Microfinance Program for Poverty Reduction in Nigeria

This paper proposes the implementation of a microfinance program in Nigeria to reduce poverty among lower income earners in rural areas. The program aims to increase income, improve agricultural productivity, and enhance standards of living for the target population. The paper also discusses the need for the program, justifies it with literature and reports, and outlines the objectives, potential outcomes, and implementation plan.

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Introduction to Economic Development
By (Name)
Course
Instructor’s Name
Institutional Affiliation
The City and State
The Date

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Introduction
For the purpose of this paper, I will demonstrate my ability towards the development of a
short term program for reducing poverty in Nigeria. In this case, I will use various poverty
reduction programs to design and implement the necessary program inthe region.The paper will
be in the form of a grant proposal to an international organization that aims at reducing poverty
in developing countries. The program will be for a short term period of only two years. The
programs developed for the reducing poverty in the countryare based on the research carried out
about the socio-economic trend of the region that includes the relevant target baseline, existing
poverty reduction programs, and the need of the locals. Also, the paper will also identify the gaps
that exist between the current situation and relevant SDG targets. Therefore, the grant application
case study report will cover the poverty reduction program of the regionas a developing country
(Hermes 2014).
Background
Since 2001, Nigeria has gone through a high rate of economic growth. However, the rate
of the country's economic growth has not impacted the country's socio-economic conditions.
This indicates that the country’s social economic development has been very slow as compared
to some other developing countries like India, and many others. In the region, various socio-
economic indicators are highly improving but the country may fail to achieve many of its Social
Development Goals by 2021 (Guérin 2015). Further, it is indicated that the Gross Domestic
Product of the region was at an average of 9.2% between "2001 and 2009" as compared to the
average growth rate of 2.5% between "1995 and 1999". Other activities of the country have
created an average of 9.0% towards the growth of the Nation. The revenue obtained by the
government from oil has increased by 65% since2001 to 2019. In addition, the government's

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expenditure has increased by greater than seventy-eight percent. Many of the country's
socioeconomic indices such as child and infant mortality rates have greatly improved (Reynolds
& Christian 2011). However, there is still a bigger gap between the indices and the country's
social Development Goals target. The country is also very behind as compared to various
comparator countries in the continent about its socioeconomic indices. For the past years, the
growth of the country has been categorized as "jobless grow" Despite an increased growth of the
country as a result of oil activities, the rate of unemployment in the area is still a bigger
challenge mostly among the youth (Guérin 2015). As jobs seem to be increasing in the region
much of the labor force is provided by families in agriculture. Therefore, this has led to an
increase in the growth rate of income for people in rural areas. Despite the decline in the poverty
rate of people in rural areas in the region, employment wage has greatly decreased. Further, the
government of Nigeria has been spending much of its revenue on human development expenses
(Adoyi 2010).
Figure one: Nigeria's socioeconomic growth (%)
2001 2002 2003 2004 2005 2006 2007 2008 2009
-10
-5
0
5
10
15
20
25
30
35
40
Real GDP Oil GDP Non-Oil GDP
Source: http://documents.worldbank.org/curated/en/734001468292284454/Nigeria-socio-
economic-assessment

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Explanation: The figure above indicates that non-oil activities created played a greater
role in the generation of the country’s Gross Domestic product as compared to Oil production.
Needs identification
This section illustrates the gaps identified between the relevant Sustainable Development
Goals of the country’s target and the current situation in the country. In addition, the status
indicates the general needs of the target participants of the selected program. In this case, the
region's Sustainable Development Goals are aimed at reducing poverty in the country. The
government of Nigeria indicates that the rate of poverty among the people in rural areas is
69.0%v as compared to 51.2 percent for the people in urban areas. More so, the government's
SDGs aim at reducing the country's poverty line from 62.6 percent to at least 30 to 20% (Claire
et al 2011). The country’s Sustainable Development Goals also aimed at reducing the rate of
children, women, and men poverty rates (Guérin 2015). Also, the SDGs of the region aims at
reducing the rate of government expenditure on providing essential services to its Citizens.
However, the country's SDGs targets have faced various gaps leading to ineffective
implementation of the current government programs of reducing poverty (Velarde 2017). Current
gaps in the Sustainable Development Goals target of the country include; first, the country's
reliance on gas and oil sector, dwindling agricultural productivity and production, and the limited
value in agriculture to create jobs, grow the economy, ensure efficient supply of food and
address poverty is still a bigger challenge to the government (Reynolds & Christian 2011). The
Country’s reduction in the productivity of agriculture is major because of the climatic changes,
manmade and natural disasters, desertification, low use of proper farming machines and
improper use of land. Also, the government of Nigeria has faced a gap in technology and
infrastructure deficit. This has been considered as a major challenge to the country's Sustainable

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Development Goals attainment. Technological gaps and infrastructure deficit hinder the
country's application and provision of technology innovation and science in most of the country's
areas. Also, the country is still facing a challenge of humanitarian and economic recession crises.
The country's economic recession is believed to be as a result of increased fluctuation of oil
prices in the Global market. In addition, the country's humanitarian crises affecting North East
have continuously created a greater challenge to the achievement of the Country's Sustainable
Development Goals (Claire et al 2011).
In this case, the development of the new short term poverty reduction program will aim at
addressing the need of the rural people in Nigeria. Also, the program will address the problem of
poverty among the lower income earners in the country. As a result of the country's economic
recession majorly in rural areas, the program will aim at supporting the need for mobilizing
many resources and finance to support the lower income earners in rural areas of the country
(Guérin 2015). It is indicated that lower income earners in rural areas of the region face greater
challenges of ensuring financial recovery and flow that lead to limited mobilization for
Sustainable Development Goals implementation. It is identified that most of the people in the
region live below US$ 1.90 per day. Also, the amount of money located in rural areas by the
government of Nigeria is relatively lower as compared to the urban areas leading to increased
poverty in such areas. Therefore, this microfinance program will aim at eliminating income
inequalities among the lower income earners in rural areas and high-income earners in urban
areas (Macharia et al 2014).
Why the selected poverty reduction program (s) required for the location.
The selected Microfinance programs are required for lower income earners of Nigerians
living in rural areas because they will aim at improving their standards of living. Studies indicate

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that most of the people living in rural areas in Nigeria majorly depend on agricultural production
as their source of income. To make it worse, the labor force in agricultural production is
provided by family labor making production inefficient. Further, microfinance programs will aim
at improving the standards of living of low-income earners in rural areas by ensuring increased
profit margins. In addition, the program is required because it will aim at increasing the
agricultural productivity of lower income earners in rural areas of the country. By funding
agricultural activities in rural areas, the productivity will improve hence increasing the income of
people in rural areas of the country (Velarde et al 2017). By implementing microfinance
programs, low-income earners of Nigerians living in rural areas will be in the position to get
small loans, acquire savings account and be in the position to make investments for two years.
By gaining access to microfinance, low-income earners of the region will be in the position to
earn better and more protection against unexpected setbacks and losses (Johnson, &
Williams2016).Also, the program is also required because it will help the low-income earners in
rural areas of the country to be in the position to live beyond "a day to day survival" by planning
their future. The program is required because it will help lower income earners of the country to
stop depending on agriculture only for sustainable development but also be in the position to set
up various productive businesses thereby helping them easily recover quickly from poverty. In
brief, the program is required for lower income earners of Nigerians living in rural areas because
it can easily break the vulnerability and poverty level of the people (Kar 2013).
Literature and reports to justify the identified needs
Studies by the United Nations indicate that much of the microfinance is required for
eradicating poverty and hunger among low-income earners in rural areas. In addition, the study
indicates that proper macroeconomic policy and good governance are the best strategies for

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developing the industrial sector and rural areas. Further, the study indicates that microfinance
programs highly contribute towards the investment in human capital, clinics, and classrooms
which are the major elements of eradicating poverty (Feigenberg et al 2010). Further, the United
Nations indicates that support from international countries in microfinance programs helps in
eradicating poverty in a better and more efficient way. By implementing microfinance programs,
the United Nations believes that lower income earners in developing countries of Africa will be
in the position to lift their well-being. Studies from the United Nations also indicate that
microfinance programs are the most important ways of extending the same similar and right
services to lower-income earners in developing countries (Reynolds & Christian 2011). Also, the
literature indicates that microfinance is the best way of protecting lower-income earners against
shocks by giving them a chance to be involved in the economic activities of the Nations. United
Nations also believes that microfinance programs can help in building markets. United Nations
also indicates that most of the people in developing countries are not in the position to get access
to different financial services as they only reach a small proportion of the people. The literature
also indicates that there are major disparities in the distribution of ATMs, banks and other related
services (Velarde 2017).
Program
The program to be implemented for the region is Microfinance. In this case,
Microfinance refers to the nature of "financial services" that are targeted at small businesses and
individuals lacking access to banking services and other related services. In this case,
microfinance includes savings, micro-insurance, payment systems, provision of loans to lower-
income earners and other services (Guérin, et al, 2013).
Objective

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The major objective of this program is to ensure the effective reduction of poverty among
lower income earners in the country's rural areas.
Potential outcomes
 The implementation of the project will aim at achieving the following potential
outcomes;
 Increased income among the low-income earners in rural areas of the country by
at least 30 to 20 percent within two years.
 Increased productivity of agriculture in the shortest run to at least half of the
farmers in rural areas of the region.
 Improved standards of living of the people at least by 25% as compared to the
current rate of poverty 42.2%.
 Reduce income inequality among the lower and the higher income earners in the
country to at least 38%.
Program implementation
The implementation of the program will involve various activities such as; giving out
loans to lower-income earners in rural areas, savings, and microcredit. In this case, the
implementation of the project will target all lower-income earners from rural areas in the region.
All the lower income earners will be provided with financial support so as to improve their
wellbeing in the shortest run (Reynolds & Christian 2011).The stakeholders to take part in the
implementation of the microfinance program include; World Bank, United Nations Development
program and Center for Financial Inclusion. Also, the key implementing partners of the

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microfinance program are; the finance minister of the country, the local leaders, the heads of the
organization giving the grant, and other rural leaders (Feigenberg et al 2010).
Evaluation
In order to meet the needs of the people identified in section two, proper evaluation needs
to be done. In this case, the evaluation of the program performance will involve the following;
first, ensuring policies on interest rates and saving regulations and large scale financial support
such as mobile banking (Caramela 2018). These interventions need to be clearly evaluated so as
to ensure that the program is not disturbed by people who may not be in support of the program.
In this case, regulations on savings may involve two major issues that is to say; carrying out deep
research about the need of the people to save and the effect of saving to the client. Therefore, to
ensure the effective reduction of poverty among the lower income earners of the country, saving
regulations need to be clearly evaluated (Reynolds & Christian 2011).
Secondly, evaluating the process or product of the program. This will involve testing of
the new process implemented by giving chance to volunteer clients to use the leading processor
products to some small groups of people. By testing the process or product in the area, the best
alternatives will be made so as to ensure effective performance of the program (Bruton et al
2011).
Thirdly, determining the sample size or clients. In order to effectively evaluate the
performance of the microfinance program, the sample size will be selected depending on the
estimated effect of the program. Determining the sample size will be both binary and continuous
depending on income changes and poverty level (Rutherford et al 2009).

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Lastly, measuring the period of program implementation. This will involve measuring the
outcomes observed in a given point of time. In most cases, the debt level of people will be
measured first to identify if people are seeking for loans so as to improve their standards of
living. This may also involve the evaluation of the quality of the loan obtained by an individual
or a group as the impacts are measured by differences in debt instruments. In addition, the
working capital of the people will be measured to determine if the program will achieve the need
of the people in the shortest run (Caramela 2018).
However, the implementation of the program may face some problems of issues both
financial and administrative. In most cases, the program may create up a bigger income
inequality among the people in rural areas and urban areas. Because the program is only meant
for lower income earners in rural areas, those in urban areas are left out leading to income
inequality. In addition, the program may be affected by government regulations on the allocation
of microfinance. At times, some countries regulate the formation of n of microfinance because of
various financial issues hence affecting the implementation of microfinance programs (Reynolds
& Christian 2011).
Summary and recommendations
The above-selected program is meant to improve the well-being of lower-income earners
in rural areas of Nigeria. In this case, the microfinance program is basically meant for addressing
income inequality among the people of the country. By implementing the program, the people in
the region will be in the position to be self-sustainable hence cutting down government
expenditure of provision of some services. Also, the implementation of the program will greatly
improve agricultural productivity by increasing investment in the sector (Johnson, & Arnold
2012). Therefore, if the program is well implemented the standards of living of people in rural

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areas of the region will improve. In order to ensure effective implementation of the microfinance
program, various improvements and suggestions need to be done. In this case, the
implementation of the program should be allocated to only the potential people who can be in the
position to repay back the money in the shortest time. In addition, the program should focus on
lower-income earners with capabilities of carrying out investments. Therefore, the
implementation of the project should be focused on lower income earners who have the capacity
to improve their income levels if given an opportunity (Caramela 2018).

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References
Adoyi W, E. 2010. National Poverty Eradication Programme (Napep). Lap Lambert Academic
Publishing. ISBN 978-3-8433-7463-7
Bruton, C., Khavul, G.D., H., S. 2011. "Microlending in emerging economies: building a new
line of inquiry from the ground up". Journal of International Business Studies. 42 (5): 718–739.
Caramela, S. 2018. "Microfinance: What It Is and Why It Matters". Business News Daily.
Claire M, Renate H, Ursula G. 2011. Jobs, growth, and poverty: what do we know, what don't we
know, what should we know? London: Overseas Development Institute
Feigenberg, B., Erica, M., Field, Rohan, P. 2010. "Building Social Capital through
MicroFinance". NBER Working Paper No. 16018. doi:10.3386/w16018
Guérin, I. 2015. La microfinance et ses derives. Emanciper, discipliner ou exploiter? (Paris:
Demopolis).
Guérin, I., Morvant-Roux, S., and M. Villarreal. 2013. Microfinance, debt, and over-
indebtedness. Juggling with Money (London: Routledge).
Hermes, N. 2014. Does microfinance affect income inequality? Applied Economics, 46(9), 1021-
1034. doi:10.1080/00036846.2013.864039
Johnson, S., & Arnold, S. 2012. ‘Inclusive financial markets: Is transformation underway in
Kenya?' Development Policy Review, 30(6), pp. 719-748, DOI: 10.1111/j.1467-
7679.2012.00596.x.
Johnson, S., &Williams, R. 2016. ‘The political economy of financial inclusion: Tailoring donor
policy to fit’, Development Policy Review, 34(5), pp. 721-743, DOI: 10.1111/dpr.12170

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Kar, S. 2013. Recovering debts: Microfinance loan officers and the work of "proxy-creditors" in
India. Journal of the American Ethnological Society, 40(3), 480-493. doi:10.1111/amet.12034
Macharia I, Orr A, Simtowe F, Asfaw, S. 2014. Potential economic and poverty impact of
improved chickpea technologies in Ethiopia Retrieved
fromhttp://exploreit.icrisat.org/page/chickpea/685/107. ICRISAT.
Reynolds, C., Christian N. 2011. "Low-Income Entrepreneurs and their Access to Financing in
Canada, Especially in the Province of the Quebec/City of Montreal".
Rutherford, S., Arora, Sukhwinder. 2009. The poor and their money: microfinance from a
twenty-first-century consumer's perspective. Warwickshire, UK: Practical Action.
p. 4. ISBN 9781853396885.
Velarde, R. 2017. "The Future of Financial Inclusion: A Leadership
Challenge" (PDF). microfinancenetwork.org.

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Appendices
Figure two: Reflective abstract

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Figure three: Reflective writing