CHAPTER ONE

INTRODUCTION

1.1       Background Information

Studies on developing economies have considered financial development vital for economic growth and poverty reduction. Strong financial systems have helped delivered rapid growth as well as direct and indirect benefits, across income distributions (Honohan and Beck, 2007). Beck and Demirguc-Kunt, (2005) indicate that financial development reduces inequality by disproportionately boosting the income growth of the poor. Hence across Africa, access to finance is rightly seen as a key to unlocking the income growth for poor families, as much as for expanding trade (Honohan and Beck, 2007).

In this regard, policy makers have held the conception that micro and small scale firms in developing countries lack access to adequate financial services for efficient inter-temporal transfers of resources and risk coping (Besley, 1995). Without well-functioning financial markets, small scale firms may lack much prospects for increasing their productivity in many significant and sustainable ways (Nwaru, 2004). Based on these reasons, and the fact that traditional commercial banks typically have minimum interest in lending to small firms due to their lack of viable collateral and high transaction costs associated with the small loans that suit them, most developing country governments, have set up credit programs aimed at improving access to credit (Arene, 1993; CBN, 2010).

1. 1. This material content is developed to serve as a GUIDE for students to conduct academic research work
2. 2. As a source for additional understanding of the subject.
3. 3. As a source for ideas for your own research work (if properly referenced).
4. 4. For PROPER paraphrasing (see your university definition of plagiarism and acceptable paraphrase)
5. 5. Direct citing (if referenced properly)
Thank you so much for your respect to the authors copyright.