Effect Of Zero Interest Rate Policy On Co-Operative Society To The Development Of Nigeria

Introduction

1.0 Background of the Study

The significant role played by the financial institution cannot be over emphasized. Their primary functions includes creation of funds for production purposes, generation of employment opportunities leading to improvements of the standard of living.

Financial institution which is broadly divided into Banking institutions and Non-bank financial institution as financial intermediaries must make sure that deposits savings held with them are paid as at when due or whenever required by the depositor. They safety that part of the deposits that are not immediately required by the owners.
This financial institution is a very important sector of the economy and it can be described as “Power house” or “engine-room of the economy” and a pivot upon vital role (financial intermediation), which involves resources allocation, there must be some regulations to guide their mode of operations because of their sensitivity in the economy.

Cooperative societies need a lot of controls and regulations both from within and outside, to manage the members funds and make adequate returns to them, the more reason why government cannot but intervene or play a significant role in ensuring the achievement of this diverse focus/objectives. Interest rates play a crucial role in the role allocation of resources and its primary role is to help in the mobilization of financial resources and to ensure the efficient utilization of such resources in the promotion of economic growth and development.

The historical path of the various interest rate policy adopted show that deregulation of interest rated was as a way of achieving positive real rate of interest and as a means of encouraging depositors to make more deposits which will be used in generating investments as an antidote to the anomalies created during the period of fixing interest rates, which discourage depositors to deposits funds, therefore bringing instability in the cost of borrowing.

A number of studies have been carried out on the role and contribution of cooperative societies, which have significantly the importance of cooperative societies in our economy.

This research work hitherto attempts to give an overview of the effect of zero interest rate principle on cooperative societies, activities, as a newly emerging dimension in the interest-based economy contrary to the core practice of co-operative societies which has its main sources of surplus from the interest charge on loan/credit granted to their members.

1.1 Statement of Research Problem

A number of interest based cooperative societies that were established in the early 70’s were crumbling or are rather adjudged sick and crippled. An average income earner, requires a viable and stable co-operative societies to provide a pole to learn on for their economic survival.

Apart from being social unjust, these inequalities have distorted the allocation of resources through the provision of business capital to artisans, at a very exorbitant interest rate, not minding what becomes the outcome of such capital making the rich to get richer and, the poor to become more poorer. Zero-interest rate financial principles and institution is now spreading across several Muslim and non-Muslim countries of the world, Nigeria not being left out. Many studies testify to the great success of zero-interest rate financial principle.

People have recently taken the bull by the horn to establish zero-interest rate co-operative societies which is perceived impracticable or impossible in many quarters to be operated and run without charging interest. We now have several of such zero-interest rate cooperative societies in our community coupled with the inherent potentials up zero-interest rate principles, it is necessary to investigate and find out the effect of this non-interest rate policy on cooperative societies performance measured by the volume of saving, shares and investments generated vis-à-vis loan granted or generated by these societies.

1.3 Research Questions

What is the extent of synergy between Zero-interest rate policy and economic growth in Kaduna State?

What is the likely effect of zero interest rate policy on cooperative society’s businesses in Kaduna State?

What are the problems militating against the Zero-interest rate policy and co-operative societies in Kaduna State.

1.4 Objectives of the Study

The main objective of the study is to evaluate the effect of zero interest rate policyonco-operative societies to the development of Nigeria.

The specific objectives are:

To evaluate the activities of Zero-interest rate policy on economic growth in Kaduna State.

To assess the effect of zero interest rate policies on the business of the members of co-operative societies in Kaduna State

To investigate the problem(s) militating against Zero-interest rate policy in Kaduna State if any.

1.5 Hypotheses

H0: Microfinance banks have not impacted on business of members of co-operative societies.

H1: Microfinance banks have impacted on business of members of co-operative societies.

1.6 Significance of the Study

Kaduna State predominantly agro based economy, micro-credit is largely applied to agricultural and allied activities and livestock development. The marginal farmers and micro enterprise are designed to benefit greatly from the micro-finance programs. This study focus on the microfinance experimental groups (user) in Kaduna State and try to find out how they are getting benefit from the programme. The data collected in turn will provide the information on the effect of credit and saving facilities if they (poor) are provided equal opportunity.

This study would help policy makers and the regulatory body examine whether or not there is need for modification in its policy framework (Daily trust Newspapers dated 12th March 2020, an advert call position paper on microfinance bank). It would also provide data to all other institutions and individuals who intend to work within the group that fight against the existing poverty of the country. The study will provide recommendations to the International Agencies, NGO’s, Government and Human right activist.

1.7 Scope and the Limitations of the Study

The study area of this research work is Kaduna State. This is because; Kaduna State is one of the states with the highest number of Microfinance Banks its state. The main limitation of the study was the difficulty in obtaining accurate data from some of the MFBs. The data used for the study is primary source which some operators and its co-operative society were not willing to give out.

1.8 Organization of the Study

This study consist of five chapters, the first chapter deals with the general introduction, statement of problems, research questions, objectives of the study, hypotheses and significance of study.

The second chapter focus on the conceptual framework, theoretical framework, Empirical Literature, Microfinance role in economic development, Microfinance policy and development framework and transmission mechanism.

Chapter three discussed the study area, source and nature of data, data collection technique, and analytical framework.

In Chapter four the result of the study findings is presented and analyzed.

The final chapter discussed the finding, recommendation and conclusion of the research.