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A. M. Makarfi

Department of Agricultural Economics and Extension,

Bayero University, Kano, Nigeria

J. O. Olukosi

Department of Agric. Economics, Rural Sociology &Extension

Ahmadu Bello University, Zaria, Kaduna State, Nigeria


Microfinance Institutions (MFIs) have evolved as a veritable strategy for alleviating poverty among the active poor in developing countries. This study aimed at measuring the performances and challenges posed to MFIs as financiers of poor entrepreneur farmers and other low resource-based individuals was conducted as a field survey, using multiphase sampling technique to select samples for detailed analysis. Two sets of questionnaires were administered on the eleven (11) MFI decision units in Kano State, Nigeria, 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, and 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 of study namely: formal finance institutions (FFIs), semi-formal finance institutions (SFFIs), and informal finance institutions (IFFIs) each with its unique features and mode of operations. They share many common problems such as low level of member savings, low equity levels in all cases and high level of borrowed funds. Average returns on assets for IFFI and SFFI ranged from 4% to 6% over the period, and confirms efficient use of resources while 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 financed 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, descending order of importance, they ranked the following factors: lack of qualified staff, inadequate working capital, board decision problems, fund recovery, government policy changes, and difficulty in sourcing additional funds, as the most crucial. 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 like broadening the savings base and training for staff are adhered to.

Key words: Microfinance, performances, constraints, sustainability.