Impact of Micro Finance Banks on Developing Economies–Evidence from Nigeria

Abstract

This research concentrated on impact of micro finance banks on developing economies –evidence from Nigeria. The recent emphasis on micro, small and medium enterprises, and the licensing of microfinance bank in Nigeria viz-a-vis the dwindling economy of developing countries prompted this study. The data for the study was mined from the Central Bank of Nigeria’s statistical bulletin from 1992 to 2020. The E-view tool of analysis, and the Autoregressive Distributed Lag model were used. The research answered a question of whether microfinance banks contribute to economic growth or not. The unit root test showed that all parameters were stationary at first difference. Consequently, it was established that generally, there was a long run relationship between microfinance banks and economic growth in Nigeria while specifically, loans and deposits of microfinance banks showed significant and positive coefficients. Similarly, a causality test indicates that there exists a unidirectional causality between microfinance bank loans and economic growth, and microfinance bank deposits and economic growth. The researcher among other recommendations opined that Central Bank should be more objective in monitoring microfinance banks to avoid failure in that sub-sector which is likely the cradle of economic growth in the developing countries.