Impact of Microfinance Banks on Poverty Alleviation in Selected Local Government Areas of Oyo State, Nigeria

Abstract

The study examined the impact of microfinance banks on poverty alleviation in selected Local Government Areas of Oyo State. Standard of living of the respondents was examined; relationship between size of loans and standard of living and the extent to which women has benefitted from microfinance bank activities were also evaluated. The study was carried out in three Local Government Areas which were selected using stratified and purposive sampling techniques. 150 customers of microfinance banks were selected. Primary data were analyzed using Foster Greer Thorbecke; Matching Framework Analysis and Partial Correlation. The results revealed that poverty index of the respondents reduced from 0.1668 to 0.1551 after collection of loans which implied that microfinance banks has impacted positively on their living standards. The extent at which women has benefitted from microfinance banks ranges from 65% to 74% between 2007 and 2010. The result indicated that women are increasingly benefitting from microfinance activities in contrast to yester years when there was gender disparity skewed against women. Moreover, the relationship between size of loan, asset acquisition and profit after loan were positive and significant with P = 0.085 and r = 0.152, this revealed that as the size of loan increases, asset acquisition and profit also increases. It was recommended that the size of loans given to customers should be increased in order to enhance their standard of living and consequently alleviate poverty. Microfinance banks should encourage formation of cooperative societies through which they can give out loans to customers.

Keywords: Microfinance bank, Poverty, Living standard, Nigeria