Effect of Micro-Finance Banks in Economic Growth of Nigeria

Microfinance institutions play a critical role in promoting economic development in developing nations, particularly in Nigeria, where access to financial services remains limited for many segments of the population. This study employs the Ordinary Least Squares (OLS) regression analysis to assess the impact of microfinance banks on Gross Domestic Product (GDP) growth in Nigeria from the period 1990 to 2023 using secondary data obtained from the Central Bank of Nigeria. The findings reveal that microfinance bank liabilities exert a negative and statistically insignificant influence on real GDP growth. Conversely, positive contributions to economic expansion were observed from microfinance bank deposits, loans, and gross fixed capital formation. Additionally, a modest yet positive correlation was identified between real GDP growth and total government expenditure. Based on these results, the study emphasizes the need for the Central Bank of Nigeria (CBN) and other monetary authorities to enhance lending practices within microfinance banks. Specifically, it is recommended that these institutions focus their credit offerings on small and medium-sized enterprises (SMEs) as well as financially constrained households to foster inclusive economic growth. By prioritizing the allocation of financial resources to these key sectors, it is anticipated that microfinance banks can significantly contribute to the broader economic development of Nigeria