MICROFINANCE BANKS AND ECONOMIC GROWTH IN NIGERIA
ABSTRACT
The aim of this research study is to determine the impact of microfinance banks on economic growth in Nigeria. This study specifically examines the relationship between microfinance bank investment, microfinance bank deposits and microfinance lending rate on economic growth in Nigeria with the aid of E views 8.0. Microfinance bank investment, microfinance bank deposits and microfinance bank lending rate were found to impact positively on economic growth in Nigeria. Microfinance bank investment and microfinance bank deposit are strong determinants of economic growth while microfinance lending rate is not a strong determinant of economic growth because the p-value of 0.3 is not significant at 5% conventional level. The only way to increase the deposit of microfinance banks profitability is to monitor closely the variables affecting it.
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
1.1    Background of the Study    -    -    -    -    -    
1.2    Statement of the Research Problem    -    -    -    
1.3    Research Question    -    -    -    -    -    -    
1.4    Objectives of Study    -    -    -    -    -    
1.5    Research Hypothesis    -    -    -    -    -    
1.6    Scope of the Study    -    -    -    -    -    -    
1.7    Significance of study    -    -    -    -    -    
CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction    -    -    -    -    -    -    -
2.2 Literature Review    -    -    -    -    -    -    
2.3 Concept of Economic Growth    -    -    -    -    
2.4 Theoretical Literature    -    -    -    -    -    -    
2.5 Empirical Literature    -    -    -    -    -    -    
CHAPTER THREE: METHODOLOGY
3.1 Introduction    -    -    -    -    -    -    -    
3.2 Research Design    -    -    -    -    -    -    
3.3 Population and Sample    -    -    -    -    -    
3.4 Theoretical Framework    -    -    -    -    -    
3.5 Model Specification    -    -    -    -    -    -    
3.6 Sources of Data    -    -    -    -    -    -    
3.7 Method of Data Analysis    -    -    -    -    -    
3.8 Measurement of Variables    -    -    -    -    -    
CHAPTER FOUR: DATA ANALYSIS AND PRESENTATION
4.0 Introduction    -    -    -    -    -    -    -    
4.1 Data Analysis    -    -    -    -    -    -    -    
4.2 Regression Result    -    -    -    -    -    -    
4.3 Discussion of Findings/Policy Implications    -    -    
CHAPTER FIVE:SUMMARY OF FINDINGS, CONCLUSION AND POLICY RECOMMENDATIONS
5.1 Introduction    -    -    -    -    -    -    -    
5.2 Summary of Findings    -    -    -    -    -    -    
5.3 Conclusion    -    -    -    -    -    -    -    
5.4 Recommendations    -    -    -    -    -    -    
5.5 Contribution to Knowledge    -    -    -    -    -    
BIBLIOGRAPHY    -    -    -    -    -    -    
APPENDIX I    -    -    -    -    -    -    -    
APPENDIX II    -    -    -    -    -    -    -    
CHAPTER ONE
INTRODUCTION
1.8    Background of the Study
World Bank defines microfinance banks as those institutions that deal with small financial transactions and serve the small scale industries and household which do not meet the requirements of commercial banks. The Microfinance Act of 2006 defines Microfinance as a business that receives money by way of deposits and interest on deposits which is lent to others or used to finance other businesses, providing loans as well as other facilities to micro or small enterprises and low income households. The Central Bank of Nigeria (2008) defines Microfinance as providing financial services for the poor who largely constitute the 65% excluded from access to financial services of conventional banks.
Apere (2016) observed that microfinance banks date back to pre-independence period in Nigeria when thrift savers operated as the financial institution for traditional group networks. The growth was phenomenal and the thrift collectors could no longer handle the expansion and complexities involved. This gave rise for a more efficient and effective system, but since conventional banks had already failed to meet the socio-economic needs of the low income bracket groups and small enterprises. In trying to address the need of a suitable financial institution for individuals in the rural regions, the government established community development banks which would later become microfinance banks. Microfinance banks have become economic growth drivers by providing financial alternatives for the low income class.
The rise of microfinance banks in Nigeria can be traced to failure of the government to improve the lives and opportunities of the middle and lower class individuals. In a bid to address poverty in the country in the 1980’s the government came up with several agendas and memorandums. Which include People Bank of Nigeria (PBN), Family Economic Advancement Programs…etc. The only successful scheme was the community development banks. (Babajide, 2012).
1.9    Statement of the Research Problem
A lot of studies have been carried out on the importance of microfinance banks on economic growth in Nigeria. In 2009 the central bank gave approval to 840 microfinance banks to begin operation in the country (CBN briefs, 2007). This alone is indicative of the fact that the importance of microfinance in the economy is starting to be understood. Asemota (2002) observing the importance of microfinance in the economy stated that Microfinance banking is about providing financial services to the economically active poor and low income household, who are traditionally not served by the conventional banking system. This enables those in the low income brackets to contribute to economic activities and growth. This shows that no matter how insignificant the contribution might seem the Microfinance banks have contributed to economic development. Enyioko (2012) observed that the recent trend is for Microfinance banks to become like commercial banks in terms of scale of operation and coverage.
Claessens (2005) rightly observed that these microfinance institutions have the potential to reduce unemployment in any country to a large extent if given the proper and sufficient reach and the contribution of small and micro business to the GDP is quite large. This calls for stability and support for the microfinance institutions, because increased investment by government in microfinance institutions would increase the contribution of small and micro business to the country’s output. This study seeks to add to existing literature on microfinance banks and their importance to economic growth.
1.3RESEARCH QUESTION
i.    What is the relationship between Microfinance Lending and economic growth in Nigeria?
ii.    What is the impact of microfinance deposits on economic growth in Nigeria?
iii.    What is the impact of microfinance bank investment on economic growth of Nigeria?
1.4    Objectives of Study
The broad objective of this study is to examine the impact of microfinance banks on economic growth in Nigeria. However there are other sub-objectives, which are as follows:
i.    To examine the relationship between microfinance bank lending and economic growth in Nigeria.
ii.    To ascertain the impact of Microfinance bank deposits on economic growth in Nigeria.
iii.    To determine the impact of microfinance bank investment on economic growth in Nigeria.
1.5    Research Hypothesis
The following are the null hypotheses that will be used for the study:
H0: There is no significant relationship between Microfinance bank lending and economic growth in Nigeria.
H0: There is no significant impact of Microfinance bank deposits on economic growth in Nigeria.
H0: There is no significant impact of microfinance banks investment on economic growth in Nigeria.
1.6    Scope of the Study
This is an empirical study and thus it revolves around the impact of microfinance industries on economic growth in Nigeria. The use of secondary data will be employed, which will be sourced from the annual statistic bulletin of the central bank of Nigeria, within the timeframe of 1990 – 2015. The adoption of this timeframe is as a result of the massive banking reforms that were carried out before and during this period.
1.7    Significance of study
The results of this very essential study would serve as a framework for future government policies. It would enable the government observe the importance of this minuscule institution and the benefits of scaling it.