MICROFINANCE BANKS AND ECONOMIC GROWTH IN NIGERIA

ABSTRACT

The study empirically examines the relationship between microfinance banksand economic growth in Nigeria for a period of 13 years (2004- 2017). The main objective of this research is to determine the impact of microfinance banks on economic growth in the Nigerian economic overtime. The study employs the econometric tools of co-integration technique with error correction model (ECM) to determine both short run and long run dynamics amongst the hypothesized variables which include microfinance bank loans, microfinance bank investment, microfinance bank deposit, inflation rate as well as microfinance bank contribution to agricultural production The result from the empirical analysis indicate that while microfinance bank loans has significant positive impact on economic growth in the short run, it does not have significant positive impact on economic growth in the long run in Nigeria. Microfinance bank invest has significant positive impact on economic performance in the long run, while in the short run it has a negative impact in Nigeria. Those other variables in addition to microfinance bank loan and microfinance bank investment are needed to boast the much needed rapid economic growth in Nigeria. The study recommends amongst other that while microfinance institution should provide loans to improve consumption in the short run, the long run improving investment and other capital goal should be directed at accumulations. It is this channel of participation that will ensure optimal microfinance bank resource in the country with target of achieving sustainable economic growth overtime.