Gbenga Festus Babarinde, Tajudeen Idera Abdulmajeed, Pa'Astwen Adi Angyu, Paul James Abu


This study investigates the effect of microfinance banks on economic growth of Nigeria from 1992-2019 using annual time series data. The study adopts Autoregressive Distributed Lag (ARDL) model, and Granger causality test as methods of analysis. This study’s empirical findings reveal that microfinance banks loans and deposits have long-run positive and significant effects on economic growth in Nigeria unlike microfinance banks investment which does not exert significant effect on economic growth in Nigeria in the long-run. However, in the short-run, microfinance loans, investments, and deposits have no significant effects on economic growth of Nigeria. Furthermore, this study confirms unidirectional causalities running from economic growth to microfinance loans, and government expenditure. Likewise, a unidirectional causality is established to flow from inflation rate to economic growth in Nigeria. This study also found bi-directional causalities between microfinance deposit and economic growth; and between microfinance investment and economic growth. It can therefore be concluded that microfinance banks have positive effect on the economic growth of Nigeria. This points to the need for the Government of Nigeria to empower microfinance banks through funding and capacity building to facilitate increased microfinance banks activities in the economy. The Government of Nigeria should also create enabling environment and programmes in the economy capable of stimulating growth that will further enhance the performance of the microfinance sub-sector in Nigeria.


Microfinance Banks, Microfinance Investments, Microfinance Loans, Microfinance Deposits, Economic Growth.

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