Spatial Relationships between Location of Microfinance Banks and Poverty in Nigeria

Abstract

The policy of microfinance banking was primarily introduced by the Central Bank of Nigeria not only to bring financial institutions to the people at the grass root but also aimed at addressing the wallowing poverty among Nigerians. This study assessed the relationship existing between the location of microfinance banks and absolute poverty at two spatial scales in Nigeria i.e. geopolitical and state levels in Nigeria. Data on location of microfinance banks in Nigeria was collected from the Central Bank of Nigeria (CBN) and that of poverty from the National Bureau of Statistics (NBS). These were analysed using Geographical Information System (GIS) operations based on regions and states with the aid of ArcGIS 10 vector based software. Additionally, correlation statistics was used to relate absolute poverty at the geopolitical and state levels with number of microfinance banks located at the spatial scales. Results indicated a clustering of microfinance banks in the southwest geopolitical region such that the ratio of population to bank was least in the southwest and highest in the northeast. At the state level, Lagos, Ogun, Anambra and FCT had the heaviest concentration of microfinance banks with a ratio of 30,570 – 79,811 persons per bank while Borno, Yobe, Kano and Katsina had the least concentration with a ratio of 925,670 – 2,321,339 persons per bank. The concentration of these banks at the geopolitical and state levels showed an inverse relationship with absolute poverty situation (r = -0.85 at regional and r = - 0.38 at state level) signifying strong relationship between these banks and poverty. It was recommended that communities and wealthy individuals especially in the northern states need to be targeted while ethical products as interest free deposits and loans could be floated by microfinance banks to satisfy community needs.

Keywords: Microfinance, banks, poverty, location