MICROFINANCE BANKS AND POVERTY ALLEVIATION IN NIGERIA

ABSTRACT

The nexus between microfinance banking and poverty alleviation is well documented in banking and finance literature. As a poverty reduction strategy, the microfinance initiative is expected to create room for financial accessibility to the economically active people living below standard. Consequently, this study estimated the effect of microfinance banks’ on poverty alleviation in Nigeria from 1992 to 2021 using the multivariate ordinary least square (OLS) approach to regression analysis. The OLS regression estimates suggested that the Microfinance bank loans increases poverty in Nigeria; microfinance investments and microfinance liquidity ratiofailed the 5 percent level of significance indicating that they do not have any significant impact on poverty alleviation in Nigeria.The granger causality test result indicates unidirectional causality exists between microfinance bank loans (MFL) and poverty alleviation (PI); microfinance bank liquidity ratio (LR) and poverty alleviation (PI) hence, MFL granger causes PI without a reverse causality while LR also granger cause PI without a reverse causality. This means that a one way causality subsist between these variables. However, no causal link was found between the other variables.The study recommends among others that microfinance should be targeted at more efficient lending, which will create more opportunities, thus increasing income and economic empowerment, and reducing poverty.