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

1
This paper was first presented at the 2011 Conference on Financial Services in Africa held at
Nicon Luxury Hotel, Abuja, Nigeria, on March 23-25, 2011.
2 Department of Agricultural Economics and Extension, Bayero University, Kano, Nigeria,
Telephone: 08035040421/08052007060
3 Professor of Agric Economics, Department of Agric. Economics, Rural Sociology
&Extension;, Ahmadu Bello University, Zaria, Kaduna State, NigeriaEuropean Journal of Finance and Banking Research Vol. 4. No. 4. 2011.
A. M. Makarfi & J. O. Olukosi
35
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.