Micro Finance Bank Operations and Economic Development: Nigeria in Perspective

Abstract

This study examines the effects of microfinance banks operations on economic development in Nigeria. Given the problems saddling the operations of Microfinance banks such as loan repayments, inadequate finance, high operating cost and a myriad of others this study made emphasis on the expected and observed effects using Gross Domestic Product per Capita (proxy for economic development) as dependent variable, Micro Finance Bank Deposit, Micro Finance Bank Loans, Micro Finance Bank investments, Micro Finance Bank Interest Rate (to capture microfinance bank operations) as dependent variables. The study employed Auto Regressive Distributive Lag (ARDL) technique on time series data gathered on the dependent and independent variables from 1993 to 2022 for the analysis. Results from the estimations showed that for the period under review there exists a long run relationship between the dependent and independent variables, the analysis further revealed that the R² which measures the overall goodness of fit of the entire ARDL model has a very high good fit. This is represented with the R² value of 0.9984 (99.84%). This indicates that the independent variable accounted for about 99.84% variation in the dependent variable. It was therefore recommended that micro finance banks should increase their credit operations to the productive sector of the economy so as to enhance productivity, which will in turn lead to increased economic growth and development.