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August 6th, 2015

Financial innovation and poverty reduction: Evidence from rural northern Nigeria

Published by MFW4A,

This paper (PDF) by the Making Finance Work for Africa Partnership (MFW4A) examines the effect of financial innovation on poverty reduction in rural northern Nigeria. Households from this part of the world are farmers hence, exposed to the vagaries of Climate Change. Assessing whether or not the poorest income quintile (the poorest of the poor) benefit from existing financial inclusive strategies, would inform policy makers and direct the attention of microfinance entrepreneurs to better innovate products that would increase financial inclusiveness and reduce poverty in developing countries. The findings of the paper include the following: First, females constitute the majority of farmers in the poorest income quintile while men are mostly in the 4th and richest quintile. Secondly, smaller size households are more likely to be in the poorest income quintile than large households as family size matters for farm labour due to traditional farm practice. Thirdly, traditional crop insurance benefits mostly rich farmers and poor farmers do not utilize microfinance institutions meant to accelerate formal access to credit. Lending to rural farm households organized into savings clubs, however, benefits the poorest income quintile farmers. Fourthly, government programmes put forward to help rural farm households cope with agricultural shocks have, unfortunately, benefited mostly those in the richest income quintile. Lastly, to eradicate poverty for all in a post 2015 sustainable development framework, looking into how rural farm households are organized in developing countries and designing financial inclusive products that would be consistent with their values and community life, would be needful.

Curated from mfw4a.org