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Keywords:
Microfinance bank Economic development Deposit mobilisation Loan penetration Capital formation.
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The impact of microfinance bank credit on economic development of Nigeria (1992 – 2006)
Abstract
This paper x-rays the contribution of microfinance bank to the economic development of Nigeria for fifteen years by using secondary data collected from the Central Bank of Nigeria records, annual reports and statistical bulletin. The ordinary least square estimation technique was adopted using
linear regression model. The study found a weak positive relationship between microfinance banks’ finance and long run economic growth in Nigeria, and between microfinance banks’ finance and capital formation. There was large positive correlation between microfinance banks’ finance and penetration ratio. The results suggest a net outflow of finance from the microfinance banks that may jeopardize the economic development of the nation. There should be a policy framework that constrains the microfinance banks to channel a minimum percentage of their deposit to productive sector of the economy in form of credit and the productive sector must be properly defined and classified for easy compliance by the microfinance banks and monitored by a regulatory authority.
linear regression model. The study found a weak positive relationship between microfinance banks’ finance and long run economic growth in Nigeria, and between microfinance banks’ finance and capital formation. There was large positive correlation between microfinance banks’ finance and penetration ratio. The results suggest a net outflow of finance from the microfinance banks that may jeopardize the economic development of the nation. There should be a policy framework that constrains the microfinance banks to channel a minimum percentage of their deposit to productive sector of the economy in form of credit and the productive sector must be properly defined and classified for easy compliance by the microfinance banks and monitored by a regulatory authority.
