Microfinance and Poverty Alleviation Programmes in Nigeria -The Needed Paradigm Shifts

Adolphus J. Toby, Henry W. Akani


This paper essentially examines the evolution of Nigerian microcredit and poverty alleviation programmes within the framework of building a sound microfinance infrastructure.  Most of the Government-controlled microfinance programmes and institutions failed because of low loan recovery rate and high subsidy index.  Hence their outreach to the poor, including the financial self-sustainability and welfare impact have been limited. Discarding wrong assumptions about the rural poor, we propose paradigm shifts that accord the public sector an indirect intervention role, but a private sector-led microfinance delivery strategy.   A market-oriented rural financial system that emphasizes savings rather than credit and avoids subsidized interest rates is recommended.  The recent Central Bank of Nigeria’s Microfinance Regulatory Framework should aim further at (1) integrating informal microcredit groups into the formal financial system, and (2) creating appropriate linkages between rural financial institutions and the Nigerian capital market.  Developing a favourable policy environment for rural financial intermediation requires macroeconomic stability, elimination of urban-biased policies, and promotion of integrated and resilient financial markets.

Keywords:  Microcredit, poverty alleviation, paradigm shift, rural financial system, outreach, subsidy index.

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ISSN (Paper)2224-607X ISSN (Online)2225-0565

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