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International Journal of Development and Management Review

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The impact of microfinance institution in economic growth of a country: Nigeria in focus

A. Bein Murad, Israel Ebosetale O. Idewele

Abstract


The study seeks to examine the impact of microfinance institution on economic growth of a country, thus using Nigeria as a case study. The study employs the multiple regression analysis given that the data are cross-sectional and time series in nature. Secondary data of all commercial banks were extracted from the Central Bank of Nigeria statistical Bulletin and Annual Reports. Data used in this model are time series secondary data for the period 1992 to 2012.The findings of the study show that microfinance loans have a significant positive impact on the short run economic performance in Nigeria. Microfinance loans enhanced consumption per capita in short run with an impressive coefficient, although these banks‘ loans do not have a significant impact on economic growth in the long run. Microfinance investment however, has a significant impact on economic performance in Nigeria in the long run. Although micro finance loans are relevant in growth process in Nigeria, other measures such as boosting agricultural production and taking appropriate steps to enhance per capita income are equally important in boosting the Nigerian economic growth. We recommend that, microfinance institutions should loan to improve consumption in the short run, while the long run goal should be to improve investment and other capital accumulation.

Keywords: Microfinance institution, Capital consumption, Microfinance loan, Investment, Economic growth, Financial institution




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