THE IMPACT OF LIFT ABOVE POVERTY (LAPO) ON SOCIO-ECONOMIC STATUS OF RURAL BUSINESS WOMEN

THE IMPACT OF LIFT ABOVE POVERTY (LAPO) ON SOCIO-ECONOMIC STATUS OF RURAL BUSINESS WOMEN 

CHAPTER ONE

1.1     BACKGROUND TO THE STUDY

LAPO (Lift Above Poverty Organization) was established in 1987. Lapo isan Non-Governmental Organisation (NGO) in Nigeria that runs a micro-finance bank (MFB); which is one of the Nigerian banks that give out loans without collateral. The LAPO Microfinance Bank Limited is a pro-poor financial institution committed to improving the quality of life of the poor through the provision of credit, savings instruments and other financial services.

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          Over the last two decades, microfinance has become the "darling child" of development, providing a new means to poverty alleviation through partnership with the poor (Arora 2006). Originally pioneered by the Grameen Bank around 1976 in Bangladesh by Dr. Muhammad Yunus the winner of the 2006 Nobel Peace prize who sought to make financial provisions to clients conventionally, microfinance have since flourished in low income economies. Today, microfinance has played a significant role in the development process. Its impact is substantial enough to have warranted acknowledgement by the United Nations which declared 2005 “The International year of microfinance”, giving impetus to microfinance programs along with its work of empowering the poor thus drawing wide spread recognition throughout the world, and its adoption by many countries around the globe-reminding people that millions worldwide benefit from microfinance.       

The origins of microfinance and microcredit are found in several areas of Asia and Latin America especially Bangladesh, Indonesia and Bolivia (Morduch, 1999). Since their emergence in the 1970’s, they are perceived as social program that aims to help the poor people to earn their living through the provision of micro-loans without collateral for the purpose of income generation thus being successful in social and economic development in the vast majority of developing countries (Anderson and Locker, 2002; McKernan, 2002; Hermes et al., 2005). Moreover, to date micro financial services are considered relevant and useful to financially excluded people everywhere (Rogaly et al., 1999).

The term microfinance is used to refer to institutions of saving, credit, insurance and money transfer used by relatively poor people. Therefore, Microfinance has been defined as “a collection of banking practices built around providing small loans (typically without collateral) and accepting tiny savings deposits” (Armendariz de Aghion and Morduch, 2005, p. 1). Ledgerwood, 1999 and Rhyne, 2001, added that Microfinance is the “provision of financial services to the self-employed low-income clients, poor and excluded people enabling them to raise their income and living standards”. These services include savings, credits, insurance, payments services, money transfers and social intermediation. They are performed by a variety of institutions, such as credit unions, savings and loan cooperatives, commercial banks, as well as NGOs and government banks.

Microfinance has thus emerged as a feasible financial alternative for poor people with no access to credit from formal financial institutions. At the heart of the idea of microfinance is the belief that poverty can be reduced and eventually eliminated through provision of credit to those too poor to access the formal financial system. Beyond being “banking for the poor,” then, microfinance is viewed by many as an instrument of development. Nevertheless, microfinance has distinguished itself from formal credit by disbursing small loans to the poor, using various innovative nontraditional loan configurations such as loans without collateral, group lending, progressive loan structure, immediate repayment arrangements, regular repayment schedules and collateral substitutes (Conning, 1999; Navajas et al, 2000).

Yunus (1999) discussion clearly illustrates the evolution of the concept of microfinance in practice. Previously, microfinance began as a concept of microcredit in practice and was first introduced in Bangladesh by Nobel Peace Prize winner Muhammad Yunus. Yunus started Grameen Bank (GB) more than 30 years ago with the aim of reducing poverty by providing small loans to the country’s rural poor (Yunus 1999). However, microfinance has evolved over the years and currently does not only provide credit to the poor, but also spans a myriad of other services including savings, insurance, remittances and non-financial services such as financial literacy training and skills development programs; thus the shift from microcredit to what is now referred to as microfinance (Armendáriz de Aghion and Morduch 2005, 2010).

 

Microfinance is noted to gives access to financial and non-financial services to low-income people, who wish to access money for starting or developing an income generation activity. The individual loans and savings of the poor clients are small. Microfinance came into being from the appreciation that micro-entrepreneurs and some poorer clients can be ‘bankable’, that is, they can repay, both the principal and interest, on time and also make savings, provided financial services are tailored to suit their needs (Barr, Michael, 2005).

LAPO is a Nigerian organisation with a Microfinance Bank (MFB) dedicated to self-employment through microfinance and an NGO, a non-governmental, non-profit community development organization focused on the empowerment of the poor and the vulnerable.^[1] The institution was founded as a non-profit entity by Mr. Godwin Ehigiamusoe while working as a rural co-operative officer in Delta State, Nigeria. LAPO started its activities in 1987 and was formally incorporated as a nonprofit nongovernmental organization (NGO) in 1993. In Nigeria, LAPO has partnered with the Grameen Bank. In 2010, LAPO transformed it's Microfinance activities into a regulated microfinance bank, while the remaining activities continued under the LAPO is a Non-Governmental Organisation (NGO).

LAPO focuses on assisting the poor, especially the women, in raising their socio-economic statuses. It not only acts as a microcredit institution, but also assists clients in overcoming problems beyond the lack of funds, such as illiteracy and environmental degradation (which often aggravates poverty). Moreover, LAPO aims to enhance leadership skills, literacy status and political participation among poor women. It empowers women by providing opportunities for them to learn income generating skills such as sewing, food processing and soap making.

1.2       STATEMENT OF THE PROBLEM

Despite the apparent success and popularity of microfinance, no conclusive evidence yet exists that microfinance programme have positive effects on -economic status of women (Armendariz 2005) however with the increased growth of the microfinance industry and the attention the sector has received from policymakers, donors and private investors in recent years, the existing microfinance impact assessment need to be re-investigated; the robustness of claims that microfinance successfully alleviates poverty and empowers women must be scrutinized more carefully.      Hence, this study revisits the evidence of microfinance services evaluations focusing on the technical challenges of conducting rigorous socio-economic effect analysisof microfinance services.

LAPO is a Nigerian organization with a MicrofinanceBank [MFB) dedicated to self-employment through microfinance ana an XuO, a non­governmental, non-profit community development organizationfocused on the empowerment of the poor and the vulnerable, The institution was founded as a non-profit entity by Mr. Godwin Ehigiamusoe while working as a rural co-operative officer in Delta State, Nigeria. LAPO started its activities in 1987 and was formally incorporated as a nonprofit nongovernmental organization (NGO) in 1993. In Nigeria, LAPO has partnered with the Grameen Bank. In 2010, LAPO transformed it's Microfinance  activities  into  a  regulated  microfinance  bank,  whilethe remaining activities continued under the LAPO NGO.

LAPO focuses on assisting the poor, especially the women, in raising their socio-economic statuses. It not only acts as a microcredit institution, but also assists clients in overcoming problems beyond the lack of funds, such as illiteracy and environmental degradation (which often aggravates poverty). Moreover, LAPO aims to enhance leadership skills, literacy status and political participation among poor women. It empowers women by providing opportunities for them to learn income generating skillssuch as sewing, food processing and soap making.

1.3     RESEARCH QUESTION S

          For the purpose of the research work, the following research questions are raised

1       What are the socio economic effects of accessing microcredit on women.

ii.      What are the effect of the availability of micro-saving services on          thesocioeconomicstatus of women

iii      What extent does the access of micro-insurance servicesimpacts on socio-economic status of women

iv.      What are the  effects   of   non-financial   serviceprovisions   bymicrofinance on socioeconomic conditions of women

1.4      OBJECTIVE OF THE STUDY

The broad objective of this study is to assess the socio-economic effects of microfinance services on women.

The specific objectives are to;

i.       To assess the socio economic effects of accessing microcredit on women.

ii.      To analyze the effect of the availability of micro-saving services on          thesocioeconomicstatus of women

iii                To   evaluate   the   effects   of   non-financial   serviceprovisions   bymicrofinance on socioeconomic conditions of women

1.5     RESEARCH HYPOTHESES

Ho:   Microfinance bank (LAPO) has no significant impact on socioeconomicstatus of women in Nigeria

Ho:   Microfinance bank (LAPO) has significant impact on socioeconomicstatus of women in Nigeria

Ho:   There is no significant relationship between Lift above poverty (LAPO) and socio –economic status of rural business women in Ekiti.

1.6     SIGNIFICANCE OF THE STUDY

LAPO play significant role in enhancing socio economic development of women because, viable approach to sustainable growth and development lies in the financial and economic advancement of women and rural dwellers in . Recent development in and other developing countries reinforce the contention that microfinance or micro credit structures are essential for development of rural areas in consideration of the fact that development concentrated in the urban centres in this country Iheduru. Provision of microfinance made positive impact on the individual household’s budget and has changed the quality of life of millions of people in developing countries especially women.

          Finally, the recommendations that would be given in this research would optimistically provide the necessary information and strategies needed by the students, researchers, government, market women and other sets of people, who may interested in Lapo

1.7     SCOPE OF THE STUDY

          This research work examine the impact of lift above poverty (LAPO) on social economics status of rural business women in Ekiti. The  scope of the study cover selected women from Ayeidun- Ekiti, Ekiti State.

1.8     DEFINITION OF TERMS

LAPO: Lift above poverty

Microfinance Bank (MFBs) mean any company licensed to carry on the business of providing microfinance services such as savings, loans, domestic fund transfers and other financial services that economically active poor, micro-enterprises and small and medium enterprises need to conduct or expend their businesses. (Microfinance Banks regulatory and supervisory framework, December, 2005).

Micro- credit: Disbursement of small or soft loans meant for rural development.

Rural Dwellers: Are people residing in a country site or an area where there is less or no governmental infrastructures and facilities such as offices, electric power supply, industries and other basic social amenities.

Microfinance: Is about providing financial service to poor who are traditionally not served by the conventional financial institutions.

Informal financial institutions: They are traditional microfinance institutions that provide access to credits for rural and urban low-income earners. Example, rotating savings and credit association, self help groups, co-operative societies.

Microfinance policy: is a regulatory guidelines on micro credits that help to promote monetary stability and sound financial system.

Poor- A poor person shall be defined as one who has magic means of sustenance of livelihood and whose total income during a year is less than the minimum taxable limit set out in the law.