Journal of
Development and Agricultural Economics

  • Abbreviation: J. Dev. Agric. Econ.
  • Language: English
  • ISSN: 2006-9774
  • DOI: 10.5897/JDAE
  • Start Year: 2009
  • Published Articles: 553

Full Length Research Paper

Uses of fund and constraints to growth among microfinance institutions in Kano State, Nigeria

A. M. Makarfi1* and J. O. Olukosi2
1Department of Agricultural Economics and Extension, Bayero University, Kano, Nigeria. 2Department of Agricultural Economics, Rural Sociology and Extension, Ahmadu Bello University, Zaria, Kaduna State, Nigeria.
Email: [email protected]

  •  Accepted: 25 October 2011
  •  Published: 12 January 2012


This study aims to address challenges posed to Microfinance institution (MFIs) as they work to improve access to credits by poor entrepreneurs among farmers and other low resource-based individuals. This prompted this research work. A field survey, using multiphase sampling technique, was conducted to select samples for detailed analysis. Two sets of questionnaires were administered on the eleven (11) MFI decision units in Kano State, to collect information on their characteristics, financial resources and mode of operations; sources and uses of funds, resource use efficiency as well as outreach. Levels of savings of members, microloans packaged and delivered, women participation, levels of profits generated as well as returns to investments and to assets were measured. The results showed that three categories of MFIs operate in the area namely: formal finance institutions (FFIs), semi-formal finance institutions (SMFIs), and informal finance institutions (IMFI) each with its unique features and mode of operations.  They share many common problems from low level of member savings, low equity levels lower than the African average in all cases and high level of borrowed funds. Though the returns indicated that average returns on assets for IMFI and SMFI ranged from 4 to 6% over the period, higher than the African average of 2% and confirms efficient use of resources, high dependence on costly borrowed funds as against savings by members may delay achievement of sustainability going by their level of dependence on subsidy. As to the main activities engaged by MFIs, petty trading ranks first followed by farming, equipment financing, livestock rearing, food and restaurant services, artisans and household wares trading respectively. With regards to problems and constraints to their growth they ranked lack of qualified staff, inadequate working capital, board decision problems, fund recovery, government policy changes, and sourcing additional funds in the fore front. Suggested solutions were made. Overall, it is evident that MFIs in Kano are profitable, efficient and could be sustainable if the identified problems and constraints are addressed by stakeholders and suggested solutions are adhered to.


Key words: Microfinance, constraints to growth, sustainability.