ABSTRACT This research study examines the impact of microfinance banks on the economic growth of Nigeria. The general objective of this study is to ascertain the impact of micro-finance bank to the economic growth of Nigeria. The other specific objectives of this include: to determine the relationship between loans and advances of microfinance banks and the gross domestic product (GDP) of the Nigeria, to ascertain the effect of deposits liabilities of microfinance banks on the gross domestic product (GDP) of the Nigeria. This study focused mainly on the fundamental activities of microfinance banks in Nigeria. So many factors accounted for continuous existence of gap in access to financial services and inadequate funds for intermediation owing to lack of aggressive saving mobilization and inability to attract commercial capital but for the purpose of this study, activities of microfinance banks which is poverty reduction and small scale enterprise financing will be our focus. Assets base, Deposit Liabilities, Loans & advances and cash reserve of microfinance banks were used to proxy the activities of microfinance institutions in Nigeria while Gross Domestic Product was used as a proxy for economic growth. Some theories were reviewed and that led to the formulation of four hypotheses that guided this study. Secondary data through the use of Central Bank of Nigeria statistical bulletin was used and applying linear regressions analysis method of statistical analysis. The study revealed that assets base, loans and advances of microfinance banks and deposit liabilities has a significant impact on economic growth while cash reserve of microfinance banks has no significant impact on economic growth in Nigeria. In all, it can be understood that the overall significance of the model shows that the activities of the microfinance banks cannot be overemphasize in a bid for a sustainable economic growth in Nigeria. It is therefore recommended that high reserve ratio by the Central Bank of Nigeria should be made low in order to encourage micro-financing in Nigeria. The microfinance banks should make sure that inexperienced management is not applied on their funds for projects because they may mismanage funds instead of putting them into a better projects and government should create an enabling environment capable of supporting the microfinance banks in microcredit delivery.

TABLE OF CONTENTS

Title page

Declaration i

Certification ii

Dedication iii

Acknowledgement iv

Abstract v

Table of Content vi-vii

CHAPTER ONE: INTRODUCTION

1.1 Background of the Study 1-5

1.2 Statement of Problem 5-7

1.3 Research Questions 7

1.4 Objectives of the Study 8

1.5 Research Hypothesis 8-9

1.6 Scope of the Study 9

1.7 Significance of the Study 9-10

1.8 Limitations of the Study 10-11

1.9 Definition of Terms 11-12

1.10 Organization of the Study Summary 12-13

1.11 Summary 13

CHAPTER TWO: LITERATURE REVIEW

2.0 Introduction 14

2.1 Micro-finance Bank 14-15

2.2 Overview of Micro-finance Bank in Nigeria 15-17

2.3 Micro-finance Policy Measures 17-18

2.4 The Challenges of Micro-finance Banks in Nigeria 18-22

2.5 Prospects of Micro-finance Banks in Nigeria 22-24

2.6 The impact of Microfinance banks on Small and Medium Scale

 Enterprises 25-26

2.7 The Role of Micro-finance Bank in Economic Growth and

 Development 26-28

2.8 Theoretical Review of Related Literatures 28-29

2.8.1 Loanable Fund Theory of Interest 29-30

2.8.2 Input-Output Theory 30-31

2.8.3 Vicious Circle Theory 31-33

2.8.4 Duesenberry’s Financial Theory of Investment 33-34

2.9 Empirical Review 34-40

2.4 Summary 41

8

CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Introduction 42

3.2 Research Design 42

3.3 Population and Sample 42-43

3.4 Methods of Data Collection 43

3.5 Research Variables 43-44

3.6 Techniques of Data Analysis 44-45

3.7 Model Specification 45

CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.1 Introduction 47

4.2 Data Presentation 47-48

4.3 Analysis of Data 48-51

4.4 Test of Hypotheses 51-57

CHAPTER FIVE: DISCUSSION, CONCLUSION AND RECOMMENDATIONS

5.0 Introduction

5.1 Discussion of Findings 58-59

5.2 Conclusion 60-63

5.3 Recommendations 63-65

5.4 Recommendation for further Studies 65

5.5 Contribution to Knowledge 66

5.4 Bibliography 67-72

5.5 Appendix II 73-79