Abstract
Given current emphasis on potentials of micro credits as a means of addressing poverty alleviation and improved economic growth especially in developing economies, this study seeks to evaluate the nature of long-run relationship and the direction of causality between economic growth and micro credits disbursed by private sector led micro finance institutions in Nigeria. Covering the period 1982 – 2011 (30 years), the Autoregressive Distributed Lag (ARDL) technique was employed in analyzing the time series data. The study finds significant long-run relationship between Nigeria’s economic growth and micro credits disbursed, while causality runs from economic growth to micro credits (unidirectional). Accordingly, increase in the quantum of micro credits as well as development of long tenured micro credit products are recommended as strategies to enhance the contributions of micro credits to Nigeria’s economic growth.
Highlights
Financial institutions constitute veritable instruments for economic growth of nations
In analyzing the empirical relationship between micro credits and Nigeria’s economic growth, this section starts with analysis of the descriptive statistics presented in table 2, below; Table 2
To analyze the relationship between microfinance institutions’ credits and economic growth in Nigeria, the study commences with the conventional test for stationarity of the series variables by employment of the Augmented Dickey – Fuller (ADF) unit root test which results are presented in table 3 below; Table 3
Summary
Financial institutions constitute veritable instruments for economic growth of nations. Adeyemi (2007) as well as Agene (2011) further observe that public policy attempts at enhancing the active poor’s access to micro credits include the establishment of various development finance institutions and agencies by the Nigerian government These include the Nigeria Agricultural, Co-operative and Rural Development Bank in 1973, charged with the responsibility of providing agricultural and rural based credits in the country, the Agricultural Credit Guarantee Scheme fund of 1978, established to mitigate varied forms of agricultural risks to which farmers are exposed. Other state ventures in this regard include various phases of Small and Medium Scale Enterprises Schemes (SMEs), as well as the National Economic Recovery Fund (NERFUND) To complement these state policies and efforts, the federal government initiated through the private sector-led banking enterprise, various schemes with the fundamental objective of improving grass root financial intermediation and inclusion hoped to fully integrate the active and enterprising Nigerian poor into the financial system. The fourth part presents the results and analysis while the fifth and last part provides the conclusions and policy recommendations
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