CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1 Introduction
The body of
literature on women empowerment and micro-finance is growing. In order to place
this study in a proper context, some of the existing literature would be
reviewed. The literature review is conducted under different captions such as
the definition of microfinance sections, overview of the microfinance sector,
the stakeholders of the microfinance sector in Nigeria, the role of
microfinance on the entrepreneurial empowerment of women.
2.2 Definition and Scope of Microfinance
Micro-finance is
the provision of a broad range of financial services such as credit and savings
to poor and low-income household and their micro enterprises Rhyne, (2003).
Microfinance refers to a variety of financial services that target low-income
clients, particularly women. Since the clients of microfinance institutions
(MFIs) have lower incomes and often have limited access to other financial
services, microfinance products tend to be for smaller monetary amounts than
traditional financial services. These services include loans, savings,
insurance, and remittances. Micro loans are given for a variety of purposes,
frequently for microenterprise development.
The diversity of products and services offered reflects the fact that the
financial needs of individuals, households, and enterprises can change
significantly over time, especially for those who live in poverty. Because of
these varied needs, and because of the industry's focus on the poor,
microfinance institutions often use non-traditional methodologies, such as
group lending or other forms of collateral not employed by the formal sector.
Micro finance
institutions (MFIs) consist of agents and organizations that are engaged in
relatively small financial transactions using specialized, character based
methodologies to serve low-income households, micro enterprises, small farmers,
and others who lack access to the banking system. In addition to financial
intermediation, many MFIs provide social intermediation services such as group
formation, development of self-confidence, and training in financial literacy
and management capabilities among members of a group. Thus the definition of
micro finance often includes both financial and social intermediation. Although
some MFIs provide enterprise development services such as skills training and
marketing, and social services, such as literacy training, proper home
management and health care, they are not generally included in the definition
of micro finance.
It must be
emphasized that, micro finance covers a broad variety of institutional
arrangements and approaches. They range from small self-help groups with a
handful of members to huge organizations that have nationwide coverage and
millions of clients. MFIs can be non-governmental organizations (NGOs), Savings
and Loans Companies, Credit Unions, Government Banks, Commercial Banks, or
Non-Bank Financial Institutions.
The last decade
has witnessed a significant transformation of the financial landscape of
Nigeria in terms of the diversity of institutions and the areas of focus. While
the numbers and types of institutions have increased remarkably, accompanied by
an array of financial services, there is still the observation that financial
services remain inadequate, particularly for small borrowers and depositors, as
well as the poor, thus leaving large sections of the society not catered for.
A plethora of
policies were initiated and implemented throughout the years by the government
and NGOs to encourage `the provision of efficient financial services for the
majority of citizens and to bridge the gaps between the formal and non-formal
sector, and between the urban and rural areas in accessing financial services.
Aryeetey (2003) asserted that Nigeria’s SME sector consists of countless tiny
enterprises begun by the poor in the cities, towns and villages. These micro
enterprises are often the sole source of income for the majority of people,
either because they lack the skills or education to find jobs in commerce and
industry, or, as is mostly the case, because there are too few jobs in the wage
economy.
The large number
of women in micro enterprises may be due to their low level of education and
skill acquisition. The small and micro businesses comprise nearly 90% of
businesses and the fastest–growing part of the private sector. While there is
no single definition, most micro enterprises demonstrate the following
characteristics:
Ø Employment:
Micro-entrepreneurs often work alone or employ one to five persons, including
unpaid family members.
Ø
Target
group: women with little or no education
mostly undertake micro enterprises.
Ø
Fixed
Assets: With so few workers, production is
often manual and simple equipment with limited fixed assets.
Ø
Location:
Many micro enterprises are home based, operate from informal market stalls or
are mobile vendors. More established micro enterprises operate out of
commercial locations.
Ø
Marketing
& supply: Micro enterprises generally sell
to and buy from, local markets. They are less likely to export their products
or rely on imports than larger firms. They sometimes buy and sell on credit.
Ø
Legal
Registration: Micro enterprises often operate
outside the bounds of the regulatory framework. These firms may not be legally
registered, pay taxes or adhere to health, safety or labour regulations.
Micro
enterprises are becoming increasingly important because they provide a large
percentage of jobs needed by women, the uneducated, the youth and the very
poor, and provide goods and services for public consumption.
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