Prime Lending Rates and the Performance of Microfinance Banks in Nigeria

Abstract

This paper sets out to examine the relationships between the prime lending rate and performance of microfinance banks in Nigeria. Variables such as, total asset, total loan obtained, deposits, shareholders fund, were used to measure the performance of microfinance banks in Nigeria. Data were obtained from the Central Bank of Nigeria statistical bulletin (CBN, 2011) and analyzed using regression aided by SPSS software. Evidence showed lending rate as a weak determinant of microfinance banks’ performance. High lending rate reduces capacity to obtain loans and advances since it constraint their access to credit facilities from big banks and other financial institutions. Therefore, there is need to reiterate credit mobilization, source long-term bank funding, and canvass for fund from big banks.

Keywords: Lending rate, Microfinance banks, Commercial bank, Small Scale Enterprises