimated that there are 500 million economically active poor people in the world operating small scale and medium businesses. Most of them do not have access to adequate financial services.

Microfinance services are financial services that poor people can qualify for. More broadly, it refers to a movement in which as many poor and near-poor household as possible have permanent access to.

Theoretically, microfinance encompasses any financial service used by poor people including those they access in the informal economy, such as loans, from a village money lender. In practice, however, the term is usually only used to refer to institutive and enterprises whose goods include both finance and empowerment of the poor.

The concept of the credit union was developed by Friedrich W. Raiffeisen and his supporters. Their altruistic action was motivated by concern to assist the rural population to break out of their dependence on money lenders and to improve their welfare.

Although much progress has been made, the problem has not been solved yet, and the overwhelming majority of people who earn less especially in rural areas, they lack access to formal financial leverage.

The concept of modern microfinance was developed in 2004 by consultative group to assist the poor (CGAP) and endorsed by the group of eight leaders at the G8 Summit on June 10th 2004.

(Christian, Robert Peck, Jayadeva, Vena and Rosenbery. Financial institutions with a double bottom line, consultative group to assist the poor from encyclopedia Washington 2004). The practical of microfinance in Nigeria is culturally rooted and dates back to several centuries.

They are mainly of the informal self – help group (SHGs). Rotating savings and credit Association (ROSCAS), savings collectors and cooperative thrift savings societies.

These informal financial institutions generally have limited resources to meet up with the demand. In order to enhance the flow of financial service to Nigerian rural areas, government has in the past initiated a series of publicly financed micro/rural credit programmes and policies targeted at the poor.

Notable among such programmes were the rural Banking programme, Agricultural credit guarantee Selene Fund (AGSF) Nigeria Agric Agricultural Cooperative and Rural Development Bank (NACROB) Nigeria Directorate of employment (NDE), Community Bank (CBS) and family Economic Advancement Programme (FEAP)

In 2000, the federal government merged the NACB, PBN and FEAP to form the Nigeria Agricultural cooperative and Rural Development Bank Limited (NACRDB) to enhance the provision of finance to the agricultural and cooperative sectors. It also created the National poverty eradication programme (NAPEP) with the mandate to provide material and equipment training.

Though these services have made several impacts in the economy, their activities were short lived due to the unsustainable nature of the programme.

1.2 Statement Of The Problem

Microfinance has evolved as an economic development approach intended to benefit low income businesses.

Most small and medium businesses do not have access to funds, yet microfinance scheme is created to meet sustained demand in the management of microfinance, and such problems are identified as following:

  1. Some microfinance institutions target a segment of the population that has no access to business opportunities.
  2. Poor management constraint of some microfinance scheme.

1.3 Objective Of The Study

The core objective behind this study is to access the activities of microfinance institutions in boosting production activities, identify strengths and weakness of microfinance scheme.

It also shall consider the impact of microfinance to small and medium scale business outfits.

Furthermore, it will identify some constraint of management of microfinance institution.

1.4 Scope Of The Study

In the course of this study, the scope of this project writing shall be limited to Imo State Cooperative Financing Associations Limited at Egbu Road.

It is to find out how far, microfinance has facilitated its business activities.

1.5 Hypothesis

  1. Ho: Microfinance institutions have not contributed to any economic growth.
    Ha: Microfinance institutions have contributed to robust economic growth.
  2. Ho: High increase productivity in cooperative business does not have any relationship with microfinance activates.
    Ha: Microfinance activities enhances cooperative business for increase productivity.

1.6 Significance Of The Study

This research work is highly significant in many ways. It’s significance is to the entire business world because it would expose how microfinance intends to benefit the low income earners and enhance service deliver by microfinance institutions to small and medium enterprise. Also, this study will serve as an eye opener, on how microfinance reduces poverty and enhance self employment among the teeming populace or citizenry of Nigeria.

Furthermore, it will show how a microfinance mechanism encourages high productivity of both small and medium scale as well as cooperative businesses.

1.7 Limitation Of The Study

In the course of writing this project, I will not fail to unfold certain constraint encountered. Firstly, the subject matter on study does not have much materials because of the newness of the scheme in the national economy, hence the relevant literatures.

Apart from materials, there were financial constraint, another problem was that of time in most cases lecture periods were used in other to get materials.

1.8 Definition Of Terms

For clarification purposes and clearance of doubt, this project work was done paripasue with some definitions of notable key works as follows:


According to Oxford Advanced Leaner’s Dictionary 6th ed. The word “Relevance” is a noun and it means a closely connected with the subject you discussion.


Means that which is small in size or nature.


Is a money that is used to run or mange a business. Finance also, could be regarded as a story requirement for a successful business start-up and inventor any contemplated expansion or running of and existing business outfit. (ICAN Students Journals, Vol. 10. No2, P: 15, 2006)


Is an economic development approach intended to benefit small business. Also, it is a financial service that is initiated to boost productivity of cooperation business, equally for small and medium scale industry.


According to Ogujiofor E.A. (2001: 80) cooperative business is an association of persons who voluntarily joined together through a business organization to achieve their common needs while equitably contributing their required capital sharing in the risk and benefit and members participate actively and democratically.

Business Ventures:

This is the activity of making, buying, selling and supplying of goods and services for profit purposes.

Chapter Five

5.0 Summary, Conclusion And Recommendation

5.1 Summary

Selecting a target market depends on the objective of the microfinance service provider and the perceived demand for financial services.

In Nigeria today, there are many unserved or underserved enterprises and households, ranging from the poor, who may not be economically active, to small growing enterprises that provide employment in their communities.

Microfinance needs to supply services that fill the gaps and integrate the unserved groups into the market. The fundamental goal of microfinance as developmental organization is to service the financial means of meeting development objectives.

Microfinance institutions needs to determine where there is unmet demand for microfinance services and which target group matches their objectives.

The robust economic growth and development of any country can be properly amassed through effective utilization of microfinance services to small scale business! A well focused programme to reduce poverty through empowering the people by increasing their access to factors of production, especially credit.

Microfinance is about providing financial services to the poor who are traditional not served by the conventional financial institutions.

Furthermore, objectives of microfinance policy 2005 are obvious, which are:

  1. Make financial services accessible to a large segment of the potentially productive Nigeria population which otherwise would have little or no access to financial services.
  2. Promote synergy and mainstreaming of the informal sub-sector into the national financial system.
  3. Enhance service delivery by microfinance institutions to micro, small and medium entrepreneurs.
  4. Contribute to rural transformation by microfinance institutions and microfinance bank.
  5. Promote linkage programes between commercial/development banks, specialized institutions and microfinance bank

These aforementioned 2005 Central Bank of Nigeria microfinance policy work in peripasue with ultimate goal of microfinance services.

From the above analysis on microfinance policy 2005 of central bank, it is belief services will require, provision of conducive relevant legal and regulatory framework to streamline programmes, adopting bottom-up approach in design and implementation of programmes and outright reform of existing programmes.

Micro-financial services as a promotional instrument to enhance the development of small business outfits as well as cooperative business enterprises is paramount.

The development effect of micro financial service has enabled cooperatives societies in strengthening their marketing functions, establishment of cooperative housing and consumer shop.

Cooperative business as a member business meant for people of the same felt-needs/identical problems who pool their limited resources together to transaction business has receive more support from the financial leverage given to them by microfinance institutions.

To this end, for proper utilization of scheme to realize the overall objective of the microfinance service, there should be adequate machinery and uncompromising framework to foster economic growth of cooperative business and other small and medium scale business.

5.2 Conclusion

There exists a huge untapped potential for financial intermediation at the micro and rural levels of the Nigerian economy.

Attempts by government in the past to fill this gaps, through supply, driven creation of financing institutions and instruments, have failed, due to the poor capitalization of such schemes and restrictive regulatory and supervisory procedures, among other factors.

The team community banks were designed to fill the gap, but their low capital base and isolated mode of operation have not enabled them to make meaning contributions.

Microfinance banks established in line with this policy framework of central bank Nigeria 2005 shall be adequately capitalized, appropriately regulated and supervised to address the need of financing the micro and small levels of the economy.

In pursuance for microfinance to harness and realize its cooperate goals of economic empowerment of the poor, employment generation and poverty reduction and strengthening of weak capital base.

The central bank of Nigeria created two categories of microfinance banks to operate in this capacity.

  1. Microfinance Banks licensed to operate unit banks i.e. in communities or local government areas.
  2. Microfinance Banks licensed to operate in a state.

These above banks are to service the financial problems and incapacities of cooperative businesses and other small business organization, which are unable to meet up with the financial obligation of their business.

Micro-financial services also will enable the small sector businesses in developmental projects, employment opportunities and self reliant business of the people, and reduction of dependence of people on government and alleviation of the high increase of poverty among the citizenry of our nation (Nigeria).

5.3 Recommendations

Base on the study so far, it is discovered that most microfinance institutions target a segment of the population that has no access to business opportunities because of lack of market inputs, and demand.

Also, some microfinance institution has failed to manager their funds adequately enough to meet future cash needs and as a result, they confront a liquidity problem.

Ultimately, most of the dilemmas and problems and problems encountered in microfinance have to do with how clear the organization is about its principal goals.

Does microfinance institutions provide microfinance service to lighten the heavy burden poverty? Or Do microfinance to encourage the economic growth? Or to help poor women develop confidence and become empowered within their families? etc.

In a sense, goals are a mater of choice, and in development, organization can choose one or many goals, provided its constituents, governance, structure and finding are all in line with these goals. Therefore, from the above analysis of the study, I recommend, that if the microfinance banks will effectively and efficiently actualized and realize its corporate objectives and goals the follows should be considered as paramount:

  1. Effective legal framework should be enacted by the act of parliament to monitor the activities of microfinance institutions.
  2. The objectives and the population target of microfinance service providers should be made clear, in other to avoid the diversion of interested segments.
  3. Although there is absence of collateral and simplicity of operations of microfinance banks, there should close monitory and controls on the loans given to the target customers to avoid the problems of loan recovery that affected the then communities banks.
  4. For robust economic growth and develo0pment especially to the rural areas, government should erected an enabling environment for effective operations of microfinance institutions.
  5. Also those employments for the management of microfinance institutions should have basic financial education, in other to effective mange the scheme and reduce incidence of misconception, prejudice and bad management.
  6. There should public enlightenment and awareness of the prospects for them to embrace the microfinance services.

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