Microfinance Institutions in Nigeria
This paper provides an overview of microfinance sector development in Nigeria. The country has the third highest number of poor people in the world, and two-thirds of its people are poor. Microfinance in Nigeria, however, serves less than one million people out of forty million people estimated to need the service. Semi-formal and formal providers of microfinance are a small but rapidly growing part of Nigeria's finance sector. Features of Nigerian microfinance include:
- Aggregate microcredit facilities account for about 0.2 percent of GDP, and less than one percent of total credit to the economy;
- Most microfinance funding goes to the commercial sector to the detriment of more vital economic activities;
- Commercial and development finance institutions are main suppliers of MFI credit;
- Challenges MFI face include high interest rates, inequitable distribution of wealth and income and reaching the poor.
MFI establishment in Nigeria has been based on weak institutional capacity and capital base, existence of a huge unserved market and utilization of Small and Medium Enterprises Equity Investment Scheme (SMEEIS) fund. Establishment of a microfinance framework for Nigeria would help international investors finance economic activities of low income groups and the poor.
