Challenges of Micro Finance Banks in Promoting Economic Development in the Federal Capital Territory, Abuja, Nigeria

Abstract

The research is an analysis of the challenges of Microfinance Banks in promoting economic development in the Nigeria’s Federal Capital Territory. The main prohibitive challenge bedeviling SMEs that are the major catalysts for development across the globe especially developing economies that prompted the establishment of microfinance banks is financial difficulty. Several decades after coming into existence, MFBs have not meaningfully ministered to the needs of the SMEs. The paper seeks to find out how far the MFBs have been able to bring about the economic development of FCT. The theory that guided the paper is Pecking Order theory while data were sought from secondary sources. It was discovered that, MFBs operators in the FCT, have inadequate experienced credit staff. As a young and growing industry, there is a lack of experienced staff in planning, product development, and effective client engagement. Most credit staff of MFIs in Nigeria, including FCT, are on their first jobs. Inadequate experienced staff limits expansion and institutional performance. Another finding is repayment problems. Loan delinquency poses a significant threat to the sustainability of financial institutions. It is a destructive force that plagues MFIs, demoralizes staff, and denies beneficiaries valuable services. Delinquency is a symptom of poor leadership. It is hereby recommended that there should be policies regarding loans and credit should be looked into by microfinance banks and reviewed in order to ease access to these loans. Loans and credits from microfinance banks play a significant role in business development especially being utilized effectively by business owners for growth and expansion. Availability of microfinance banks has a significant impact on business development with regards to sales and profit. As a financial institution that primarily exists for business development at the rural level, not many microfinance banks are accessible by the poor business owners at the rural areas. Hence, microfinance banks should address this by ensuring that their services are easily accessible to poor business owners seeking to expand their operations and businesses, thereby contributing to economic development.