The Effect of Microfinancing on Economic Development in Nigeria (1990-2018)

International Journal of Economics and Management Studies

© 2020 by SSRG - IJEMS Journal

Volume 7 Issue 4

Year of Publication : 2020

Authors : Abiodun Thomas Ogundele, OloladeTolulope Ibi-Oluwatoba, Isaac Olaitan Okeya

10.14445/23939125/IJEMS-V7I4P117

How to Cite?

Abiodun Thomas Ogundele, OloladeTolulope Ibi-Oluwatoba, Isaac Olaitan Okeya, "The Effect of Microfinancing on Economic Development in Nigeria (1990-2018)," SSRG International Journal of Economics and Management Studies, vol. 7,  no. 4, pp. 126-135, 2020. Crossref, https://doi.org/10.14445/23939125/IJEMS-V7I4P117

Abstract:

The study examined the effect of microfinancing on economic development in Nigeria from 1990-2018. Three models were specified using three variables such as GDP per capita (GDPPC), Gross Domestic Product (GDP), and Human Development Index (HDI) as proxies for economic development; microfinance bank loans to SMEs (MFLS), total microfinance banks loans (MFTL), commercial bank loans to SMEs (CBCS) and total commercial bank loans to rural communities(CBCR) were proxies for the independent variable. Prime lending rate (PLR) is used asa control variable. Data was sourced from various CBN Statistical Bulletin and employed ARDL as an estimation technique. It was found that series are integrated into different orders. However, MBLS, CBCR, and SMEs impacted negatively on GDPPC, while MFTL and PLR impacted positively on GDPPC. On GDP, it was found that CBCS, and PLR have negative effects on GDP while CBCR and MFTL have positive effects on GDP. It was further revealed that CBCS has a negative impact on HDI, while all other variables impacted positively on HDI. On the models, microfinancing hasa significant impact on GDPPC, and GDP insignificantly affected on HDI. In conclusion, microfinancing has a heterogeneous effect on economic development. It recommended that commercial banks should intermediate to both the private sector and SMEs.

Keywords:

Microfinancing,economicdevelopment, small and medium scale enterprises, economic growth, deposit money banks, Nigeria.

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