Microfinance Banking and Financial Inclusion in Nigeria

Abstract

This study examines the influence of microfinance banking on financial inclusion in Nigeria from 2006 to 2021.  The precise goals are to: examine the relationship between microfinance banks’ interest rate and financial inclusion in Nigeria; examine if the number of microfinance bank branches affect financial inclusion in Nigeria in Nigeria.  Financial inclusion as the dependent variable was measured using bank loans to rural regions and deposits from rural regions. While microfinance banking was measured with microfinance bank interest rate, number of microfinance bank branches, number of depositors with microfinance banks and microfinance bank assets. The error correction model was used in the empirical analysis. To ensure stationarity of variables, the Augmented Dickey Fuller (ADF) test is utilized. The reliability of the results is ensured by the Engle and Granger tests, which determine if the residuals of cointegration are stationary Findings showed that financial inclusion in Nigeria is positively impacted by microfinance banking. Particularly, bank loans to rural regions and deposits from rural regions are significantly impacted by microfinance banks’ interest rates. The number of microfinance branches has a favourable impact on bank loans to rural regions, but a negative impact on deposits from rural regions.