Do microfinance banks’ activities affect Nigeria’s economic development?

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Microfinance banks were set up to provide financial services to poor people to reduce the rate of poverty and improve the quality of living in the country. As such, this study ascertained the effect of microfinance banks on the economic development of Nigeria. Secondary data were obtained from the CBN Bulletin and records of the National Population Commission from 1996 to 2019. The study used Vector Autoregressive (VAR) estimates to test the effect of the independent variables (microfinance banks’ total loans and advances, total investments, and total deposits) on the dependent variable (per capita income). Johansen Co-integration results showed a relationship between microfinance banks and Nigeria’s economic development in the long run. The VAR results show that the activities of microfinance banks have a positive but insignificant effect on Nigeria’s economic development in the short term. Microfinance banks have not done well in their intermediation function to positively and significantly affect economic development, especially reducing the poverty rate, unemployment rate, and improving living standards, among other macroeconomic development indices in the short run. The study recommends that microfinance banks will help to improve the standard of living in the country by granting more credits to rural dwellers through the creation of corporative societies, age grades, and unions that are predominant in rural areas.

Acknowledgment
We are grateful to all researchers who contributed to this paper.

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    • Table 1. Descriptive statistics
    • Table 2. ADF test result at the second difference: intercept only
    • Table 3. PP test result at the second difference: intercept only
    • Table 4. Johansen co-integration for INPC, MBTLAA, MBTCD and MBTD
    • Table 5. Normalized long-run coefficient based on the Johansen test
    • Table 6. VAR residual serial correlation LM tests
    • Table 7. VAR residual heteroskedasticity tests
    • Table 8. VAR residual normality tests
    • Table 9. Multicollinearity test
    • Table 10. Short-run dynamic estimates of VAR normalized on INPC
    • Funding acquisition
      Adegbola Olubukola Otekunrin, Onyegiri Paul Kenechukwu, Damilola Felix Eluyela
    • Project administration
      Adegbola Olubukola Otekunrin, Onyegiri Paul Kenechukwu, Okoye Nonso John
    • Supervision
      Adegbola Olubukola Otekunrin
    • Validation
      Adegbola Olubukola Otekunrin, Okoye Nonso John
    • Visualization
      Adegbola Olubukola Otekunrin, Okoye Nonso John
    • Writing – review & editing
      Adegbola Olubukola Otekunrin, Onyegiri Paul Kenechukwu, Damilola Felix Eluyela, Okoye Nonso John, Ayomide Ibrahim
    • Resources
      Onyegiri Paul Kenechukwu, Damilola Felix Eluyela, Ayomide Ibrahim
    • Methodology
      Damilola Felix Eluyela, Okoye Nonso John
    • Software
      Okoye Nonso John
    • Conceptualization
      Ayomide Ibrahim
    • Data curation
      Ayomide Ibrahim
    • Formal Analysis
      Ayomide Ibrahim
    • Investigation
      Ayomide Ibrahim
    • Writing – original draft
      Ayomide Ibrahim