Impact of Microfinance Banks Activities on Poverty Alleviation in Nigeria

Abstract

The fight against extreme poverty has been on the front burner of global discourse for a very long time. Poverty is deemed as a state of deprivation but more specifically, where an individual or group has insufficient income for securing basic goods and services. Microfinance has been globally acknowledged as a vehicle that drives the poor out of extreme poverty zone. This study set out to examine the impact of microfinance banks activities on poverty alleviation in Nigeria. Annualized time series data for 20 years, covering the period 1993-2012, were collated from the Central Bank of Nigeria (CBN) and National Bureau of Statistics (NBS). Poverty Index (PI) was the dependent variable while microfinance banks activities was adopted as independent variable.  Also, liquid liability (M₂), Interest Rate (IR) and Federal Government Capital expenditure were the controlled variables. Multiple linear regression model was adopted for the test of the hypothesis. The result showed that microfinance banks activities do not have a significant positive impact on poverty alleviation in Nigeria.  This portends that the operation of the microfinance banks activities in Nigeria need a review.  It is fairly flawed. There is the need for the relevant authorities to go back to the drawing board.  Recommendations offered included; the establishment of core microfinance banks and not micro-money deposit banks masquerading as microfinance banks; the establishment of microfinance banks in rural and semi-urban rather than urban areas; and the establishment of women-friendly microfinance banks in Nigeria. Further study on this subject is highly encouraged.

Keywords: Microcredit, Microfinance, Poverty Alleviation.