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Understanding micro-lending in Nigeria



Understanding micro-lending in Nigeria


Micro-lending is a special tool for small or micro entrepreneurs to expand or establish their business, expand their opportunities and increase income or improve the lifestyle for the poor and jobless people. It is one of the ultimate tool against poverty. With the growing economy for Africa's one of the biggest economic power Nigeria has to a lot of potentials. These potentials can greatly be utilized with the help of Micro-lending. Especially for the people who are living a life of from hand to mouth, since Micro-lending was originally designed for these kind of people. It is a product of new thinking in community development which established that the rural entrepreneurs are bankable and that majority of them will remain below poverty line until they are exposed to formal banking and given access to credits, information and capacity building.

What is Micro-lending:

Micro-lending is as it is defined, that can be described with the two words it is defined with "micro" and "lending". Basically, if you want to borrow money from any bank it has to be a large amount of money and most likely to be given a mortgage. For many poor people without any significant property to use as mortgage it is almost impossible to lend money from banks. Micro-credit or Micro-lending is getting a very small amount loan without any significant leverage or no leverage at all. It is small loan with interest for a very short period of time.

Micro-lending in Nigeria:

Despite of being one of the biggest economy in Africa, there are still about 62% of the population in Nigeria lives below the line of poverty. Many people in Nigeria's rural area are still under developed and have many people who are very poor or jobless. About 70% of Nigeria's population earn less than $1.25 a day. With more than 160 million people and being one of the largest populous country in Africa and fast growing economy, Nigeria is a perfect place to utilize micro-lending to its full potential.

Despite getting about 40 per cent GDP from Nigeria's rural agricultural economy , most of the development and investments are city oriented. Micro- lending's main target is to improve the luck of the poor rural people where there are not many job varieties or choices. Nigerian micro credit makes the jobless people to start a business on their own. They can raise poultry, do handy works or start any kind of business that will help them. One of the main target of micro -lending is the women who are most likely housewives and has nothing to do. One of the main reason for targeting women are that they are less likely bunk the loan and leave. These woman can make clothes, raise poultry animals or have any other business they want.

Although there are different interest rate, the overall interest rate of micro-lending is pretty high in Nigeria which is near about 35 per cent. But considering the amount over a large loan it is pretty acceptable.

There are many micro finance banks in Nigeria that lends micro-loans. There are many N.G.O.'s too that are working on improving the poor's status of these rural people. One of the most heard of micro finance bank in Nigeria is LAPO( Live Over Poverty Organization).  Lapo offers  micro loans for entrepreneurs or people who wants to expand their business. The duration of the loan can be from 2months to 1 year.  

Many banks are making a lot of profit all around the world with micro-credit. If run properly micro-lending can change the economy of Nigeria drastically.

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