Transformation of Microfinance Schemes from Subsistence Living to Small-Scale Enterprises in Nigeria

This paper presents an overview of policy issues in the 2004 UNESCO Nairobi Office project that aimed to facilitate growth of activities financed through microcredit.

Most microcredit projects tend to remain at the subsistence level, unable to create employment or generate a multiplier effect. The UNESCO project intended to facilitate the transformation of these activities from the level of subsistence living to small-scale enterprises. Recognizing the importance of technology for the success of transformation, the project surveyed polices that promote the adoption of technology and the growth of small-scale enterprises. Study findings revealed:

• General lack of policy focus on technology and the poor;
• Lack of emphasis on the small and medium enterprises (SME) sector as a source of growth;
• Lack of funds for technology development, research, and SME development;
• MFI concentration on quick turn-over enterprises.

The paper recommends introducing polices that will encourage technology financing by MFIs, technical growth of the SME sector, provision of an enabling environment for the SME sector and the development of a knowledge-based economy.