MICROFINANCE BANKS AND AGRICULTURAL FINANCING IN NIGERIA
 (AN IMPACT ANALYSIS)
ABSTRACT
    Microfinance banks intervention on agricultural financing in Nigeria has being question if its role in boosting, agricultural production in Nigeria plays tremendous impact in the economy. Since the avert of agriculture in the country in contributing to the nation GDP, the sector has not being properly funded by the government and private  investor on agriculture has being very low due to inadequate finance to the sector.
    However, the government has made several effort to increase agriculture produces in the economy with the implementation of some monetary policies to boost and encourage agricultural investment. Some of these policies has facilitated the established of microfinance banks with the aim of assisting and providing support from SME and agricultural investment.
    Some variables were analyzes in relation with loan granted to agriculture and other sector in the economy with the money supply to the economy. Using a time series of 21 – years.
    The result deduce from the ordinary least squares (OLS) regression indicate that microfinance banks has not properly influence growth and development in the agricultural sector of Nigeria, show that more need to be achieve so that the gap in financing agriculture can be reduce simultaneously.    
TABLE OF CONTENT
CHAPTER ONE: INTRODUCTION
1.1    Background of the Study                    
1.2    Statement of Research Problem            
1.3    Research Question                        
1.4    Objectives of The Study                    
1.5    Research Hypotheses                
1.6    Scope of Study                         
1.7    Significance of the Study                    
1.8    Limitations of Study                         
CHAPTER TWO: LITERATURE REVIEW
2.1    Introduction                             
2.2    Agriculture and the Nigeria Economy         
2.3    Reasons for Agricultural Financing             
2.4    Microfinance History in Nigeria             
2.5    Objective of Microfinance Banks             
2.6    An Overview of the Characteristics of Microfinance Institutions in Nigeria             
2.7    Agricultural Financing in Nigeria             
2.8    Role of Microfinance Bank in Promoting Agricultural Finance                         
CHAPTER THREE: METHODOLOGY
3.1    Introduction                            
3.2    Research Design                         
3.3    Population and Sampling Size                 
3.4    Source of Data                         
3.5    Research Instrument                         
3.6    Model of Specification and Data Analysis         
CHAPTER FOUR: EMPIRICAL ANALYSIS
4.1    Introduction                             
4.2    Data Presentation and Analysis             
4.3    Data Interpretation                        
CHAPTER FIVE: SUMMARY OF FINDING, CONCLUSION AND RECOMMENDATIONS
5.1    Introduction                             
5.2    Summary of Findings                     
5.3    Conclusion                            
5.4    Recommendation                        
    Bibliography                             
    Appendix                                 
CHAPTER ONE
INTRODUCTION
1.1    BACKGROUND TO THE STUDY
    In Nigeria, credit has been recognized as an essential tool for promoting small and micro enterprises (SMEs). About 70% of the population is engaged in the informal sector or in agricultural production. The federal and state governments have recognized that for sustainable growth and development, the financial empowerment of the people is vital. To give effect to these aspirations various policies have been instituted over time by the federal government to improve rural and urban enterprise production capabilities (Olaitan, 2006).
    Small business enterprise (SBE) through Micro Financial  Institution (MFI) transformation is all about seeking to bring about improvement into the availability of credit to the farmer, artisan, and those involved in agro-live processes and the landless within the simple and rustic economies of country-sides and urban slums.
    The micro farmers lack of necessary financial services to do business, especially credit from the universal banks; this is because they are considered not credit worthy. Consequently they depended on families, friends and other informal sources of funds to finance their business.
    Successive governments have come up with special programs, whose principal targets are the overall empowerment of low income earners in urban centers, unfortunately most of the programmes failed to achieve the desired result which led to  the emergence of microfinance banks which is aimed at extending credits to micro enterprises including farmers and encouraging entrepreneurship development thereby boosting agricultural produces for local consumption and exporting for international trade which will yield GDP of the country.
    In the light of the foregoing, this study is conducted to examine the impact of microfinance banks on agricultural financing project in Nigeria.
1.2    STATEMENT OF THE RESEARCH PROBLEM
    One of the challenges of micro financing in Nigeria at present is how to micro finance institutions can reach a greater numbers of small scale business entrepreneurs which including small scale or rural farmers.
    The existing microfinance banks in Nigeria serves less than 1 million people out of 40 million potentials people that need the service (CBN 2005). Also, the aggregate micro credit facilities in Nigeria account for about 0.2% of GDP and less than 1 percent of total credit to the economy. The effect if not appropriately addressing this situation would further accentuate poverty and slow down growth and development of agricultural produces and other SMEs in the country.
    The concept of micro-financing is presently being misapplied; for instant, the CBN directed every MFI to have a minimum of N20,000,000 while at the same time directly NDIC to insures each depositor for a maximum N100,000 regardless of the amount of money invested. These requirements take the microfinance industry out of the reach of the people it was intended to serve, the very poor.
    It is interesting to know that the CBN does not regulate interest rate charged by microfinance banks.
    Having failed to capture its target market, microfinance banks in the country are now trying to compete with full-fledged banks but are grossly lacking in the most important aspect of its operations; that is raising funds from depositors and getting prospective clients to shed their phobia for bank loans for fear of exorbitant interest rates charges and hidden bank charges.
1.3    RESEARCH QUESTION
    The following research questions shall guide the study:
i.    What is the impact of microfinance banks credit on agricultural performance (production).
ii.    What are the challenges of microfinance’s in Nigeria?  
iii.    How can micro finance institutions be responsive to farmers and agro-producers demands?
1.4    OBJECTIVES OF THE STUDY
    The primary objective of this study is to examine the impact of microfinance bank on credit on the growth and development of agricultural sector in Nigeria. Other salient objectives will include:   
i.    To determine the impact of micro finance credit and on agricultural production.
ii.    To examine the challenges of micro financing in Nigeria.
iii.    To suggest means by which micro finance institutions can be more responsible to small scale farmers and rural farmers needs in Nigeria.
1.5    RESEARCH HYPOTHESES
    The following hypotheses will be tested in the study;
Ho:    There is no significant impact of microfinance banks credit on agricultural production.
H1:    There is a significant impact of microfinance banks credit on agricultural production.
1.6    SCOPE OF THE STUDY
    The scope of this study cover microfinance banks activities and operations on agricultural financing in Nigeria. It also cover some relevant agencies in line with agricultural production, processing marketing, distributing, financing and other relevant operations that may arise.
1.7    SIGNIFICANCE OF THE STUDY
    Robust economic growth cannot be achieved without putting in place well focused programmes to reduce poverty through empowering the people by increasing their access to factors of production, especially credit. The latent capacity of the poor farmers and rural farmers would be significantly enhanced through the provision of microfinance services to enable them engage in economic activities and be more self-reliant, increase employment opportunities enhance household income and create wealth.
    Hence, this study is to enlightened agricultural investors on how best they can access funds from microfinance banks, knowing which line of agriculture to invest in and also to policy makers in the areas of finding the impact of micro-financing on rural and peasant farmers. The study will also enhance further investigation on the operation of agricultural financing and other salient subject areas.
1.8    LIMITATIONS OF THE STUDY
    Owing to shortage of literature and comprehensive financial data, raw data shall be generated.
    There is constraint on geography coverage since few microfinance banks operations will be emphasis in relation all as a case in Nigeria.
    Reluctant of some government officials in regarded to data generation was encountered.