Economics

NIGERIA: Microfinance instrumental to poverty eradication

Nigeria EconomyDeveloping countries like Nigeria can use microfinance initiative to address poverty by widening people’s access to finance especially the active poor.

According to a study released by the International Finance Corporation (IFC), microfinance can reduce poverty because it decreases inequality and gives low-income people access to basic financial services that may be difficult to get otherwise.

This means that there is the need to create more microfinance institutions in the rural villages where access to finance is critical in Nigeria.

Recent finding by the IFC shows that finance is a key constraint for Micro Small and Medium Enterprises (MSMEs). For instance, IFC provides financing to a large network of financial intermediaries in emerging markets, which in 2011 financed 23 million MSMEs, which in turn employed over 100 million people.

Meanwhile, as the country’s population grows, the need to create more jobs intensifies, and developing countries may get to address this need, as well as that of poverty reduction by widening people’s access to finance and supporting self-employment in low-income areas such as agricultural villages.

The corporation pointed out that the generate the most jobs in developing countries but they are also less productive, pay less, and do not offer as much training and development opportunities for employees.

“The largest numbers of jobs are created within companies’ supply and distribution chains. For example, an IFC loan to an Indian cement manufacturer helped the company expand and create more jobs. For every job created within the company, more than 20 were created in the supply and distribution chains and youth face specific employment challenges. Legal barriers, lack of access to finance, and cultural norms often force women to work in jobs that pay less and are less secure,” the Corporation said.

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