Financial inclusion and performance of microfinance banks in Nigeria
Abstract
In this study, the impact of financial inclusion on the performance of microfinance banks in Nigeria was examined considering the continued problem of financial access, inadequate deposit mobilisation and unequal financial institution outreach despite all the efforts made in the financial sector reform. This study specifically looked at the effects of microfinance banks' loans and advances to the private sector, the number of microfinance bank accounts per 100,000 adults, the number of microfinance banks operating and the spread between lending and deposit of microfinance banks on total deposit. The study was based on Financial Intermediation Theory, Information Asymmetry Theory, and Inclusive Finance Theory which offer a comprehensive description of the mobilisation, allocation, and utilisation of financial resources within the financial system. The research design used was an ex post facto with a positivist approach. Secondary data was collected from the Central Bank of Nigeria Statistical Bulletin and other official regulatory publications for the period 1992-2024 (33 years). The Augmented Dickey-Fuller unit root test, Johansen co-integration test and the parsimonious Error Correction Model at 5 percent level of significance were employed in the analysis of the data. The results showed that loans and advances available to the private sector with the microfinance banks, number of microfinance bank accounts per 100,000 adults, and number of operating microfinance bank had positive and statistically significant impacts on the total deposit of the microfinance banks while the lending-deposit spread had a negative but statistically insignificant impact. Results of the error correction showed a stable long-run relationship between the variables. The study has concluded that in strengthening financial inclusion it greatly contributes to the performance of microfinance banks with regard to deposit mobilisation. It suggested making credit more accessible, financial accounts more common, better institutional outreach and more efficient operations. The study has made a significant contribution to knowledge as it has offered empirical evidence with the institution-specific financial inclusion indicators as determinants of the performance of the banks of microfinance in Nigeria.