Determinants of Microcredit Access: Empirical Analysis from South West Nigeria
(ProQuest: denotes formulae omitted.)1 IntroductionAccessibility to microcredit is one of the very important factors in the process of poverty alleviation (Asghar, 2012; El Komi, 2010) To identify the factors that would enhance proper access to microcredit by the rural poor would not only aid rural development but can also guide the government to make more pro poor policies that would influence more credit to be channeled to the rural areas for poverty reduction purposes.Microfinance, which was hitherto referred to as informal finance or rural finance evolved in some European countries in the eighteenth and nineteenth centuries; tagged as Banks for the poor. In Asian countries like China, India, Indonesia and Philippines, microfinance was presumed to have a longer history (Seibel, 2005) What can be termed as the modern microfinance has its antecedent in Bangladesh with the commencement of Grameen Bank project in 1974. Grameen Bank (defined as Rural Bank) was started by Muhammad Yunus, a Professor at the University of Chittagong, Bangladesh in 1976. Suffice to say that the rural banking operation actually commenced in 1976. The bank mainly targeted rural women for its credit programmes. More efforts were made by the international organisations to explore the benefits of microcredits in reducing poverty worldwide. For instance, it is also on record that the Microcredit Summit launched in 1997, the global campaign to expand the coverage of microfinance to 100 million of the world's poorest micro entrepreneurs by 2005. Hence, the United Nations declared year 2005 as the International Year of Microcredit (El Komi, 2010).Microfinance is the provision of credit, savings and insurance services to the poor and vulnerable people who could otherwise have no opportunity to them or be compelled to borrow under unfavourable conditions. In the past three decades, microfinance programmes have been considered by the development economists as one of the foremost developmental strategies for poverty reduction. The importance of microfinance in poverty reduction can hardly be overlooked as access to sustainable financial services increases income and assets of the poor (Central Bank of Nigeria, 2005).As a banker to the poor, microfinance institutions (MFIs) face some challenges; prominent among them is accessibility of microcredit to the targeted poor. Having access to credit can be described as the right of the poor who are economically active to use or obtain such services from the MFIs in order to establish or expand micro businesses.Access to credit plays a prominent role in poverty reduction particularly among the rural poor. For instance, access to microcredit of a peasant farmer can assist her/him to procure materials that can serve as input for improved productivity. In the like manner, accessibility of microcredit to a rural/urban artisan or micro entrepreneur can enable him/her to increase the working capital that can boost the trade with improved customer satisfaction, increased income and eventually escape from poverty trap. All this can lead to increase in household's literacy level, improved health status and better living standard (Todaro and Smith, 2011) In addition, access to microcredit can secure working capital for microbusiness that will generate more income, create employment and eventually reduce poverty. Conversely, inaccessibility of the poor to microcredit as a result of stringent conditions from the supply side and ineligibility of the applicant can further impoverish the poor. This has been identified as one of the major causes of rural poverty (Obisesan and Akinlade, 2013) Ali, et al (2013) discovered that small businesses face difficulties as a result of the requirements demanded by microfinance banks before the loan approval. These include individual collateral, repayment capacity, security deposit and guarantor.In the developing nations, both the public and private banks give priority to the medium and large scale industries in their loan disbursement.