The Impact of Microfinance Banks on Poverty Alleviation in Nigeria

ABSTRACT

The issue of poverty alleviation continues to attract attention from world government and various organizations. In developing countries like Nigeria, there are programmes designed to alleviate poverty level especially in the rural areas. The establishment of microfinance banks for this purpose remains one of the key strategies for achieving this goal. This study, therefore, is aimed at evaluating the impact of microfinance banks on poverty alleviation in Nigeria within the period 1990 to 2020. The Autoregressive Distributed Lag (ARDL) model technique was used to estimate the model equation. The findings showed that microfinance bank activities (credit and investment) do not have significant effect on poverty alleviation in Nigeria in the current sampled period rather, it will take some lag length at least three period lag length for there to be a modicum of positive effects. In line with the theoretical expectation, interest rate was found to have negative and significant effect on poverty alleviation. The study recommends among others the need for the relevant regulatory authorities and the government to ensure that the active poor and MSMEs have access to microfinance bank credit at a low and affordable cost which will in turn increase their chances of active participation in the economic system thereby alleviating poverty in the long-run. The study concludes that microfinance institution is indeed a potent strategy for poverty alleviation in Nigeria and a viable tool for purveying credit to the poor.