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THE ROLE OF MICRO-FINANCE INSTITUTIONS IN ENHANCING WOMEN ENTREPRENEURSHIP

ACCOUNTING PROJECT TOPICS AND MATERIALS

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

In the economic development of a communities and families around the globe, women have been seen to play a crucial role. However, they still face obstacles such as unemployment, societal discrimination, poverty and low household incomes. In developing countries, this has often constrained their effective performance of these roles (Maru and Chemjor, 2013).The proliferation of micro-finance services in developing countries is viewed as a panacea for fighting poverty (Akanji, 2006). Micro-finance entails the financial services provision to clients who are often locked out of banking and other financial services. It assists in reaching out to the vulnerable segments of the society like women, urban poor and rural poor who are outside the purview of the formal institution (Jain and Jain, 2012). Women in the working sector, both formal and informal contribute to the overall income of a nation. These women provide and maintain to a sustainable livelihood of the communities and families in the country and around the world. Women face many socio-challenges such as personal difficulties, lack of education, legal barriers and socio-cultural attitude. As traditionally, women have often been marginalized, approximately 70 % of the world population comprises of women, and they still lack access to financial services and access to credit. MFIs today predominantly target women. Micro-finance is an important tool to empower women from poor household (Noreen, 2011). The women who were already engaged in the informal sector witnessed more competition on products due to trade liberalization and the rise of commodity prices. Similarly, the economic crisis led women into economic activities which were previously considered to be the men’s domain (Rutashobya and Olomi, 1999). The crisis of the 1970s to 1980s exacerbated a shift of direction of income generating activities, from depending on formal income to informal activities. The informal sector became important; the reliance of household members on formal wage earnings was replaced by informal income generating activities (Tripp, 1996). The rapid growth was initiated by the informal entrepreneurs themselves as a measure of survival following the failure of the state (Maliyamkono and Bagachwa, 1990; Rutashobya, 1998; Rutashobya and Olomi, 1999; Tripp, 1996). The decline of real wages, persistent inflation, and the decline of the formal sector employment attributed to the rapid expansion of the informal sector (Bagachwa 1993; Lugalla 1995).

Studies on micro-finance and women empowerment have used different theories to explain the relationship. These theories include psychological motivation theory, social learning theory, network affiliation theory and human capital theory (Muteru, 2014). These theories are presumed to be appropriate for micro-finance and women empowerment as the objective of micro-finance services is to provide financial services to women as they often face barriers to access to credit. The majority of the women in employment is in the informal sector and, therefore, is not supported by the commercial banks. Small and medium enterprises owned by women are often beneficiaries of micro-finance services and products. There have been various studies on the relationship between micro-finance institutions and women empowerment across the globe. Lavoori and Paramanik (2014) study on micro-finance impact on women’s decision making in rural India revealed that MFI system of financing has had an unexpected positive influence in the lives of rural women. Nilkantan et al. (2013) study on the impact of micro-finance on women empowerment in India, however, found that need to design explicitly program features to promote women empowerment. Kato and Kratzer (2013) study on micro-finance and women empowerment found that participation in micro-finance services could enable women to have the capability of making strategic choices concerning their lives. It has often been the assumption that by increasing women access to financial services will influence a greater contribution to household incomes and also improve well-being in the family, ability to bring wider changes in gender equality and translate into the overall well-being of women (Biswas, 2008). It is believed that giving women the proper resources, they empowered to help households and the whole community escape poverty. By providing access to finance for business operations, micro-finance services can significantly increase women ability and capacity to work autonomously which, in return, reduce their vulnerability to poverty (Wrigley-Asante, 2011).

1.2 STATEMENT OF THE PROBLEM

According to Basu (2006), the concept of empowerment of women hasn’t been practical as there are still low numbers of female entrepreneurs and their success is unacknowledged or even remains invisible. The increase of women with access to MFI is expected to increase their levels of income which would, in turn, result in enhanced gender equality and also to their improved well-being. Micro-finance activities have been controlled in Kenya since 2006, when Kenya’s Micro-finance Act, (2006) was signed to bring the MFIs that are determined to take deposits from the public under CBK supervision and regulation (Wambugu and Ngugi, 2012). Berg (2001) argues that, most of the businesses in developing countries lack access to basic financial services that would help them manage their assets and generate income. Studies finds that participation in micro-credit programs results in women’s economic and socio-empowerment (Mayoux, 2001),most women in micro-finance institutions fall under informal sector with most of them involved in small business to earn income to support their families.

Despite the increase in the number of the micro-finance institutions in Nigeria, access to finance is still considered as one of the major hindrances to women entrepreneurs in Nigeria (Nwanyanwu, 2011). This implies that micro-finance institutions have not reached the poor of which women form the majority. To support the observation, Eluhaiwe (2005) noted that most women entrepreneurs in developing countries do not have easy access to credit for their entrepreneurial activity due to the service that micro-finance institutions provide and some of the conditions attached to them, they are not able to reach the poorest of the poor that they seek to serve. United Nations Consultative Group to Assist the Poor (CGAP, 2003) also confirmed that most micro-finance clients today fall in a band around the poverty line and the extremely poor are rarely reached by micro-finance in Africa countries. In the same vein, Sanusi (2012) opined that access to finance is one of the major factors impeding the growth of women-owned businesses in Nigeria.

1.3 OBJECTIVES OF THE STUDY

The general objective of this study is to examine the role of micro-finance institutions in enhancing women entrepreneurship, a case study of Ikenne LGA of Ogun state. The specific objectives of this study include the following: 1. To examine the pattern of financial products made available by micro-finance institutions and rendered to women entrepreneurs. 2. To investigate the degree of accessibility of micro-finance institutions products by women entrepreneurs. 3. To determine the influence of micro-finance institutions finances on women entrepreneurs’ performance. 4. To identify the problems encountered by micro-finance institution operators in financing women entrepreneurs.

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